Meeting of the Parliament 12 February 2026 [Draft]
I am pleased to speak on behalf of the Finance and Public Administration Committee, following publication of our “Report on the Scottish Budget 2026-27”, and I look forward to receiving the stage 2 amendments that the Cabinet Secretary for Finance touched on a moment ago.
This is the final stage 1 budget bill debate in this parliamentary session, so I am keen to discuss issues that the committee has raised that have been key themes throughout our scrutiny over the years. I also wish to thank our excellent committee team of MSPs and clerks, who have worked so hard and with dedication throughout the past half-decade. I can see Liz Smith nodding in approval.
This year’s draft budget was published much later than usual, on 13 January 2026, as a consequence of the late United Kingdom budget. As the committee noted, that provided an unacceptably short time for parliamentary scrutiny of the Scottish Government’s proposed tax and spending plans for the next financial year. It is not the first time that the committee has called on the UK Government to give much greater regard to devolved budgets when setting the timing of future fiscal events.
The need for greater transparency in relation to budgetary information has been another consistent theme. The committee recognises improvements that have been made by the Scottish ministers throughout this parliamentary session in providing more budgetary data and presenting it more clearly. However, like many witnesses and commentators, we are frustrated and disappointed that, despite repeated requests, the Scottish Government has fallen short of baselining all routine in-year transfers. We therefore recommend that formal agreement be reached between the Scottish Government and the Scottish Fiscal Commission on how regular in-year transfers should be presented.
We also seek greater clarity on which elements of funding announces new money, to provide certainty for public bodies and local government and avoid the unhelpful and unnecessary confusion that has occurred this year, notably in relation to increased funding for the college sector and where money saved from mitigating the two-child cap will be spent.
The committee also expressed concerns that one-off ScotWind leasing revenues are being used to plug funding gaps rather than being allocated to net zero projects, as intended. As we note in our report, the Scottish Government appears to bank on the fact that it will not need to draw down ScotWind funds, because new moneys are considered certain to become available, particularly in the run-up to the next United Kingdom general election. The committee is not convinced that that is an efficient or effective way to manage Scotland’s public finances.
The committee’s 2026-27 budget report recognises significant financial pressures faced by the Scottish Government and its limited flexibilities to manage cash flow over years. We therefore believe that a comprehensive review of the fiscal framework is now urgent. It is encouraging that the two Governments are currently discussing the scope of that, and we welcomed the opportunity just before Christmas to input the committee’s views on the priority areas for the review. We support a continuation of that consultative approach while balancing the need for early resolution.
On Scottish Government spending plans, the college sector will receive a very welcome uplift in funding, which the committee had called for. Housing has had an even more impressive boost, and although we welcome the additional £20 million that has been announced today, the committee has significant concerns that pressures on local government finances may lead to large council tax rises and some local authorities struggling to meet their statutory obligations. We have therefore urged the Scottish Government in our report to discuss with local government how and where further support might be provided to ease such pressures if additional funds become available.
The sustainability of social security spending and its impact on other areas of the Scottish budget that are being squeezed is a long-term committee concern. It is disappointing that the Scottish ministers have yet to undertake the reviews that we asked for on the fiscal sustainability of social security spending, the extent to which it supports economic activity and the outcomes arising from universal payments and services. We therefore urge the incoming Government to undertake that work without delay.
On taxation, although we recognise the fiscal pressures on the Scottish budget, we have asked the next Scottish Government to consider the most effective way to ensure a fairer, more gradual and transparent approach to raising income tax revenues than continuing to use fiscal drag—a policy that has also been imposed by successive United Kingdom Governments. A further priority in the next session of Parliament should be reform of local government taxation—not easy, given the likely level of loss aversion, but necessary.
The committee has consistently urged the Scottish Government to recognise and respond to the long-term fiscal sustainability challenges that lie ahead, given demographic trends. Unfortunately, the Scottish Government did not, as requested, fully respond to the Scottish Fiscal Commission’s two key fiscal sustainability reports in 2023 and 2025.
Regarding the medium-term funding outlook, publication of the first Scottish spending review outcomes for both capital and resources this parliamentary session is welcome. Although that should bring more certainty to portfolios, public bodies and local government on the spending trajectory over the next three years, we agree with witnesses that more detail should have been provided and, despite our request, the Scottish Government appears not to have taken a zero-based budgeting approach to the spending review. Indeed, the document includes little detail on the approach taken, leaving uncertainty over the figures presented.
We will of course be taking evidence on the Scottish spending review and the infrastructure delivery pipeline in the weeks ahead. Witnesses shared concerns about whether plans to make £1.5 billion of cumulative efficiencies across the spending review period are achievable and how progress will be reported.
We urge the next Government to regularly report savings made, in order to allow scrutiny of progress towards overall efficiency targets and clarify any impacts on public service delivery. Although we welcome the Scottish Government’s infrastructure delivery pipeline, we had pressed for the document since December 2023, and it is, frankly, underwhelming. Detail should have been provided on costs, timelines and potential overruns for the projects.
In addition, the split between delivery and development casts doubt on exactly what will be delivered when and at what cost. Given that the UK Government will reduce Scotland’s capital allocation in real terms over the forecast period, inclusion of shovel-ready projects to optimise capital investment would be helpful.
We urge the incoming Scottish Government to flesh out both the pipeline and the Scottish spending review document with much more detail.
The committee looks forward to receiving a response to our stage 1 report ahead of stage 2 proceedings on the bill next week, and I look forward to hearing members’ contributions in today’s debate.