Scotland to receive extra £3.4bn from UK Budget, says chancellor

Scotland will receive an additional £3.4bn in Treasury funding as a result of the UK government Budget, according to Chancellor Rachel Reeves.

Reeves, formally setting out her spending plans for the first time, said it would be the largest real-terms funding settlement since devolution.

Labour sources said the Scottish government would also receive an additional £1.5bn to spend in the current financial year.

First Minister John Swinney had called for the UK government to "immediately and significantly" increase funding for Scotland ahead of the Budget.

The SNP government has already cut £500m from its budget this year, with ministers warning that without extra cash they would need to make difficult choices when they set out their tax and spending plans for next year in December.

Reeves said the funding announced in the Budget "must be used effectively in Scotland to deliver the public services that the people of Scotland deserve".

Some of the measures included in the Chancellor's Budget do not apply to Scotland.

However, spending decisions in areas that are devolved to the Scottish government, and that will only apply south of the border, also have a knock-on effect for the Holyrood administration’s finances through what is known as the Barnett Formula.

That is because it gets a fixed share of changes to budgets of UK government departments such as transport, justice, health and education – areas of government devolved to Scotland – as part of its funding arrangement with the UK Treasury.

Among the key issues that affect Scotland is an increase in minimum wages, with hourly rates for over-21s set to rise from £11.44 to £12.21 an hour from April.

The rate for 18 to 20-year-olds will increase from £8.60 to £10, while the minimum wage for apprentices will rise from £6.40 to £7.55.

The chancellor also confirmed a windfall tax the UK government levies on the profits made by oil and gas firms will rise from 38% from 35% on 1 November, and will remain in place until 2030.

North sea oil and gas firms had campaigned against the increase.

Reeves also said plans to levy VAT on private school fees would raise more than £9bn aross the UK.

The chancellor also announced:

• A 5p cut to fuel duty on petrol and diesel, due to end in April 2025, will be kept for another year
• Firms are to pay National Insurance on workers’ earnings above £5,000 from April, down from £9,100 currently, with the rate increasing from 13.8% to 15%
• Employment allowance - which allows companies to reduce their NI liability - is to increase from £5,000 to £10,500
• The main rate of corporation tax, paid by businesses on taxable profits over £250,000, is to remain at 25% until the next election
• Tax on non-draught alcoholic drinks - including whisky - is to increase by the higher RPI measure of inflation, but tax on draught drinks is to be cut by 1.7%
• Capital gains tax paid on profits from selling shares to increase from up to 20% to up to 24% - with rates on additional property sales to stay the same
• Freeze on inheritance tax thresholds extended beyond 2028 to 2030
• The £70m rural growth deal for Argyll and Bute will progress following a spending review
• Funding for a green hydrogen project in East Renfrewshire

Reeves said the government would "restore stability to our country" and "protect working people."

The chancellor added the Labour administration was "fixing the foundations of our economy, investing in our future, delivering change, rebuilding Britain".

SNP Westminster Leader Stephen Flynn MP welcomed additional funding for public services, but said the Budget “fails to deliver the transformative change people in Scotland were promised”.

He criticised the government’s decision to raise employers’ National Insurance contributions, and said it should have u-turned on its winter fuel payment cut and scrapped the two-child benefit cap.

Flynn added: "After fourteen years of the Tories, this UK budget should have been the chance to completely turn the page but people in Scotland are still paying the price for Brexit and Westminster cuts, which are wiping billions of pounds from public finances and household incomes."

Scotch Whisky Association chief executive Mark Kent described the increase on spirits duty as a “hammer blow”.

The levy was increased by 10% by the previous UK government, and industry bosses had been hoping for a reprieve.

Mr Kent accused Reeves of increasing “tax discrimination of spirits in the Treasury’s warped duty system, and with 70% of UK spirits produced in Scotland, that will do further damage to a key Scottish sector”.

MPs will spend several days debating the UK government's plans, before being asked to approve them in the form of a finance bill.

The announcement informs the Scottish government - which is due to announce its budget on 4 December - how much can expect to receive 2025-26.