Breathing space for Scottish families and businesses at Budget

• Energy costs lowered as home heating oil tariffs removed and 0% VAT on household electricity extended. 
• Growth backed with investments in Glasgow and Edinburgh.  
• The Scottish Government will have an additional £600 million for public services.

Families and businesses in Scotland will get breathing space from action announced in Budget 2026. 

Against a backdrop of global uncertainty, rising energy costs and pressure on household finances, Chancellor John Healey has taken action on the cost of living, fuel prices, and local jobs — alongside more funding for the Scottish Government to provide public services. 

In the Budget, John Healey announced: 

• Support with energy bills: The removal of the 4% tariff on kerosene will support the 142,000 Scottish households that rely on heating oil. The UK government will extend 0% VAT on household electricity bills for three months, to 30 June 2027, while a Debt Relief Scheme will write off crisis-era debt for eligible households.  

• Fuel: the extension of the 5p cut to fuel duty for a further six months until 30 June 2027. The 3.7p cut to red diesel duty continues, which matters for farmers, rural hauliers and other fuel-heavy users across Scotland.  He also announced a permanent increase to the generosity of mileage rates to support those who drive for work.   

• Food prices: Tariffs axed on over 100 food products, including chocolate and fruit juice. Combined with tariff suspensions earlier this year, this will save households up to £21 annually.  

• Pensions: by the end of this Parliament, 93,000 low-income pensioners in Scotland will pay less tax or none at all on their income, as a result of reducing the disproportionate administrative burden of paying small amounts of tax.   

• Wages: Increasing the National Living Wage by 3.9% to £13.21 per hour and the National Minimum Wage by 3.9% to £11.27 per hour for 18 to 20-year-olds and by 3.9% to £8.31 per hour for 16 to 17-year-olds and eligible apprentices. An estimated 180,000 workers in Scotland saw a direct pay rise following April 2026’s increase to the National Living Wage and National Minimum Wage. 

Backing growth in Scotland 

• The establishment of a new Energy Wealth Fund to support Scottish clean energy jobs way into the future.   
• £18 million will fund a UK Advanced Chip Design Academy led by the University of Edinburgh, building on Scotland’s strengths in advanced technology.  
• £6 million will expand Glasgow’s Scottish Event Campus (SEC), subject to business case, allowing the venue, which hosted COP26 and the Commonwealth Games, to go bigger and better.  
• £20 million will see the creation of two Defence Technical Excellence Colleges in the East and West of Scotland.
• Extending duty suspensions for 350 goods to help businesses in the chemicals, plastics, hydrogen, automotive and food and drinks sectors.  
• The Budget strengthens Britain’s national security by fully funding the £15 billion Defence Investment Plan, including £4.7 billion that was previously unfunded. Defence spending supports 12,200 industry jobs in Scotland, up 7% from 2025.  

Secretary of State for Scotland, Douglas Alexander, said: 

This is a budget that puts money back in the pockets of Scottish households, backs businesses, and puts Scotland firmly at the heart of the UK government’s plan for growth and reindustrialisation.  

We’re helping families tackle the cost of living by cutting the standing charges from gas bills, saving households around £45 a year, then looking to remove them altogether. We’re also extending the VAT cut on energy bills, as well as removing the tariff on heating oil.

But we’re not just easing the pressure today, we’re building Scotland’s future. £18 million for a semiconductor manufacturing research centre at the University of Edinburgh, £6 million to expand the Scottish Event Campus and grow on the legacy of COP26. That’s creating jobs and good growth in every postcode.

There’s a boost for Scotland’s public services too, with an extra £600 million for the Scottish Government to spend.

Funding for public services 

The Scottish Government’s main source of funding comes through the block grant. This includes money collected from taxpayers across the UK – including from people in Scotland – which is then available for the Scottish Government to spend on devolved services. The Scottish Government also raises its own revenue, through the Scottish Rate of Income Tax, and non-domestic rates on businesses, for example.   

Spending Review 2025 provided the Scottish Government with their largest spending review settlements in real terms since devolution in 1998, receiving an average of £50.9 billion per year between 2026-27 and 2028-29.  

Changes in the devolution roadmap may have an impact on the funding of the devolved governments. Our approach to fiscal devolution in Scotland, Wales and Northern Ireland is already well established, however, we will engage with devolved governments on any implications for their budgets in the usual way to ensure they continue to be funded to deliver a comparable policy offer. 

The Scottish Government has at least 20% more funding per person than equivalent UK Government spending in the rest of the UK. The higher amount reflects that providing services across Scotland genuinely costs more.  This means that for each £1 of equivalent UK Government spending in the rest of the UK, the Scottish Government has at least £1.20 to spend per person in Scotland.  

The Scottish Government will receive an additional £600 million, on top of an additional £1.7 billion from Budget 2025 and Spring Forecast 2026.