Common Weal’s review of the Scottish Budget 2026

The final budget before an election is often a time to either go big or to go home. The Scottish Government chose this budget to stay on the sofa.

The problem with making big promises in a budget right before the election – especially if you’re a minority government dependent on other parties to pass it and they are eyeing up their election prospects themselves – is that you might well not be around to make them happen.

But if you pass that budget based on giving your supporting parties their sweeties, then they might use that “victory” to improve their own election prospects, possibly at the expense of yours.

So it was quite handy for the Scottish Government that Scottish Labour came out fairly early with their intention to abstain on the budget vote which guaranteed that the SNP could pass a majority without the explicit support of any other party. Albeit at the cost of cutting Labour’s own objections towards anything they disliked being there or anything they liked not being there. Still, it does appear that the SNP put at least some effort towards negotiations with the Greens being the principle winners (getting their principle asks for some new wealth taxes as well as further extensions to free school meals), followed by the Lib Dems (winning some asks around lower priced ferry travel, business investments and investments into ADHD). Even the Tories got a sweetie in the form of a partial softening of the Government’s revaluation of properties covered by Business Rates, though the party has signalled that it’s likely to vote against the budget in any case.

Probably the biggest tax change was the introduction of two new bands of Council Tax targeting houses worth more than £1 million and more than £2 million plus funding to revalue houses likely to come under that tax up to current estimates (everyone else will still be taxed based on what their house was worth more than a third of a century ago). We don’t yet know the rates that these houses will be charged at but even though Common Weal advocates for a much fairer tax rate on the owners of wealthy property, this change is not going to fix the fundamental problems with Council Tax that can only be fixed with an all-property revaluation and the shift to a property tax based on a percentage of the house’s actual present value rather than based on bands which, by definition, will always mean a relative tax cut for the very richest. It’s also worth noting the affront to democratic accountability caused by the announcement of this policy given that a consultation on the future of Council Tax – itself a poor substitute for the promised Citizens Assembly on Council Tax – is, as of the time of the publication of the budget, still ongoing and seeking views.

The next biggest change is in Income Tax. Not a review of rates or a major change to the bands. Nor even an assessment of the most efficient way to use income tax to generate revenue and reduce inequality. The changes here – to uprate the thresholds on the lower bands by 7% - an effective tax cut for people paying those rates – while freezing the thresholds for the upper bands (an effective tax rise for folk who pay those bands and see their wages uplift along with inflation as more of their income falls into the higher rated bands) appears to be motivated solely by the election campaign line that most people in Scotland will pay less income tax than they would if they had the same income and lived in England.

This still hasn’t stopped commentators from completely and utterly misunderstanding the nature of wealth and income inequality in Scotland though. It didn’t take long for them to say that the tax rises hit the “middle class” of Scotland. The problem with that term is that only about 12% or so of people in Scotland actually pay those income tax rates on any of their income. If very nearly the top 10% is also “the middle”, something is very skewed with both our perceptions and the reality of income inequality. This is a topic that we are going to come back to with a major report in the next few months.

The final point to note in this budget is its focus on short-termism. This is quite likely a reaction to the budget’s proximity to the elections again. There’s very little scope to promise a Five Year Plan if you don’t know if you’ll have the power to start implementing it in five months. Some of the cuts now being promised to previous long term plans are sounding alarm bells though. For just one example, a nearly £30 million cut to the annual injection of capital into the Scottish National Investment Bank which means that warnings last year that the Government would miss its capitalisation targets must be sounded louder. There is much that Common Weal has come to disagree with around the operation of SNIB but we fully support it being capitalised properly to meet its potential. Given that we’ve described this as an institution that should be a part of Scotland over the coming centuries, never mind decades, losing ground now will have impacts that echo far beyond the electoral cycles.

This budget has likely served its purpose of getting the Government into election mode and was likely never really designed to do much more than that. Depending on results in May, we may or may not be facing anything from another full “emergency budget” to a more modest “spending review”, and so any promises made here must be taken in that light. The major structural reforms that are sorely overdue – such as reforms to Council Tax, an actual inequality strategy, and proper long term investments in areas like climate and social housing – will likely have to wait till then.