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The Scottish government may have to raise taxes or cut services, including free university tuition and prescriptions, as funding for Holyrood falls over the next few years.<\/p>\n
The Institute for Fiscal Studies (IFS) says that Scotland received 26% more per resident for devolved public services from the UK government than is spent on comparable services in England in 2024\u201325.<\/p>\n
It has warned that this funding advantage has fallen over the last few years and will continue to do so in future.<\/p>\n
A challenging fiscal outlook means it will be hard for the next Scottish Government to continue to provide more generous services and benefits than in England, says the IFS.<\/p>\n
The think tank\u2019s warning comes amid an election campaign in which various parties are making tax and spend pledges. <\/p>\n
The SNP in particular is promoting its \u201cgiveaways\u201d on travel and education which the IFS warns may not be sustainable. Reform UK has promised to cut income tax, while other parties want to reduce business rates.<\/p>\n
The IFS adds that \u201cfunding more generous provision will increasingly need some combination of higher devolved tax revenues \u2013 whether through higher economic growth or higher tax rates \u2013 and more efficient public service delivery. Without these, cutbacks in service provision or devolved benefits will likely be necessary.\u201d<\/p>\n
The warning is among the key findings of the first Scottish election briefing from the IFS, funded by the Nuffield Foundation and the Robertson Trust.<\/p>\n
The briefing examines how and why funding for day-to-day (resource) and investment (capital) spending has changed over time, and the outlook for the coming Scottish parliamentary term. <\/p>\n
Recent trends have shaped \u2013 and been shaped by \u2013 the current Scottish Government\u2019s tax and spending choices. The future outlook will shape the tax and spending options available to the next Scottish Government.<\/p>\n
\u201cAfter several years during which resource funding has grown at a decent pace, growth in funding is set to slow significantly over the next few years, posing budgetary challenges for the next Scottish government,\u201d it said.<\/p>\n
\u201cIf residents of Scotland wish to continue to enjoy a more generously funded set of public services and benefits than is provided in other parts of the UK, it will be increasingly necessary for them to contribute more towards the cost through higher devolved revenues.\u201d<\/p>\n
Helen Miller, the think tank\u2019s director, said: \u201cThe tricky funding outlook facing the next Scottish Government has important implications for assessing the proposals the different Scottish parties will make in the upcoming election campaign. <\/p>\n
\u201cCuts to some taxes or increases in spending on priority items are feasible but will require tough choices elsewhere in a Scottish budget which will already be under some strain.\u201d<\/p>\n David Phillips, head of devolved and local government finance at IFS and co-author of the report, said: \u201cAfter falling during the 2010s, the last six years have seen real-terms increases in Scottish Government funding, mostly as a result of increases in UK government funding. <\/p>\n \u201cYet UK government decisions now mean that growth in funding is set to slow over the next few years. Indeed, without top-ups to UK government spending plans, the outlook for Scottish Government funding will likely be even more challenging than official forecasts suggest \u2013 given these forecasts implicitly assume earnings and hence income tax revenues in Scotland will outpace those in the rest of the UK. <\/p>\n \u201cIf wages and hence tax revenues in Scotland instead grow in line with the rest of the UK, funding for day-to-day spending on public services may even be no higher in real terms in three years\u2019 time than now.\u2019<\/p>\n Martin Brogaard, research economist at IFS who also co-authored the report, said: \u201cScotland currently enjoys more generous public services than England, in large part because the Scottish Government receives around 26% more funding per person than is spent on comparable services in England. <\/p>\n \u201cBut after growing during the 2010s, this funding advantage is now shrinking as the so-called \u2018Barnett squeeze\u2019 bites. <\/p>\n \u201cWithout substantial increases in devolved revenues, improvements in public sector efficiency or cuts to other spending, it will be increasingly difficult for future Scottish Governments to continue to provide a wider range of free services \u2013 such as university tuition and personal care \u2013 than their counterparts elsewhere in the UK.\u201d<\/p>\n Scottish Conservative shadow finance secretary Craig Hoy said:\u00a0<\/strong>\u201cThis is a grim warning about what lies ahead for Scottish taxpayers thanks to the SNP\u2019s dire financial mismanagement.<\/p>\n \u201cThey are already forced to pay the highest taxes in the UK to fund the SNP\u2019s ballooning and unsustainable benefits bill and now more tax rises and cuts look set to be on their way.<\/p>\n \u201cJohn Swinney\u2019s SNP government has been spending like a drunken sailor and clobbering hard-working Scots with the bill, but they have finally run out of road.<\/p>\n \u201cThey\u2019ve abjectly failed to rein in reckless public spending and failed to grow Scotland\u2019s economy with their anti-business policies.<\/p>\n \u201cThe Scottish Conservatives are the only party that opposed their budget and offered credible, costed plans to cut tax and tackle the spiralling benefits bill.<\/p>\n \u201cThis report makes it clear that if the SNP remain in government after the next election, Scots will continue to pay more while getting less.\u201d<\/p>\n \t <\/div>\n![\"Helen](\"https:\/\/dailybusinessgroup.co.uk\/wp-content\/uploads\/2025\/10\/Helen-Miller-director-IFS.png\")
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