On 3 March the UK Chancellor delivered her Spring Statement in the UK Parliament, referred to as a ‘Spring Forecast’.
This reflects the desire of the UK Government to focus on a single fiscal event each year – the Autumn Budget, with the Spring Statement acting as more of an update to the fiscal context. Despite the statement itself containing no significant policy announcements, recent developments do have an impact on public finances in Scotland.
The short blog will summarise some of the key messages, and the implications for the Scottish Budget.
Economic and fiscal headlines
Alongside the Spring Statement, the Office for Budget Responsibility (OBR) published updated economic and fiscal forecasts. Overall, these forecasts suggest minimal changes since the November 2025 forecast:
- Real GDP growth is expected to be 0.3 percentage points lower than in November, growing by 1.1 per cent in 2026. This remains low by historic standards. Productivity growth is expected to increase to 1 per cent, which helps boost real GDP growth to 1.5 per cent in the remaining years of the forecast, although this is still low by historical standards.
- The unemployment rate is expected to increase to 5.3 per cent in 2026 due to subdued hiring demand. Unemployment is then expected to gradually reduce to 4.1 per cent by 2030.
- The OBR notes that real terms weekly pay growth had reduced to less than 1 per cent by the end of 2025. Looser labour market conditions, lower inflation and the pass through of the increase in employer national insurance contributions are all expected to contribute to continued slow growth in earnings.
- Slower earnings growth is expected to contribute to lower CPI inflation, falling from 3.4 per cent in 2025 to 2.3 per cent in 2026. This is 0.2 percentage points lower than the November 2025 forecast.
- These forecasts imply that the ‘fiscal headroom’ the UK Chancellor has to meet her fiscal rules has increased slightly from £21.7 billion to £23.6 billion.
It is worth noting that the OBR finalised this forecast before the recent conflict in the Middle East. The OBR assumes in their forecast that energy prices will contribute to falling inflation in 2026 – however given recent events, the price of gas in the UK has increased significantly. If this price increase is sustained, this could have a significant impact on the wholesale costs of gas and electricity – as happened following the Russian invasion of Ukraine in 2022.
The OBR also published updated forecasts for UK and devolved tax receipts. This suggests that the net tax position in 2026-27 will be £1,290 million, a decrease from £1,378 million in the November 2025 forecast. Both land and buildings transactions tax and income tax are forecast to contribute to this reduction in the net tax position.
The UK Chancellor also stated that in two weeks’ time she would outline three major choices that will “determine the course of our economy into the future”. These choices relate to strengthening global relationships, reducing trade barriers and harnessing the power of AI.
Policy changes since the Autumn Budget
While the Spring Statement did not include a raft of new policy announcements, there have been some developments which change the spending plans set out in the Autumn Budget 2025 and have implications for Scotland because they relate to devolved areas of responsibility.
Business Rates
On 27 January, the UK Government announced an additional package of business rates relief for pubs. This will reduce business rate bills for pubs by 15% from April 2026, followed by two years of real terms freezes. The UK Government suggests this will save the average pub £1,650 in 2026-27.
Special Educational Needs and Disabilities (SEND) Reform
Last week the UK Government announced changes to the special educational needs and disabilities (SEND) system as part of its broader Schools White Paper. The UK Government has announced it would spend £4 billion to make mainstream schools more inclusive for children with SEND over the next three years. However, because SEND spending in England has exceeded the dedicated schools grant since 2020, the UK Government has been using temporary “statutory override” to stop these deficits appearing on local authorities’ balance sheets. This override ends in 2028-29, and according to the OBR this would very likely result in many local authorities being unable to meet their statutory requirement to balance their budgets. On 6 February the UK Government announced that it would spend £5 billion to pay off up to 90% of English councils’ debts related to SEND provision.
Implications for the Scottish Budget
In total, the Scottish Budget will receive £921 million in additional Barnett consequentials between 2026-27 and 2028-29. This is over and above consequentials flowing from the UK Autumn Budget.
£900 million of this is resource, and comprises £542 million in 2026-27, £13.3 million in 2027-78, and £345 million in 2028-29.
The £21 million capital is approximately £7 million per year, and is generated by spending associated with the fares freeze in London.
There are 3 main factors driving the resource consequentials. The business rates relief for pubs results in an additional £8.8m in 2026-27, £13.3 million in 2027-28, and £18.3 million in 2028-29. The Cabinet Secretary announced reliefs worth an estimated £9 million for 2026-27 before Stage 2 of the Scottish Budget for 2026-27, so the Scottish Government has already allocated some of this money in anticipation.
A further £533 million in 2026-27 is related to the spending to write off SEND deficits in local authorities in England, while a further £326.5 million in 2028-29 is additional funding for SEND, as part of the reform described above.
The Scottish Budget as passed by Parliament on 25 February 2026 included plans to draw down £80 million in ScotWind revenues to support resource spending in 2026-27. All things being equal, these additional Barnett consequentials mean that the Scottish Government should no longer need to utilise ScotWind revenues in 2026-27, so could opt to carry them forward to another year, or allocate to other priorities.
In addition to the Barnett consequentials outlined above, the economic forecasts could also have an impact on the Scottish Budget. Slower earnings growth is now expected to push CPI inflation down. CPI inflation now stands at 3.4% in 2025 and is expected to reduce to 2.3% in 2026. This is broadly positive for the Scottish Government given the significant costs associated with triggering inflation guarantees in public sector pay deals. Lower inflation reduces the likelihood of further automatic uplifts, such as the additional £23.25 million that would have been required if CPI had remained at 3.5% in 2025. Even the small reduction in CPI from 3.5% to 3.4% for 2025 reduces this cost by £10 million, thereby easing pressure on the public purse. Although inflation is forecast to be 2.3% in 2026 this forecast, as noted above, pre-dates the latest conflict in the Middle East which could push inflation higher again, so the risk of inflation-triggered cost pressures for public sector pay remains.
With the Scottish election due in May, it will be the next Scottish Government that will decide how to reflect the additional funding in the Autumn Budget Revision, usually published in September.
Andrew Feeney-Seale and Rachel Cook, Financial Scrutiny Unit, and Andrew Aiton, Data Visualisation Manager