Scottish Budget for 2025/26
When Shona Robison gets to her feet to outline the Scottish Government’s draft budget for 2025/26 next week, the Finance Secretary will do so from a considerably improved fiscal position than expected just a few months ago.
Back in September, the SNP MSP set out nearly £1billion worth of measures to balance the books, including £500m of in-year cuts. At the time, the expectation was that there would be more pain to come in December, when the Scottish Government set out its spending plans for 2025/26. However, the financial outlook is now markedly different. UK Chancellor Rachel Reeves delivered her Budget speech on 31 October and said Scotland would be receiving an additional £3.4billion in Treasury funding.
The UK Government also announced an extra £300m is heading north to help cover the cost of increased employer National Insurance contributions for public sector workers, although that has already prompted a row with Scottish Ministers who argue it is not enough. Either way, it does appear that the Scottish Government has more room to manoeuvre in budget terms than we previously thought.
What does it mean for the Rural Affairs budget?
Funding for agriculture was maintained during the last UK parliament from 2019–2024 to the same levels as under the EU Common Agricultural Policy (CAP) which meant that the devolved nations knew the settlement they would receive for that five-year period. That ring-fenced funding amounted to £620m per year for Scotland. It is worth noting however that this was based on the 2014–2020 CAP period, so with inflation, the ‘real terms’ budget should have grown to more than £800m annually.
The UK Government has now ended that arrangement of ring-fenced, multi-year budgets, and has instead wrapped up funding for agriculture into this year’s block grant, which means agriculture will have to compete with all other government priorities such as education and the NHS for next year’s Scottish budget. In future, it appears agriculture will be subject to the Barnett formula, which means that any increase or cut in funding for Defra will have a knock-on impact for funding in Scotland.
The National Farmers Union of Scotland (NFUS) has urged the Scottish Government to commit to multi-year funding for agriculture and is campaigning for an extra £50m as well as the return of the ‘missing’ £46m that was previously removed from the rural budget. Farmers and crofters from across Scotland made their feelings known to MSPs from all parties at a rally outside parliament this week.
What do we need to see in the Budget?
One of the challenges for the Scottish Government with such a large increase to the block grant – the biggest since the advent of devolution – is managing expectations. Demands are pouring in for more investment in the NHS, housing, local government, universities and to support struggling retailers and other small businesses. There is also a clear funding gap for meeting Scotland’s ambitious climate and nature targets.
Soil Association Scotland agrees with the NFUS that the overall budget for agriculture needs to be increased. Our farmers and crofters are being asked to deliver on climate and nature goals while continuing to produce high quality food. They need to be supported to do so.
In terms of how that additional funding is spent, it is worth noting that the amount of money dedicated to the Agri-Environment and Climate Scheme (AECS) has been reduced significantly in recent years. We would like to see the AECS budget restored to its 2017 peak of £55m. In 2024/25, it was just £29.6m. Within that agri-environment spend, the budget for organic conversion and maintenance should be protected, with flexibility to cope with increased applications as the government attempts to reach its target of doubling organic land.
As set out in this blog last month, we would also like to see a well-funded Organic Action Plan to support market development, public procurement, research and advice.
A report by Soil Association Scotland and Woodland Trust Scotland demonstrated that £10m to support farmers and crofters to undertake small-scale, low-density tree planting could double the amount of land currently under agroforestry. More widely, if the Scottish Government is to meet its own targets on tree planting and peatland restoration, then cuts to the Forestry Grant Scheme should be reversed and peatland work scaled up.
There is also a need for further investment in knowledge sharing and advice for farmers and crofters to transition to nature and climate-friendly approaches. This should include ongoing support for the Knowledge Transfer Innovation Fund as the shift to a new Agricultural Knowledge and Innovation Service (AKIS) model continues.
Finally, to help meet the ambition of the Good Food Nation Act 2022, support for the Food for Life programme must be at least maintained to help local councils and other public sector bodies source fresh, local and sustainable produce.
So what comes next?
The Finance Secretary’s speech on Wednesday is just the start of the budget process. The current Scottish Government is a minority administration so will need to find votes from other parties to get its proposals passed. There have been talks with the Scottish Liberal Democrats and the Scottish Greens, and there will likely be more horse trading to come before the budget is formally passed in the New Year.
Perhaps one thing that all political parties could agree on is the importance of supporting our farmers, crofters and land managers to deliver on food production, climate and nature.
