Press Release
Response to the Scottish Fiscal Commission's latest fiscal update
25 August 2026
25 August 2026
Commenting on the Scottish Fiscal Commission’s fiscal update published this morning, Hanna Wheatley, Senior Economist at the think tank Future Economy Scotland, said:
“Today’s update sets out the key challenge facing the Scottish Government: short-term headroom is masking a structurally tighter medium-term picture. While the government’s funding this year will now be higher than anticipated in January’s Budget, it is far from out of the woods. The vast majority of the increased funding is a one-off top-up, and we recommend the Scottish Government carry some forward through the Scottish Reserve.
“Looking ahead, 2027-28 faces a crunch point: no one-off funding uplifts and a negative reconciliation payment of £720 million, which is higher than resource borrowing limits for the year. These factors are contributing to a 1.2% real terms fall in the Scottish Government’s funding for day-to-day spending next year. The UK Government’s decision to divert capital funding to defence will further hamstring Scotland’s squeezed capital budget.
“The Scottish Government’s plan to close its budget gap largely rests on public service reform, and today’s update highlights how little progress has been made. This means the Government’s current approach is unlikely to be able to deliver the required savings without cuts to frontline services. Instead, we urge the Finance Secretary to use the upcoming Scottish Budget to set out a progressive and efficient tax strategy for the coming five years to raise the necessary revenue to fund Scotland’s future.”
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[1] The Scottish Fiscal Commission published its latest fiscal update at 9.30am on 25 August.
[2] Future Economy Scotland's recent report, Funding Scotland's Future, set out tax reforms that could raise £2.3bn, helping to close the budget gap while creating a fairer and more efficient tax system
[3] To request an interview with a spokesperson or for any other questions please contact hanna@futureeconomy.scot
[4] Future Economy Scotland is a non-partisan think tank that aims to create a new economy that is democratic, sustainable and just. The organisation does not have a formal stance on Scotland’s constitutional future, and is not aligned to any political party or any politician. The organisation is a not-for-profit company limited by guarantee operating with charitable principles. For more information visit: www.futureeconomy.scot