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A recent analysis by the Institute for Fiscal Studies (IFS) suggests that Scotland may need to reevaluate its approach to free university education and its comparatively generous welfare benefits. The think tank points out that Scotland’s funding advantage over England, which has allowed for more extensive public services, is shrinking. If the current trend continues, maintaining these flagship policies could prove challenging without changes in taxation or improvements in public service efficiency.
According to the IFS, Scotland received 26% more funding per capita for devolved public services than England in 2024-25, a decline from 32% in 2019-20. This difference is expected to further narrow to 23% by 2028-29. The reduction, the report explains, is largely due to the operation of the Barnett formula, a mechanism which allocates budget according to population shares rather than intentional policy decisions to reduce Scotland’s funding. Despite this “Barnett squeeze,” funding for Scotland has grown at an average rate of 2% annually in real terms since 2019-20, with day-to-day spending per person rising about 11% since then. However, this rate of increase remains below that experienced in England.
The IFS emphasizes that the Scottish government’s ability to sustain its current social policies depends largely on raising tax revenues or enhancing economic growth and public sector efficiency. The report highlights that recent tax increases targeting higher earners have contributed the most to Scotland’s expanded budget, although slow wage growth and changes in taxpayer behavior have limited potential revenue gains. Without these adjustments or significant cuts, future budgets might see tough compromises. Martin Brogaard, an IFS economist and co-author of the report, noted: “Without 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 – such as university tuition and personal care – than their counterparts elsewhere in the UK.”
This outlook prompts concerns about difficult fiscal decisions ahead. Helen Miller, IFS director, commented on the challenge: “Cuts 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.” The Scottish Conservative finance spokesman Craig Hoy criticized the current government’s financial management, describing it as “dire” and accusing it of reckless spending that burdens taxpayers. Meanwhile, a spokesperson for the Scottish government defended their fiscal policies, stating that taxation and spending decisions “mean that we can support vital public services and provide free tuition, prescriptions and the Scottish child payment to help tackle child poverty,” adding a commitment to economic growth, tax strategy, and public service reform
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