UofG Centre for Public Policy

15 September 2025: In an article published in The Herald on 8 September 2025, Professor Graeme Roy writes about the Scottish Government's upcoming Spending Review, an opportunity to reset how our public finances are managed and potentially a defining moment in how Scotland prepares to meet the policy and fiscal challenges ahead.

Article by Professor Graeme Roy

This article was originally published in The Herald on 8 September 2025.

With just eight months until the Scottish Parliament election, we can expect policy announcements from all parties to dominate the news agenda until then.  

But while promises are easy to make in the heat of an election campaign, whether they can be delivered depends on the health of the public finances.

And on current trajectories, the outlook is increasingly challenging.

The Scottish Government estimates that, based on trends in funding and spending, a significant fiscal gap is emerging. Resource spending – the funding of day-to-day public services – is projected to exceed the available budget by £2.6 billion by 2029–30, equivalent to around 4% of planned spending. On capital, which covers infrastructure such as roads, schools and hospitals, the shortfall is even starker: £2.1 billion, or 23% of projected investment.

Crucially, these figures reflect only the near-term pressures. Over the medium to long term, rising costs associated with an ageing population, increased demand on health and social care, and investment required to meet Scotland’s climate commitments, will further stretch the public finances.

It is within this context that the Scottish Government will present its Budget later this year or early in 2026.

Importantly, it has committed to also publishing a multi-year Spending Review.

Spending Reviews are major turning points in how our public finances are managed. They provide an opportunity to take stock of what the government is spending money on, whether services are delivering the intended outcomes, and where reforms or efficiencies may be needed. They provide an opportunity to link financial planning more directly to policy objectives, and to challenge existing assumptions about how services are delivered.

That might involve techniques like ‘zero-based’ budgeting – where departments build budgets from scratch rather than rolling forward previous allocations – or scenario modelling, for example looking at how services might adapt to a 10% funding cut. It can also mean identifying areas where cross-cutting reform could deliver better results for less money.

Spending Reviews are also a chance to assess how broader strategies – for example, achieving net zero, reducing child poverty, or growing the economy – interact with spending plans. Understanding how those priorities sit within overall financial constraints is vital for setting realistic and deliverable goals.

In that sense, what matters is not just the final numbers published in a Spending Review, but the quality of the process that underpins it. A good process avoids decisions being driven solely by short-term politics. Instead, it embeds evidence, analysis and consultation at its core. It links to other parts of government activity, including workforce planning and public service reform. And when savings are required, it ensures these are delivered strategically, rather than through blanket cuts shared equally across departments.

A Spending Review - if done properly - is a major undertaking. It requires strong leadership to set out the scale of the challenge, and the political will to signal where commitments may need to be scaled back. It also needs an openness to transparency and to lead a debate about difficult trade-offs.

Given that, it might seem odd to publish a comprehensive Spending Review so close to an election. Why set out detailed plans, knowing that a new government could take office just a few months later?

But in many ways, an upcoming election makes the case for doing so even stronger.

By setting out the outlook for funding and spending, the Spending Review can act as a foundation for all political parties as they develop their election platforms. It provides a transparent baseline of what is currently affordable and highlights the trade-offs that any party will face if it wishes to spend more in one area. In short, where a party wants to go further than the current government, the Spending Review ensures that voters can scrutinise how they would fund it.

It also comes at a critical moment. Pressures are building across key services, from hospital waiting times to standards in education. At the same time, structural shifts are reshaping the demand for, and delivery of, public services. Doing more of the same will not be enough.

The upcoming Spending Review will be one of the most important milestones of this government’s term. But more than that, it has the potential to be a defining moment in how Scotland prepares to meet the policy and fiscal challenges of the next decade and beyond.

Author

Graeme Roy is Professor of Economics, Deputy Head of the College of Social Sciences and Assistant Vice Principal at the University of Glasgow, and a Senior Fellow of the Centre for Public Policy. He is also currently interim Head of the Adam Smith Business School. Graeme is Chair of the Scottish Fiscal Commission, Scotland’s official independent economic and fiscal forecaster.

---

First published: 15 September 2025