Overview
This report, which is based on data from a representative sample of nearly 900 households in Scotland in our November 2024 survey, comes at an interesting point in time. The UK has a new Government, while Scotland has a new First Minister. UK-wide inflation has fallen considerably compared with its peak in 2022, but the Bank of England has also recently halved its economic growth forecast. Substantial hardship clearly remains across the UK: for example, food banks in the Trussell network distributed 69% more emergency food parcels in 2024 than they did five years ago. The increase in food parcels in Scotland over the same time period has been less stark (at 9%), but the trend is nevertheless concerning.
Politicians face the perhaps unenviable task of sorting things out. In October 2024, the UK Chancellor Rachel Reeves announced the Government’s Autumn Budget. It’s fair to say that decisions to raise taxes and means-test the Winter Fuel Payment were met with little enthusiasm – our Tracker found that over half (57%) of UK households believed the budget would leave them worse-off in the next 12 months. The Scottish Government meanwhile announced its budget for 2025-26 on 4th December 2024, which is expected to be approved by Scottish Parliament by the end of February 2025, in time for the start of the new financial year.
From the perspective of household finances, two major elements of the Scottish budget are tax and social security. While the budget does not propose any increases to rates of income tax, there are planned changes to the Scottish income tax thresholds, with the first three thresholds increasing by 3.5%. Compared to the rest of the UK, the Scottish Government’s proposals mean that all taxpayers earning below £30,300 will pay less income tax in Scotland than they would if they lived elsewhere in the UK – although this will only amount to £28 per year for most. The small gain from these income tax threshold changes for low-to-middle earners may be dwarfed by higher Council Tax, as around a fifth of Scottish local authorities are considering Council Tax increases of at least 10% in 2025.
Also significant are proposed increases to devolved elements of social security, which is forecast to account for 13.5% of resource spending in 2025-26, up from 9.7% in 2022-23. This substantial increase is largely because the Scottish Government (1) has introduced benefits that are not available elsewhere in the UK, like the Scottish Child Payment, and (2) where an equivalent benefit exists in the UK, the Scottish Government is spending more than other parts of the UK. For example, the Adult Disability Payment is forecast to add £314 million to Scotland’s welfare bill, over and above the grant funding received from the UK Government.
In addition, the Scottish Government confirmed winter fuel payments of £100 per pensioner household for those who will no longer receive the more generous means-tested (£200 or £300) payment from winter 2025-26. It has also indicated a desire to “mitigate” the UK government’s two child cap on Universal Credit from 2026-27, a move welcomed by anti-poverty campaigners, particularly as official statistics show that the relative child poverty rate is stagnating, despite targeted policies like the Scottish Child Payment. There remain concerns among advocacy groups that those in greatest need will still not get the support they need, with ‘standstill funding’ proposed for the Scottish Welfare Fund (a national scheme for those most in need); and a significantly reduced budget for social security advice (from £226 million in 2024-25 to £178 million in 2025-26) which is feared will severely impact disabled people seeking support with complex benefits systems and other challenges.
This report highlights the context in which these policy changes are occurring at a household-level. We explore the overall financial wellbeing of households in Scotland and look at how they are managing to make ends meet. We also explore Scottish attitudes to both the UK Budget and a series of Scottish Government policies, before giving an overview of how households in Scotland feel about their financial futures.
Politicians face the perhaps unenviable task of sorting things out. In October 2024, the UK Chancellor Rachel Reeves announced the Government’s Autumn Budget. It’s fair to say that decisions to raise taxes and means-test the Winter Fuel Payment were met with little enthusiasm – our Tracker found that over half (57%) of UK households believed the budget would leave them worse-off in the next 12 months. The Scottish Government meanwhile announced its budget for 2025-26 on 4th December 2024, which is expected to be approved by Scottish Parliament by the end of February 2025, in time for the start of the new financial year.
From the perspective of household finances, two major elements of the Scottish budget are tax and social security. While the budget does not propose any increases to rates of income tax, there are planned changes to the Scottish income tax thresholds, with the first three thresholds increasing by 3.5%. Compared to the rest of the UK, the Scottish Government’s proposals mean that all taxpayers earning below £30,300 will pay less income tax in Scotland than they would if they lived elsewhere in the UK – although this will only amount to £28 per year for most. The small gain from these income tax threshold changes for low-to-middle earners may be dwarfed by higher Council Tax, as around a fifth of Scottish local authorities are considering Council Tax increases of at least 10% in 2025.
Also significant are proposed increases to devolved elements of social security, which is forecast to account for 13.5% of resource spending in 2025-26, up from 9.7% in 2022-23. This substantial increase is largely because the Scottish Government (1) has introduced benefits that are not available elsewhere in the UK, like the Scottish Child Payment, and (2) where an equivalent benefit exists in the UK, the Scottish Government is spending more than other parts of the UK. For example, the Adult Disability Payment is forecast to add £314 million to Scotland’s welfare bill, over and above the grant funding received from the UK Government.
In addition, the Scottish Government confirmed winter fuel payments of £100 per pensioner household for those who will no longer receive the more generous means-tested (£200 or £300) payment from winter 2025-26. It has also indicated a desire to “mitigate” the UK government’s two child cap on Universal Credit from 2026-27, a move welcomed by anti-poverty campaigners, particularly as official statistics show that the relative child poverty rate is stagnating, despite targeted policies like the Scottish Child Payment. There remain concerns among advocacy groups that those in greatest need will still not get the support they need, with ‘standstill funding’ proposed for the Scottish Welfare Fund (a national scheme for those most in need); and a significantly reduced budget for social security advice (from £226 million in 2024-25 to £178 million in 2025-26) which is feared will severely impact disabled people seeking support with complex benefits systems and other challenges.
This report highlights the context in which these policy changes are occurring at a household-level. We explore the overall financial wellbeing of households in Scotland and look at how they are managing to make ends meet. We also explore Scottish attitudes to both the UK Budget and a series of Scottish Government policies, before giving an overview of how households in Scotland feel about their financial futures.
Key findings
• Over one-in-six (18%) households in Scotland are in serious financial difficulties - slightly higher than the rate for the rest of the UK (15%). This figure for Scotland is largely unchanged compared to 2023, but has improved slightly for the rest of the UK (17%).
• One-in-five (20%) households in Scotland say they are 'currently struggling to pay for food or other necessities' - the same rate as the rest of the UK.
• There are signs of lower financial resilience among Scottish households: a third (32%) of households in Scotland have nothing in savings, compared to 23% in the rest of the UK. This nine percentage point gap is an increase on 2023, when the gap stood at three percentage points (29% in Scotland and 26% in the rest of the UK).
• Over a third (36%) of Scottish households still describe their energy bills as 'unaffordable' - though this is an improvement on 2022 when over half of households were struggling with their energy bills. Nevertheless, half (51%) of Scottish households continue to avoid turning on the heating or are turning it on less than usual.
• Over a third (36%) of Scottish households feel they have no control over their financial situation, while a similar proportion say that financial worries cause them to sleep poorly at night (35%) or that their financial situation is causing their mental health to deteriorate (37%). The negative impact on mental health increases for those in the bottom income quintile (59%) and even more so for those in serious financial difficulties (82%).
• One-in-seven (14%) households in Scotland are 'very worried' about their overall financial situation in the next 12 months and one-in-five (20%) lack confidence for their finances in the next three months. This is similar to the situation in 2023 but considerably improved compared to 2022 when 39% lacked confidence for the next three months.
• One-in-five (20%) households in Scotland say they are 'currently struggling to pay for food or other necessities' - the same rate as the rest of the UK.
• There are signs of lower financial resilience among Scottish households: a third (32%) of households in Scotland have nothing in savings, compared to 23% in the rest of the UK. This nine percentage point gap is an increase on 2023, when the gap stood at three percentage points (29% in Scotland and 26% in the rest of the UK).
• Over a third (36%) of Scottish households still describe their energy bills as 'unaffordable' - though this is an improvement on 2022 when over half of households were struggling with their energy bills. Nevertheless, half (51%) of Scottish households continue to avoid turning on the heating or are turning it on less than usual.
• Over a third (36%) of Scottish households feel they have no control over their financial situation, while a similar proportion say that financial worries cause them to sleep poorly at night (35%) or that their financial situation is causing their mental health to deteriorate (37%). The negative impact on mental health increases for those in the bottom income quintile (59%) and even more so for those in serious financial difficulties (82%).
• One-in-seven (14%) households in Scotland are 'very worried' about their overall financial situation in the next 12 months and one-in-five (20%) lack confidence for their finances in the next three months. This is similar to the situation in 2023 but considerably improved compared to 2022 when 39% lacked confidence for the next three months.
Further reading
- One third of Scottish households have no savings