Treasury must compensate Scotland for tax hike – Shona Robison

Defending her decision to raise taxes, Reeves said: “We had to make difficult decisions to raise the money so that we could reduce NHS waiting lists, so that we could build the homes that our country needs, so that we could give the settlement to Scotland yesterday.”

A UK government spokesperson said the Treasury would provide funding to support the public sector with the additional costs.

They said the £3.4bn figure did not include the additional support.

The spokesperson added: “We will work through the implications for the devolved governments budgets at official level.”

It is understood that of the £3.4bn settlement for 2025-26, £2.8bn is for day-to-day spending.

The Scottish government is due to announce its budget for the next financial year on 4 December.

The Fraser of Allander Institute, an independent think tank, said the UK Budget was “likely to make the Scottish government’s job of balancing its budget significantly easier” thanks to a £1.5bn increase in funding in 2024-25.

However, First Minister John Swinney said the increase in this financial year “largely accords with our expectations in our internal planning”.

He said it would be used to meet the cost of public sector pay deals and the impact of inflation.

Swinney said the Scottish government did not expect to have “any new capacity” for spending in 2024-25.

It has already made £500m of cuts from its budget for this financial year.

During First Minister’s Questions, Scottish Conservative leader Russell Findlay said Labour had “chosen to hammer workers and declare war on business” and criticised Robison for describing the budget as a “step in the right direction”.