Chancellor Rachel Reeves has announced a sweeping £52 billion spending package for Scotland as part of the UK Government’s latest Spending Review, describing it as the largest real-terms funding settlement since devolution began.
The multi-year plan will see Scotland receive an average £50.9 billion block grant annually over the next three years, with investment pledged for defence, advanced computing, and the development of carbon capture technologies.
Key Investments for Scotland
Among the headline announcements:
- £250 million earmarked for infrastructure upgrades at HM Naval Base Clyde (Faslane), supporting submarine operations and defence jobs across the west of Scotland.
- Up to £750 million to develop Britain’s most powerful supercomputer, to be hosted in Edinburgh, bolstering AI research and advanced analytics.
- Development funding for the long-awaited Acorn carbon capture project at St Fergus gas terminal in Aberdeenshire, which aims to store CO₂ under the North Sea.
Reeves said the investment package was designed to support communities “that powered our last industrial revolution” and help them lead the next – with a focus on energy transition, digital innovation, and defence resilience.
Defence Spending to Rise
Overall UK defence spending will increase to 2.6% of GDP by 2027, with a £4.5 billion boost for munitions production, including facilities in Glasgow. Reeves positioned this as part of a broader ambition to make the UK a “defence industrial superpower”.
Details of the Clyde base investment remain forthcoming, but Defence Secretary John Healey said the funding would ensure infrastructure to “keep submarines maintained and at sea – continuing to protect us around the clock”.
Carbon Capture Project Moves Forward – With Caution
The Acorn Project, which aims to capture and store emissions offshore, has lingered on a reserve list for funding. While Reeves announced that development support is now planned, no specific figure or timescale was provided.
The UK Government confirmed a final investment decision would come “later this parliament”, pending readiness and affordability. The lack of concrete details drew criticism from SNP Westminster leader Stephen Flynn, who welcomed progress but noted the contrast with the £22bn already committed to similar projects in England.
Scotland’s Broader Budget Outlook
While much of the Spending Review focuses on England, increased NHS funding and a £39bn boost for housing south of the border will also result in Barnett consequentials – additional funding allocations for the devolved Scottish Government.
However, analysts have warned that pressures on welfare budgets and inflation could still force tough decisions in Holyrood, despite headline increases in funding.
Reactions & Comments
Commenting, Seamus Logan said:
“While I welcome the UK Government’s stated support for Acorn at St Fergus in my constituency, I am disappointed that the Chancellor did not outline an actual figure on this funding amount. Given the £22 billion given to Teesside and Merseyside in Track 1 of the Government’s Carbon Capture plan, and today’s announcement on the £9.4 billion for CCUS, I would have hoped for some clarity on Acorn.
“We’ve waited for around twenty years to hear about Government support for carbon capture and storage in the North-east of Scotland as subsequent UK Governments made pledges they didn’t keep; now Labour has made this commitment on paper, it remains to be seen if this amount will be enough to kick start the green generator at Peterhead Power station and the necessary investment in Peterhead Port.
“In her Spending Review speech to Parliament today, the Chancellor announced £14.2 billion for the Sizewell C nuclear power station in Suffolk. This huge sum will only cover four years of the nuclear plants’ decade long construction costs and I’m sure it will be delivered late and at massively higher cost. While other parts of the UK get the greenlight on energy support, the North-east of Scotland is facing catastrophic job losses, with more predicted to follow without significant investment in the area.
“Here in the North-east of Scotland we are at a pivotal moment in our green energy transition and carbon capture is integral to our future success, to our potential for job creation and to retaining the talent and expertise of those working in the fossil fuel sector as part of the Just Transition. Investment in Acorn means realising supply chain opportunities as well as our green energy transition. This is Scotland’s future, and we must not be short changed.”
Fiona Campbell, CEO of the Association of Scotland’s Self-Caterers, commented:
“The ASSC warmly welcomes Màiri McAllan back to the Scottish Government in her new role as Cabinet Secretary for Housing and extends our best wishes to Paul McLennan for the future. Addressing Scotland’s housing emergency is an urgent and long-overdue priority. We look forward to working collaboratively with the new Cabinet Secretary to deliver real solutions, such as building more affordable homes and bringing empty properties back into use. It’s vital that future housing policy is grounded in evidence and avoids scapegoating Scotland’s £1bn self-catering sector, which plays an important role in the tourism economy and rural communities.”
Professor Joe Nellis is economic adviser at MHA, the accountancy and advisory firm.
The Chancellor’s Spending Review has set an ambitious tone for economic renewal, unveiling a sweeping programme of investments designed to resonate with the Labour Party’s traditional base and beyond. Key highlights include a 3% annual real-terms increase in NHS funding over the life of this Parliament, as well as significant investments in defence, social housing, transport, and the energy transition.
Among the headline commitments are a £39 billion allocation to social and affordable housing, new transport initiatives extending beyond London, and a bold push into nuclear energy. The Chancellor also declared her ambition to position Britain as a ‘defence industrial superpower,’ with infrastructure projects supported by British industry and built using materials sourced from homegrown firms such as British Steel.
This Spending Review signals a decisive shift. It represents not only an effort to jumpstart growth in the short term but also to lay the groundwork for the longer-term, sustainable growth needed to lift living standards and tackle the challenges that lie ahead.
The Chancellor’s plan for front-loaded capital expenditure, financed through borrowing but kept within her fiscal investment rule, will be welcomed by many in the business community. However, the sustainability of this spending spree will ultimately hinge on reigniting economic growth. Without a robust rebound, the Chancellor may find herself forced to contemplate tax increases in the Autumn Budget to keep public finances on track.
Andrew Bowie MP said:
“The Chancellor’s spending review presented a golden opportunity to get funding to areas which have been ignored by the central belt obsessed SNP government in Scotland.
“But that opportunity has been squandered.
“Today we saw that Labour want to take credit for the last Conservative government’s detailed work on developing new nuclear and alternative energies.
“But there was nothing about massively damaging Labour policies still in place.
“The hike in employer National Insurance contributions is already gutting public services and charities.
“There is no change to the family farm tax which will have a major impact on Scotland’s food security.
“And there is no change to the massively damaging windfall tax which is costing North East oil and gas workers their jobs, right now.
“There is a tacked on, watered down version of the shared prosperity fund which does next to nothing for communities in Scotland.
“Rather than levelling up north of the border, Labour is set to level down.”
Scottish Conservative MP for Gordon and Buchan, Harriet Cross, who has been a leading campaigner against the family farm tax, said:
“Labour’s spending review was an opportunity for the Chancellor to give farmers a vote of confidence, but instead she left the industry at the bottom of the pile again.
“It’s disgraceful that the agriculture budget and sustainable farming didn’t even merit a mention in the Chancellor’s spending review statement, yet these atrocious cuts will be disastrous for the industry.
“There was a glimmer of hope that Rachel Reeves would finally do the right thing by removing Labour’s family farm tax, yet her abhorrent abandonment of the industry shone through once more.
“With less than a year to go before it comes into effect, her decision not to scrap this damaging tax risks livelihoods, undermines generations of hard work and threatens the breakup of family farms across Scotland.
“Labour are intent on raiding farmers for everything they have, with rises to employer National Insurance contributions, a new fertiliser tax, a double cab pick-up tax, and now a family farm tax with cuts to the very budget they rely on.
“I, along with Conservative party colleagues and the industry, will not accept this Labour government’s attack on farmers lying down and we will continue our fight against this.
“Keir Starmer must recognise the harm he is causing to our agriculture sector and reverse these plans to safeguard both farming and the nation’s food security before it’s too late.”
Director at the Association of Professional Staffing Companies (APSCo) commented:
“The Chancellor’s announcement didn’t reveal any surprises, however it did feel more like a Spending Review promising future returns, rather than one giving much need confidence to businesses today. Future-proofing the UK’s budget is a necessity, but it’s perilous to overlook the corporate landscape. Companies are nimble and move quickly, so while we welcome investment in longer-term skills and economic growth, the short-term must not be neglected. Unfortunately, we are already seeing the impact of this oversight, with offshoring and hiring freezes being more acutely felt. Unemployment levels are now at their highest levels in nearly four years and reports today suggest that a quarter of a million jobs have been lost since the Autumn Budget. This needs to be urgently addressed.
“The current situation isn’t being helped by the Government’s approach to the professional staffing sector. Reforms to employment regulation may be required, but not to the detriment of an accessible and flexible workforce. It was disappointing to hear the Chancellor reference the ban on zero-hours and fire & rehire practices in her speech, for example. Yes, exploitation needs to be stamped out in the workforce, however, an unnecessarily rigid process won’t be beneficial for anyone, particularly not skills short remits such as healthcare and the NHS. As we highlighted in our response to Wes Streeting following the announcement that agency workers and temporary staffing firms would be limited in use across the NHS, a reduction of access to flexible resources will be damaging in the short-term. The detailed Spending Review document suggests that this practice is being extended across other Government Departments, with the Department for Environment, Food & Rural Affairs (Defra) and the Foreign, Commonwealth & Development Office (FCDO) also being tasked with reducing reliance on contractors.
“The focus on skills and training is something we certainly welcome. The money for skills is clearly focused on the young, construction workers and getting the economically inactive back into work, which are all sensible steps. However, this needs to happen in parallel to building up more technical skills, particularly given the focus on AI. Boosting training and apprenticeships for young workers is necessary, but so too is greater flexibility around skills investment outside of this demographic, which industry leaders have long called for.
“Given the lack of comprehensive impact assessment the Government is hedging its bets that British business will suck up the costs and uncertainty of the fundamental labour market change the Employment Rights Bill promises. Only business can deliver the much-needed growth to support this Spending Review. We fear that their optimism is unfounded, given the potential for international outsourcing. We ask them to reconsider the breadth of the measures and undertake detailed updated impact assessments now, whilst the Bill is still in Parliament.”
Inflation jumps higher than expected