SCOTLAND’S leading economic research institute has called out Labour MPs and MSPs for claims about Rachel Reeves’s Spending Review that are “neither transparent nor helpful”.
It came as the Fraser of Allander Institute issued its analysis of the Chancellor’s plans, which it summed up as “largesse in the short-run, followed by pretty steep subsequent cuts in real- (and in some cases cash-) terms”.
This pattern, the institute's director Mairi Spowage and deputy director João Sousa said, was visible in Scotland’s capital funding – money for investment and long-term projects, rather than day-to-day spending.
Fraser of Allander said: “We are now looking at a one-off boost to investment budgets of 6% in real-terms next year, followed by falls in each year.
“In fact, the figures only get starker once we take into account that so much of the boost to investment is on defence. Non-defence capital spending falls by -0.9% a year in real terms going forward, meaning it’s nearly 4% lower by 2029-30 than this year.”
The experts then added: “This pattern is broadly reflected in the Barnett consequentials for Scotland. The Scottish capital block grant increases by £0.6 billion (7.7% in real terms) next year, but then falls back to below 2025-26 levels by the end of the decade.”
On day-to-day revenue spending, Fraser of Allander said that budgets other than health, education, and defence were looking at “a relatively healthy 1.4% increase next year, but this is followed by 1.5% and 1.1% falls in each subsequent year, meaning that their budgets are 1.2% lower in real terms by 2028-29 than this year”.
The experts added: “The UK Government will no doubt argue that its efficiency drive will make it possible to do this while not cutting services, but we’ll reserve judgement on that. Similar initiatives in the past have had disappointing results; this one may well succeed, but it will have to buck the trend of history to do so, which would be no mean feat.”
They then went on to question claims from Labour MPs and MSPs that the Spending Review meant the Scottish block grant would increase by £9.1bn by 2028/2029, the end of the Spending Review period.
In May, the UK Government said the 2025/2026 block grant was worth £50bn, meaning the £52bn pledge would represent an increase of around 4% over four years.
Using a baseline of 2023/2024, the Labour have said the Scottish Government will receive “an average extra £2.9 billion across the duration of this Spending Review”.
Fraser of Allander said: “We have seen some Labour MPs and MSPs describing this event as increasing the block grant by £9.1bn over the Spending Review period.
“While it is true that Barnett consequentials add up to this figure (across different periods for resource and capital), this doesn’t seem like a particularly transparent or helpful way of describing the changes.
“It essentially assumes that no additional funding would have been made available for the Scottish Government in cash terms relative to that in 2025-26 – which is not a credible baseline.
“A much more insightful – though perhaps less cheery – conclusion from looking at the SFC’s [Scottish Fiscal Commission’s] forecast is that by 2028-29, funding will be £0.7bn lower than their central estimate published on 29 May.”
The £9.1bn claim was shared by Scottish Secretary Ian Murray, Scottish Labour, and MSP Michael Marra, among others.
Record investment in Scotland from this UK Labour Government. Investment in the North-East, funding for the Acorn Project, more money for our NHS. That's the difference a Labour Government makes. pic.twitter.com/75wi0Y7yuo
— Michael Marra MSP (@michaeljmarra) June 11, 2025
Elsewhere, experts have questioned whether Labour will be able to afford to stick to its commitments without raising taxes.
The Chancellor has repeatedly said the cost of Wednesday’s spending review is covered by the tax rises she brought in last year, saying departments must now “live within their means”.
But on Thursday, Reeves failed to rule out further tax rises in the autumn as new figures showed the economy shrank more than expected in April.
Asked on whether she could guarantee there would be no further tax rises, Reeves told LBC: “I think it would be very risky for a Chancellor to try and write future budgets in a world as uncertain as ours.”
