Scotland’s public sector deficit narrowed by £600m to £25.3bn in the latest financial year, according to figures released in the Government Expenditure and Revenue Scotland (Gers) report. The improvement came as tax revenue raised in Scotland grew faster than public spending, with revenue climbing 6.9% to £98.3bn while expenditure rose 4.8% to £123.6bn. National insurance contributions and income tax receipts were the biggest drivers of the extra revenue, up £2.4bn and £1.5bn respectively.
The Gers report, compiled annually by Scottish government statisticians independently of ministers, sets out the balance between what is raised in tax across Scotland and what is spent by the Scottish, UK and local governments on services delivered in and for Scotland. This includes reserved responsibilities such as the state pension alongside devolved areas like the health service, plus a proportional share of UK-wide spending such as defence and debt interest.
The improved fiscal position sits against a backdrop of tightening UK public finances more broadly. UK government borrowing fell by nearly £20bn in the year to March, reaching £132bn — the lowest annual borrowing figure since 2019-20 — as stronger receipts across the UK helped offset higher spending. At the same time, Holyrood parties are grappling with a separate £4.8bn shortfall in the coming Scottish budget, with experts questioning whether parties have been transparent about how they would close the gap given rising social security costs and public sector pay pressures.
How does this year's deficit compare with previous years?
The direction of travel is less clear-cut than a single year's snapshot suggests. Separate Gers figures covering the 2024-25 financial year showed the deficit widening to £26.2bn from £21.4bn the year before, with total revenue of £91.4bn against expenditure of £117.6bn, according to a national broadcaster's report. The Scottish Government attributed that earlier deterioration to a second consecutive fall in North Sea revenue and to onshore revenue growth, driven mainly by income tax, lagging behind the pace of spending growth, according to a Scottish Government statement. Excluding North Sea revenue altogether, that year's deficit stood at 14.3% of GDP, or £30.3bn, the same statement noted.
What is driving the numbers?
North Sea oil and gas revenue has continued its multi-year decline, falling for a third consecutive year to £3.9bn from £4.5bn, with Scotland's geographical share dropping from £3.6bn to £3.2bn. In the 2024-25 figures cited above, North Sea revenue was recorded at £4.1bn, down from £4.9bn the previous year, according to the Scottish Government. Spending per person in Scotland stood at £22,281, some £2,720 higher than the UK-wide average, though the earlier 2024-25 figures put Scottish spending per person at £21,192 against £18,523 across the UK as a whole, according to the national broadcaster's report. The Institute for Fiscal Studies has separately estimated total public expenditure for and on behalf of Scotland at £118bn for 2024-25, slightly above the government's own Gers figure, in a report on Scottish public service spending.
What happens next?
Attention now turns to how the Scottish budget will be shaped around these figures. The Scottish Fiscal Commission's budget scrutiny material puts total funding available to the Scottish Government in 2026-27 at a forecast £61.677bn, according to parliamentary budget scrutiny papers. Audit Scotland has meanwhile set out that the 2026/27 Scottish Budget carries total managed expenditure of £67.979bn, including resource funding of £50.6bn, according to an Audit Scotland briefing. Those figures will feed directly into the debate over how ministers close the previously flagged £4.8bn shortfall while responding to the fiscal pressures highlighted in the latest Gers data.
Key Facts
- Scotland's deficit fell by £600m to £25.3bn in the latest Gers report.
- Revenue rose 6.9% to £98.3bn; expenditure rose 4.8% to £123.6bn.
- North Sea revenue fell for a third straight year, to £3.9bn.
- Spending per person in Scotland was £22,281, £2,720 above the UK average.
- UK-wide government borrowing fell to £132bn in the year to March, the lowest since 2019-20.
