Social Enterprise Scotland Response to the UK Government’s Budget Announcement
Posted: 01 December 2025, in News
Last Wednesday, the UK Chancellor set out the Government’s spending and taxation plans for the coming years. While political tensions surrounded the announcement, what matters most for our sector is the real impact these measures will have on social enterprises and the communities they serve across Scotland.
There are elements of this Budget that we welcome. The decision to finally scrap the two-child benefit cap is a long overdue and significant step that could lift 630,000 children out of poverty across the UK, with 20’000 of those living in Scotland. This change will directly benefit many families supported by Scotland’s social enterprises and is an important move toward a fairer society.
The confirmed increases to the UK National Minimum Wage provide welcome clarity. From April, the rate for workers aged 21+ will rise from £12.21 to £12.51 per hour, for those aged 18–20, wages will increase from £10.00 to £10.85, for under-18s, from £7.55 to £8.00, and the apprentice rate will also increase to £8.00. While these changes will have a limited direct impact on our sector, with 88% of Scottish social enterprises already paying the Real Living Wage of £13.45 for everyone over the age of 18, any future uplift to the Real Living Wage may place additional cost pressures on our social enterprise members.
Therefore, there must be acknowledgement and real-time changes to contracts and funding to keep pace with this deserved increase in wages. We cannot be in a position where social enterprises are effectively punished for being Real Living Wage employers.
Changes to salary sacrifice arrangements will have more far-reaching consequences. From April 2029, pension salary sacrifice will be capped at £2,000, and employers will be required to pay National Insurance on that sacrificed amount. This risks reducing saving incentives for workers and may contribute to slower wage growth across the economy. Similarly, reducing the annual ISA allowance from £20,000 to £12,000 from 2027 (with an exemption for over-65s) will constrain people’s ability to save for the future.
On transport and environmental measures, the introduction of a per-mile road pricing system for electric vehicles from 2028—on top of existing road taxes—combined with the ongoing freeze in fuel duty raises serious questions about the UK’s commitment to achieving net-zero and accelerating the transition away from fossil fuels.
For Scotland specifically, the Budget allocates £820 million through the Barnett Formula over the current spending review period, 2026/7 – 2028/9. The expansion of the sugar tax to include products such as milkshakes, pre-made lattes, and Irn-Bru will affect several key Scottish goods. The Chancellor also announced fully funded apprenticeship training for SMEs for under-25s in England; as apprenticeships are devolved, we await clarity from the Scottish Government on whether additional measures will be introduced to strengthen Skills Development Scotland’s support for employers and young people.
Overall, while the removal of the two-child cap is a major and welcome step, the broader Budget represents only limited progress. Scotland urgently needs a long-term economic strategy that puts wellbeing, sustainability, and community empowerment at its core. Social enterprises continue to lead by example, but this requires meaningful investment, bold policy reform, and recognition of the sector’s central role in building a fairer, greener, and more resilient economy.
Social Enterprise Scotland will continue to champion the needs of our sector and the communities we serve as these policies unfold.