Scotland has vowed to scrap the two-child benefit cap, saying it will lift 15,000 Scottish children out of poverty.

Scotland’s finance secretary Shona Robison also committed to a record investment in the NHS as she unveiled the nation’s draft budget for the coming year in a speech at Holyrood.

The MSP previously said the budget would put “the people of Scotland first”.

Ms Robison told the chamber on Wednesday: “This budget invests in public services, lifts children out of poverty, acts in the face of the climate emergency, and supports jobs and economic growth.

“It is a budget filled with hope for Scotland’s future.”

Highlights from the draft budget:

• The Scottish government will mitigate the impact of the UK government’s two-child benefit cap. Ms Robison has urged Westminster to provide the necessary data to allow for the change to be made. She said: “Let me be crystal clear, this government is to end the two-child cap and in doing so will lift over 15,000 Scottish children out of poverty.”

• The nation’s NHS will receive a record £21bn for health and social care – an increase of £2bn for frontline NHS boards. The investment comes as spending watchdog Audit Scotland warned the NHS is unsustainable in its present state, with a fundamental change “urgently needed”.

• Almost £200m will be invested to reduce NHS waiting times. Ms Robison said by March 2026, no one will wait longer than 12 months for a new outpatient appointment, inpatient treatment or day-case treatment.

• The SNP has ditched its flagship council tax freeze. Local authority funding will be increased by more than £1bn, taking the total amount to more than £15bn. Ms Robison said while it is up to the local authorities to make their own decisions with the funding, there is “no reason for big increases in council tax next year”.

• More than £300m of ScotWind revenues will be invested in jobs and in measures to meet the climate challenge.

• £768m will be invested into affordable homes, enabling more than 8,000 new properties for social rent, mid-market rent and low-cost home ownership to be built or acquired this coming year.

• The Scottish government will also work with the City of Edinburgh Council to “unlock” more than 800 new net zero homes at the local authority’s Granton development site.

• New funding of £4m will be invested to tackle homelessness and for prevention pilots.

• An additional £800m will be invested into social security benefits.

• More than £2.5m will be delivered to support actions within the Disability Equality Action Plan.

• Spending on education and skills will increase by 3% over and above inflation, an uplift of £158m.

• £120m will be provided to headteachers to support initiatives designed to address the poverty-related attainment gap.

• Free school meals will also be expanded to primary 6 and 7 children from low-income families.

• A new initiative titled “bright start breakfasts” will be funded to help deliver more breakfast clubs in primary schools across the country.

• £29m will be invested into an additional support needs (ASN) plan, which will help maintain teacher numbers at 2023 levels and additionally train new ASN teachers.

• Almost £4.2bn will be invested across the justice system. The funding will seek to maintain police numbers. An additional £3m will be made available to help mitigate retail crime amid shoplifting concerns.

• £4.9bn will be invested to tackle the climate and nature crises.

• £25m will be allocated to support the creation of new jobs in the green energy supply chain in Scotland. And to help people at home and work, £300m will be invested in upgrading heating and insulation.

• £90m will be invested to protect, maintain and increase the nation’s woodlands and peatlands.

• £190m will be made available to boost bus services and to make it easier for people to walk, wheel or cycle. The electric vehicle charging network is also to be expanded.

• Almost £1.1bn will be used to maintain and renew the nation’s rail infrastructure.

• £237m will be invested to maintain and improve the nation’s ports, as well as deliver a “more resilient and effective ferry fleet”.

• In rural communities, more than £660m will be used to support farmers, crofters and the wider economy.

• The culture budget will increase by £34m.

• Income tax rates in Scotland have been frozen until 2026.

• The SNP had already confirmed it intends to restore a universal winter fuel payment for pensioners next year. Those in receipt of pension credit or other benefits will receive a £200 or £300 payment, depending on their age. All other pensioners will receive a reduced payment of £100.

The Scottish budget is largely funded through the block grant alongside taxes raised north of the border.

Holyrood has an additional £3.4bn to spend in 2025-26, thanks to cash announced by UK Chancellor Rachel Reeves in her budget in October – taking the overall settlement to £47.7bn.

However, the Scottish budget for 2023-24 amounted to around £59.7bn.

Holyrood ministers are legally obliged to balance the books and have limited borrowing powers with which to raise additional funds.

The draft budget will be scrutinised in the Scottish parliament over the coming weeks before an expected vote in February, where the SNP will need to garner support from outside its minority administration for it to pass.

Read more from Sky News:
PM refuses to reveal what he was told about Louise Haigh phone ‘theft’
Bank of England governor frets over impact of budget and Trump’s return

Following her statement, Ms Robison said she was looking forward to working with the opposition parties.

She added: “I am proud to present a budget that delivers on the priorities of the people of Scotland.

“Parliament can show that we understand the pressures people are facing.

“We can choose to come together to bring hope to people, to renew our public services, and deliver a wealth of new opportunities in our economy.”

In response, the Scottish Greens said it will not back the proposed budget “as things stand”.

Ross Greer, the party’s finance spokesperson, cited its failure to expand free school meals for all P6 and P7 pupils.

The MSP said: “The government has agreed to more modest Green proposals like free ferry travel for young islanders, free bus travel for asylum seekers and higher tax on the purchase of holiday homes, but these measures are not nearly enough to make up for the cuts elsewhere.

“Big changes will be needed if they expect the Scottish Greens’ support.”

IPPR Scotland welcomed the intention to scrap the two-child benefit cap, as did Oxfam Scotland.

However, the charity criticised the Scottish government’s failure to implement a tax on “pollution spewing private jets” and is calling on ministers to “turbocharge talks with the UK government in order to give the tax clearance for take-off as soon as possible”.

Meanwhile, the Scottish Conservatives branded it “more of the same from the SNP”.

Craig Hoy, the party’s shadow cabinet secretary for finance, said: “Taxpayers are paying the price for years of SNP waste on ferries, gender reforms, failed independence bids, and a National Care Service that has already cost £30m.”

The MSP said the NHS is on its knees and needed “urgent reform”.

He added: “The extra funding is welcome but our NHS needs more than money, it needs leadership and a serious plan to reduce waiting lists, yet the SNP’s only proposal is rehashing a previous broken promise.

“The Nationalists have no vision for the future of the country and it’s clear John Swinney is out of ideas.”

The Scottish Tories also said the two-child benefit cap is “necessary”.

MSP Liz Smith, the party’s shadow social security secretary, said: “Social security payments must be fair to people who are struggling and to taxpayers who pick up the bill.

“We believe the two-child cap is necessary and the right approach at this time.

“The rapidly rising benefits bill is currently unsustainable as a direct consequence of the SNP’s high tax rates and mismanagement of our economy and public finances.”

One of Britain’s biggest parcel carriers has been hit by a capacity crisis at the start of the crunch festive trading period, forcing it to urge key customers to divert business to rival delivery firms.

Sky News has learnt that Yodel, which was due to recruit thousands of seasonal workers to help it deal with a surge in volumes from Black Friday until Christmas, has told clients including New Look, Gousto and eBay that it has been affected by a series of operational challenges.

In a memo sent to customers this week, which has been seen by Sky News, Yodel said it had seen “significant delays in processing [parcels] therefore impacting the availability of empty trailer[s] and our planned driver schedules”.

Money latest: Taxman issues clarification on selling items online

“Unfortunately, this combined with a number of our peak HGV drivers not arriving for their agreed time slot has impacted our ability to provide the number of agreed collections.

“Upon investigation, we uncovered that this was due to significant financial incentives being offered elsewhere.

“We are working closely with these drivers as they had made a commitment to Yodel for the peak period.”

It went on to warn clients: “We are currently unable to guarantee a 24-hour service.”

“With this in mind and the reduction in network productivity due to the… high numbers of large, manually sorted parcels entering the network, we are unfortunately requesting that you reduce your planned volume for our network for the upcoming week, if you are able to divert parcels through your other carriers.”

The crisis is the latest to hit Yodel this year, after it came close to collapse in February and was forced to seek emergency funding from new investors.

Read more from Sky News:
Burberry launches High Court action against B&M
First rail companies to be nationalised are revealed
The market town named the happiest place to live

Yodel was previously owned by the Barclay family, whose business portfolio also included the Telegraph newspapers and London’s Ritz hotel.

A Yodel spokesperson said on Wednesday: “Due to record-breaking volumes and a surge in larger parcels over Black Friday week and Cyber Monday, we worked with a small number of clients to adapt collection schedules to maintain smooth operations.

“We are grateful to these clients for their collaborative approach and ongoing support.

“Our teams are working tirelessly during the busiest time of the year, and we expect to clear a small backlog by this weekend.”

Yodel makes more than 190 million deliveries annually from its sites across the UK.

Business reaction to the budget is the “biggest issue” facing the Bank of England, according to its governor – while he also contemplates the impact of Donald Trump’s looming return to the White House.  

Andrew Bailey told an event the future was clouded by domestic and global “uncertainty”, making it difficult to predict the effect on the UK economy, particularly around inflation.

He was speaking at the Financial Times’ Global Boardroom just a fortnight before the Bank is due to make its next interest rate decision.

The prospects for a third cut this year are grim, with financial markets betting there will be no change.

Money latest: Taxman issues clarification on selling items online

All the mood music coming from Mr Bailey and his fellow rate-setters over the past few weeks has been cautionary, with the bulk of public commentary talking of the need for a “gradual” approach.

The Bank is worried by a recent surge in inflation that has taken the rate back above its 2% target.

Forecasts suggest it will keep going up in the coming months, towards 3% from 2.3% currently, amid renewed pressure from energy and services costs.

Another headwind is the pace of wage growth which, the Bank fears, will stoke inflation by boosting demand in the economy.

Mr Bailey said it was not yet clear what effect the hike to employer National Insurance contributions, announced in the budget and set to take effect in April, would have.

“I think the biggest issue now in the immediate future is the response to the National Insurance change; how companies balance the mixture of prices, wages, the level of employment, what is taken on margin, is an important judgement for us,” he said.

The budget raised employers’ National Insurance contributions by 1.2 percentage points to 15% and also lowered the threshold for when firms start paying to £5,000 from £9,100 per year.

Read more:
Bank of England sees 4.4 million homes paying higher mortgages

Businesses have responded by claiming it will hit wage settlements, investment and jobs.

They have also warned that the cost increases will be passed on to customers, potentially stoking inflation.

The retail sector alone says it faces an additional £7bn burden in 2025 from the changes while hospitality expects a £3.5bn hit. Both are major employers.

While weaker pay settlements could help the Bank bring down borrowing costs through interest rate cuts, policymakers will be worried about the threat of higher prices in shops, bars and restaurants.

Mr Bailey said the Bank had laid out a “range of options” analysing the potential economic impact, “some of which would imply greater inflation and some of which would imply less inflation”.

“So there is uncertainty there and we need to see how the evidence evolves,” he said.

Read more from Sky News:
First rail companies to be nationalised are revealed
The market town named the happiest place to live

The other global pressure he spoke about was the impact of the Trump presidency from late January.

The governor said the Bank was analysing the possible effects of threatened trade policies on the UK.

Mr Trump has warned of tariffs covering all US imports as part of his agenda to protect US industry and jobs.

Mr Bailey said of such a scenario that it clearly “moves trading prices but it also depends on how other countries react to them, and how exchange rates react to them as well”.

He did not disagree, in an FT interview, that further interest rate cuts could be expected next year.

Financial markets are expecting up to four, barring any further shocks.

Mr Bailey described the process of falling inflation as being “well embedded”.