In our first Scottish Budget blog, we looked at the broad regeneration funding outlook, which we can summarise as follows: regeneration funding has been reduced, and – according to the Spending Review – looks set to stay at that reduced rate for at least the two years thereafter.

Uncertainty about the continuation of certain funding streams – such as the Investing in Communities Fund – has both SURF and many communities worried.

That’s why we’ve written to the Deputy First Minister following the budget to gain clarity on the ICF and to highlight the real-life impact that its discontinuation will have on communities, projects, and people.

In this blog, we’ll look at each of the four key policy priorities recently outlined in our Manifesto for Regeneration, and break down how the budget fares on each.

Housing

On the Affordable Housing Supply Programme, investment in 2026-2027 is set at £926 million, with a total public sector investment of £4.1 billion over the course of the next four years (£953.4 million in 2027-28, £1,036.2 in 2028-29 and £1,184.6 in 2029-30). These will result in 36,000 new affordable homes.

However, we know that this will not fully address the housing crisis, and a sustained level of under-investment – as highlighted in the Spending Review – will add to existing housing issues. Research commissioned by the Scottish Federation of Housing Associations, Shelter Scotland, and the Chartered Institute of Housing suggests that investment levels need to be ‘£1.64bn annually, and £8.20bn over the next Scottish Parliament in today’s prices’ – with affordable need estimated at over 15,000 homes per year (significantly above current Scottish Government targets).

Given predictable cost overruns in the delivery of housing and slower-than-expected completions in recent years, this means that the Scottish Government could safely do with doubling its current financial commitment to meet the real affordable housing need in Scotland today.

For SURF, this is the number one priority in our suite of Housing policy asks – and we will continue to raise this point during both the election campaign and during the next parliament.

A few wider points around housing worth mentioning:

  • Continued funding for Discretionary Housing Payments is welcomed, particularly given issues around shortfalls in Local Housing Allowances and wider benefits disparities. The Spending Review suggests this will remain an ongoing priority for the Scottish Government, with year-on-year increases planned for both 2027-2028 and 2028-2029.
  • Planning will receive an extra £200,000 to cover the payroll costs associated with the Future Planners programme and standing up National Planning Hub. SURF hopes more funding into planning can alleviate pressures in the wider system, help accelerate housebuilding, and drive planning flexibilities, especially in dense town centres, rural areas, and islands. It should be noted, however, that the Spending Review has Planning spend fall to £9.5 million for the following two years.
  • The Scottish Empty Homes Partnership sees its budget reduced from the £2 million invested in previous years to £1.3 million for 2026-2027. Given its role in bringing back empty homes into usage, this is a project that should be scaled up, rather than down.
  • On council tax, while we welcome a step towards further tax equity – there needs to be a more comprehensive focus on system-wide reform for Council Tax. A new valuation is urgently needed – and SURF will of course raise this in the current consultation on council tax reform.

Transport

Continued support for buses is welcomed – with £50.5 million set aside, a 2% year-on-year increase – along with funding for Local Authorities to develop further bus infrastructure improvements, including – most promisingly – franchising, which receives £4 million in support over 2026-2027. Short of a municipally-owned transport network, franchising is the next most promising way forward in ensuring a reliable, affordable, and high-quality transport system – and, again, is a SURF policy priority for transport.

Furthermore, SURF hopes that the significant 66.3% increase in the Active and Sustainable Travel budget means an accompanying increase in the budget for the Bus Infrastructure Fund – which is included in the aforementioned budget line. Although a BIF increase is mentioned, no further detail is provided.

Related to transport and wider connectivity, digital investments total £70.5 million, more than double the budget in 2025-2026, but still a 47.6% reduction from the year prior (2024-2025), when significant investment in the R100 rollout took place. There is also funding set aside around digital strategy which we await further detail on.

Local Democracy

There’s no specific detail on additional resource for further strengthening community councils. Specific funding support at a local level – for example through the creation of Community Action Plans – remains fairly limited and constrained to other funding streams, such as Community Led Local Development.

Nevertheless, CLLD funding sees a modest increase of 3.3% – this is an area of particular importance for community led regeneration, and SURF feel it should be resourced appropriately. Many Local Authorities have seen a marked rise in CLLD applications which means there is significantly more demand than there are funds to meet that demand. A larger-than-inflation increase would be most welcome in this space.

Although no detail is provided on specific projections for CLLD spend in 2027-2028 and 2028-2029, the total investment over the next three years is projected at just under £28 million – which suggests that funding will remain at £9.3 million for the foreseeable. In practice, this means a real-terms reduction in CLLD funding, a worrying trend.

Fair Funding

A multi-year funding settlement for the third sector remains aspirational – with no further detail on a wider roll-out. Although Creative Scotland see its multi-year funding settlement continue, SURF would like to see this adopted more broadly, with a move to see this embedded in future funding.

On Arts and Culture, the increase in funding is worth mentioning, with a 11.7% increase from £238.4 million to £266.3. Creative Scotland see their funding rise by over £20 million.

A 27% cut in the Community and Renewable Energy Scheme (CARES) budget will hit communities working to develop local community energy projects. These can range from early-stage feasibility studies to developing community action plans and investing in renewables such as wind turbines, hydro, solar PV or decarbonising buildings. Total spend on CARES over the spending review period comes to £29.5 million which, like CLLD, suggests real-terms cut in funding for these projects when compared with 2025-2026. This cuts into the capacity of community led regeneration projects, especially given existing climate and energy aspirations.

Final Thoughts

While there are some positive signs, such as a real-terms increase in Local Authority funding and a continued focus on poverty alleviation measures – such as the Scottish Child Payment, which is well-evidenced as having a considerable impact and lifting 40,000 children out of poverty – there are significant areas where more must and can be done, particularly around the flatlining regeneration funding.

With the election nearly upon us, it remains interesting to see how different parties approach the above key policy priorities going forward, and how a new political landscape may change resourcing in future.

In our next blog in our 2026 Scottish Budget series, we’ll present a roundup of the funding settlements for key regeneration stakeholders.

If you have thoughts about this piece or would like to raise the impact of the budget on your organisation and work, please contact Augustijn van Gaalen, SURF’s Policy & Advocacy Manager, at augustijn@surf.scot.