4. Financial performance
Financial performance
The purpose of this section is to summarise the financial performance against the budget for the 2025-26 financial year. Transport Scotland receives the majority of its funding from the Scottish Government, with a small amount of generated income (Note 5). During 2025-26, £3.9 billion funding was received from the Scottish Government and total income generated was £33.3 million.
Transport Scotland’s funding from the Scottish Government includes funding for its Non-Departmental Public Bodies (NDPBs) including, Highland and Island Airports (HIAL), David MacBrayne (DML), Scottish Canals and Scottish Rail Holdings (SRH). The expenditure of NDPBs is reported in Transport Scotland’s consolidated HM Treasury Total outturn in the same way as Transport Scotland’s own spending.
While Transport Scotland’s budgets are recorded through the Scottish Government accounting system (Oracle), the organisation is accountable for the full HM Treasury budget position, including expenditure and accounting adjustments reported by its sponsored bodies. The tables below therefore present the total HM Treasury outturn for which Transport Scotland is accountable. Budgets are revised throughout the year through the Scottish Government’s Autumn Budget Revision (ABR) and Spring Budget Revision (SBR) processes to reflect changes in funding and forecast expenditure.
Overview
Transport Scotland maintained strong financial control throughout 2025-26, managing expenditure within 1% of its overall budget allocation. While the year-end HM Treasury Outturn shows an overall overspend of £41.9 million, (2024-25: £248.4 million underspend), this position is wholly attributable to non-cash depreciation and Annually Managed Expenditure (AME) adjustments. These budgets are inherently volatile, largely driven by accounting adjustments and valuation movements, and are therefore managed through wider Scottish Government budget processes. As such, they do not affect the resources available to support front line transport services or capital investment programmes.
Total Budget and Outturn
| Directorates | Opening Budget Bill 2025-26 £'000 | Budget as at SBR 2025-26 £'000 | Outturn 2025-26 £'000 | Variance to SBR Budget £'000 | % Variance |
|---|---|---|---|---|---|
| Rail Services | 1,418,639 | 1,508,367 | 1,449,761 | (58,606) | -4% |
| Concessionary Fares and Bus | 471,224 | 482,724 | 479,814 | (2,910) | -1% |
| Motorway and Trunk Roads | 1,010,647 | 1,036,423 | 1,169,445 | 133,022 | 13% |
| Ferry Services | 533,047 | 437,465 | 435,471 | (1,994) | 0% |
| Air Services | 79,558 | 71,858 | 63,606 | (8,252) | -11% |
| Other Transport | 295,554 | 251,053 | 243,017 | (8,036) | -3% |
| Local Authority Grants | 72,727 | 12,400 | 12,760 | 360 | 3% |
| Total SG funding | 3,881,396 | 3,800,290 | 3,853,874 | 53,584 | 1% |
| HMT Adjustments | 203,594 | 141,980 | 130,265 | (11,715) | -8% |
| HMT TOTAL | 4,084,990 | 3,942,270 | 3,984,139 | 41,869 | 1% |
Other Transport includes Sustainable and Active Travel and Low Carbon expenditure. Motorway and Trunk Roads include Safety, Adaptation, Maintenance and Improvement.
Outturn Analysis by Budget Classification
| Budget Classification | Budget as at SBR 2025-26 £'000 | Outturn 2025-26 £'000 | Variance to SBR Budget £'000 | % Variance |
|---|---|---|---|---|
| Resource | 1,592,629 | 1,566,630 | (25,999) | -1.6% |
| Capital | 2,010,564 | 1,970,160 | (40,404) | -2% |
| Non-cash | 345,135 | 434,915 | 89,780 | 26% |
| Financial Transactions | (10,000) | (10,000) | - | 0% |
| AME | 3,942 | 22,434 | 18,492 | 469% |
| HMT TOTAL | 3,942,270 | 3,984,139 | 41,869 | 1% |
Nil values are denoted by ‘–‘
Outturn variances – summarised by budget classification
| Outturn variances by budget classification | 2025-26 £'000 |
|---|---|
| Technical accounting adjustments (provisions) | 18,492 |
| Non-cash | 89,780 |
| Air Services Resource | (3,304) |
| Concessionary Fares and Bus Services Resource | 64 |
| Ferry Services Resource | 923 |
| Rail Services Resource | (22,297) |
| Other Transport Resource | 5,548 |
| Motorway and Trunk Roads Resource | (5,703) |
| Air Services Capital | (4,464) |
| Concessionary Fares and Bus Services Capital | (2,974) |
| Ferry Services Capital | (3,364) |
| Rail Services Capital | (21,168) |
| Other Transport Capital | (16,898) |
| Motorway and Trunk Roads Capital | 7,232 |
| Total Outturn Variance | 41,869 |
Resource
Resource expenditure was £26 million (1.6%) below budget. This reflected lower than anticipated expenditure across a number of areas, including rail services, roads and air services, partially offset by pressures within demand-led concessionary travel schemes and higher operating costs in some transport programmes.
The largest contributor to the underspend was Rail Services, where lower than anticipated costs and additional income generated by Scottish Rail Holdings resulted in a net underspend of £22.3 million. Underspends were also reported within Roads and Air Services, reflecting lower programme costs and favourable operational conditions during the year.
These underspends were partially offset by overspends within Other Transport and Ferries. Overall, the resource underspend reflects effective in-year financial management and monitoring of expenditure across the portfolio.
Capital
Capital expenditure was £40.4 million (2%) below budget, primarily reflecting the reprofiling of expenditure and changes in the timing of delivery across a number of programmes. The largest underspend was within Rail Services at £21.2 million, where infrastructure works were rescheduled due to delays in materials and supplier delivery. Further underspends arose within Other Transport (primarily Active and Sustainable Travel), Air Services, Ferries, and Concessionary Fares and Bus Services, reflecting a combination of procurement challenges, delivery delays, adverse weather and changes to programme timetables. These underspends were partially offset by additional investment in the trunk road network, where increased maintenance activity supported safety-critical adaptation and network strengthening programmes.
Financial Transactions
Financial Transactions budgets support loans and other repayable investments rather than day-to-day expenditure. During 2025-26, the Transport portfolio returned £10 million of Financial Transaction repayments from the Low Carbon Transport Loan Scheme, in line with an agreement reached with the Cabinet Secretary for Finance and Local Government. These repayments contributed to the Scottish Government's overall Financial Transactions budget position and represent the return of previously invested funds rather than a reduction in operational spending.
Non-Cash
The non-cash depreciation budget is influenced by accounting valuations of infrastructure assets, particularly the trunk road network. The outturn exceeded budget by £89.8 million (26%), reflecting year-end valuation movements that could not have been reliably estimated when the budget was set. These non-cash adjustments are accounting in nature and do not impact Transport Scotland's operational spending power.
Annually Managed Expenditure (AME)
AME reflects non-cash accounting adjustments relating primarily to provisions and other technical accounting requirements. Outturn was £18.5 million above budget, reflecting movements in the value of provisions during the year, including the release of provisions no longer required and the recognition of revised liabilities as projects progressed. The variance is predominantly driven by increased provisions associated with infrastructure projects. As AME budgets are ringfenced and managed separately from operational spending budgets, these adjustments do not affect the resources available to support the delivery of transport services or infrastructure investment programmes.
Reconciliation of overall outturn to the SoCNE
The Statement of Comprehensive Net Expenditure (SoCNE) records net operating costs of £3,497 million. Capital expenditure and HM Treasury Adjustments relating to NDPBs are not recognised as in-year expenditure within the SoCNE. The table below reconciles the overall HM Treasury outturn to the SoCNE position.
| Reconciliation of outturn to the SoCNE | 2025-26 £'000 |
|---|---|
| Net Operating Costs from SoCNE | 3,497,326 |
| Add: HMT Adjustments that do not go through the SoCNE | 130,265 |
| Add: Additions to PPE (Note 6) | 277,959 |
| Add: Additions to Investments (Note 9) | 101,574 |
| Less: Repayments of Investments (Note 9) | (22,985) |
| Reconciled HM Treasury Outturn | 3,984,139 |