Scotland’s ‘£2bn budget boost’ branded a con by SNP leaders

The Scottish government has dismissed as a “con” what Conservative opponents have labelled the chancellor’s £2 billion budget boost for Holyrood.

Philip Hammond said moves in his Autumn Budget would “mean £2 billion more for the Scottish government” but Scotland’s finance secretary Derek MacKay said Holyrood had been “short changed”, and that funds for day-to-day spending would actually fall.

During his statement to parliament yesterday, the Chancellor of the Exchequer said having his “ear bent” by the Scottish Conservatives’ 13 MPs had resulted in a number of financial concessions for Scotland.

He confirmed that VAT on police and fire services would be scrapped from next year, claiming the move came after the SNP had created the single organisations while fully aware of the costly charges in 2013.

Duty on whisky will also be frozen, and a range of tax breaks to help North Sea oil and decommissioning were unveiled, while further progress on city and region deals was also confirmed.

The Scottish Consrvatives also said that moves in support for housing outlined by Mr Hammond such as abolishing stamp duty for first-time buyers purchasing properties below £300,000 south of the border will leave the Scottish Government under pressure to match them.

Scottish Conservative leader Ruth Davidson said the impact of her party’s new MPs, who were elected in June, had forced the UK government’s hand and urged First Minister Nicola Sturgeon, with £2 billion in additional funding at her disposal, to abandon plans to increase income tax north of the border.

Ms Davidson said: “The budget hands the SNP government a £2 billion Barnett bonus. It’s funding that could now be used to help solve Scotland’s housing crisis, to upgrade infrastructure, and to support our schools and hospitals. That extra funding also means that SNP ministers must look again at their reckless plans to raise income tax in Scotland. As a result of the Chancellor’s decisions today they are getting £2 billion extra funding to help meet their own spending commitments.

“With income tax and stamp duty being cut south of the border, there is a growing tax gap between people in Scotland and elsewhere in the UK. The SNP can’t keep hitting Scots in the pocket – and need to hold off further tax rises in the Holyrood budget next month. The case for raiding the pay packets of ordinary Scottish families has collapsed. The Chancellor has delivered for Scotland. As we look ahead to the Scottish budget next month, it’s now vital that the SNP government follows suit.”

However, opponents pointed out that with the funds coming in the form of Barnett consequentials, they are Scotland’s share of additional spending in England which falls in areas of devolved competence - like health, education and housing.

The £2bn cited by Mr Hammond is also spread over the period from the current financial year through to 2020-21, and includes more than £1.1bn in financial transaction funding.

This is capital funding for loan or equity initiatives, like “help to buy” schemes, meaning the government is constrained in how it is spent.

The details were seized upon by Scotland’s finance secretary, Derek Mackay - who will unveil his own draft budget in December.

He said it was “money with strings attached” which could not be spent “directly on frontline public services” and would eventually have to be repaid to the Treasury.

He told the BBC’s Politics Scotland programme that “it’s not a £2bn boost to Scotland, it’s a con”.

Mr Mackay also claimed the block grant for day to day spending was being cut in real terms, something refuted by the UK government.

But Scottish Secretary David Mundell told the broacaster’s same programme that there would be a “significant increase in Scottish government spending”.

On the capital funds, he said the Scottish government could “use that money in innovative ways”, saying: “The money is definitely available. It’s for the Scottish government to come forward with the mechanisms that allow it to be used.

“Additional money is coming to Scotland and directly will benefit Scotland.”

But The Fraser of Allander Institute, an economic think tank based at the University of Strathclyde, said the extra funding for the resource budget amounted to “around £350m”, saying it “remains on track to be squeezed in real terms over the next two years”.

Director Graeme Roy added: “The challenge therefore remains for Derek Mackay as to how best to balance the resource budget with major commitments like additional support for the NHS, more money for childcare and public sector pay uplifts all to be paid for.”