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Last Updated: Tuesday, 9 October 2007, 20:00 GMT 21:00 UK
Row over spending review figures
Alistair Darling
Alistair Darling's first spending review drew mixed reaction
Scottish Government spending will increase by an average annual rate of 1.8% over the next three years, the Treasury has announced.

It said spending would go up by between 1.2bn to 3.7bn each year to make a total increase of 7.2bn.

Scottish Secretary Des Browne said the outcome of the budget and spending review was "very good for Scotland".

However, First Minister Alex Salmond said the figures were misleading and that the true increase was 1.4%.

The SNP also said it was the worst economic settlement since devolution and claimed Scotland had been "short-changed".

Mr Browne said the Barnett Formula, the process which sets Scotland's share of public spending, provided the same per capita spending increase as comparable government departments in England.

He said Scotland also benefited "substantially" from the UK's continued strong economic growth and employment performance.

Nobody is fooled by Labour's spin that Scotland's budget increase is bigger than it really is
Stewart Hosie SNP MP

He said the Scottish budget had increased from 14bn in 1999 to 26bn last year and spending was at record levels.

He added: "This very generous settlement is in context of an overall review which has been tighter than in recent years for many Whitehall departments.

"Where spending has increased across other departments, it is in areas which also benefit Scotland - on counter-terrorism, and on international development."

The Treasury argued that Scotland will benefit in other ways from the measures announced by the chancellor.

Moves to simplify the taxation system will "potentially" help 277,000 firms in Scotland.

Nearly 50,000 lone parents will benefit from work credits, and more than 308,000 families will benefit from child tax credits, it claimed.

But SNP Westminster Treasury spokesman Stewart Hosie MP said the spending announcement was the "worst economic settlement since devolution".

'Sorry charade'

Mr Salmond said the increase in real terms was only 1.4%.

"This creates an extremely serious position in terms of Scotland's finances," he said.

"It means that Scotland is effectively being both squeezed and short-changed by the Treasury.

"That is being done at a time when Scottish oil revenues, over the next five years, are due to reach 55,00m in comparison with 38,000m over the last six years."

Coins
The SNP claimed Scotland had been short-changed

The Tories argued that the announcement left fundamental questions unanswered by both the Labour government at Westminster and the SNP administration in Edinburgh.

Tory finance spokesman Derek Brownlee said: "Whoever is in power north and south of the border, Scotland needs both governments to work constructively together.

"If either government uses the spending review for partisan reasons, Scotland is the loser."

Liberal Democrat MP Alistair Carmichael said it had been clear for months that the spending review would be difficult.

He said: "They cynically promised things they knew they could never deliver, and now they're desperately blaming everyone but themselves for the resulting mess.

"This sorry charade shows the time has come to move on from the Barnett formula.

"The Scottish Parliament must be given greater powers to raise its own revenue."

Key services

CBI Scotland's chairman, David Thorburn, said: "Whilst welcoming the announcement of further steps to simplify the regulatory burden on business we are, however, disappointed that the planned rises in small company corporation tax have not been shelved."

Grahame Smith, general secretary of the Scottish Trades Union Congress, said that the chancellor should be commended for "not stooping to engage in an auction of virtue with the Tories whose proposals brazenly target only the very wealthiest households".

He added: "The Scottish Government must now work to ensure that key services are protected in the forthcoming Scottish budget.

"The STUC encourages the Scottish Government not to adopt the further efficiency savings announced today that are bound to have an unwelcome impact on the quality of public services."

Matt Smith, Unison's Scottish secretary, said they wanted early talks with the Scottish Government as it prepared its budget.



SEE ALSO
Q&A: Comprehensive Spending Review
08 Oct 07 |  Business
The government's Budget challenge
08 Oct 07 |  Business

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