Page last updated at 19:30 GMT, Monday, 24 November 2008

Swinney warns of Scots budget cut

John Swinney

The Scottish Government has expressed "deep concern" that its budget could be cut by 500m, in the wake of the Chancellor's pre-Budget statement.

Alistair Darling's plan to get the economy moving again included an extra 5bn in efficiency savings - which will have an impact north of the border.

Scots Finance Secretary John Swinney said it could cause "real difficulty".

Scottish Secretary Jim Murphy said the pre-Budget report would boost the Scottish economy by 2bn.

Mr Swinney welcomed the general direction of the UK Government's plan, including a cut in VAT, from 17.5% to 15%.

He also told BBC Scotland that the pre-Budget statement would allow Scottish ministers to bring forward their programme for building infrastructure, such as roads and schools.

The Labour Government has decided to act
Jim Murphy
Scottish secretary

"It will have a consequential beneficial impact on the construction sector and a variety of other sectors within the Scottish economy, at a time when that's required the most," he added.

But the finance secretary said that the UK efficiency savings drive could cause "real difficulty at a time when we're trying to get the economy to recover".

"I'm deeply concerned by the changes in efficiency savings that the UK Government has brought forward, because that looks to me as if there is the possibility that the Scottish Government's budget could be reduced by the actions of the UK Government by up to 500m in 2010-11," he said.

The chancellor's action plan, which aims to help save the UK from a deep recession, has taken UK borrowing to record levels by doubling the national debt, which is set to reach 118bn next year.

KEY POINTS
VAT cut by 2.5 percentage points
45% tax rate on earnings over 150,000 from 2011
All National Insurance to go up by 0.5% from 2011
Economy to shrink by up to 1.25% next year
Borrowing to hit record 118bn
Phased increase in vehicle excise duty
Mr Murphy conceded there would be future ''belt tightening'' in public spending and said the UK could not resolve the effects of the global financial crisis by itself.

But he insisted the average Scottish family would benefit from the VAT cut to the tune of 275 a year, while Scotland's 292,000 small and medium-sized businesses would receive a 1bn guarantee facility to support bank lending to small exporters.

Mr Murphy told BBC Scotland: "We're faced with a choice - do we sit on the sidelines as spectators and watch more people lose their jobs, their homes, their businesses, or take this action? The Labour Government has decided to act."

Under the contents of the pre-Budget report, Scottish ministers will be able to accelerate capital investment of some 260m - mirroring the 3bn effort for England.

In terms of current spending, Scotland can expect an extra 10m from the increase in energy efficiency spending and 1m from the boost to advice services.

PRE-BUDGET REPORT

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The Scottish Conservatives claimed the pre-Budget report would increase the "black hole" in the Scottish Government's plans to replace council tax with local income tax by 300m.

The party's finance spokesman, Derek Brownlee, said: "The SNP cannot hide from reality any longer.

"It is time to kill off local income tax and concentrate on the Conservative solution of cutting and reforming council tax."

Scottish Liberal Democrat MP Alistair Charmichael said the announcement was a "mix of small measures".

"This was an occasion," he said, "when we needed bold announcements that would inspire confidence that the government would help people to get through difficult times, but we saw nothing of the kind."

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