Swinney in war of words with London on EU funds

Published on Wednesday 16 December 2009 20:23

THE Scottish Government has accused the Treasury of undermining its efforts to access European funds that would help small businesses north of the Border.

• John Swinney has accused the Treasury over European funding. Picture: Phil Wilkinson

Scottish finance minister John Swinney last night warned that strict and inflexible Treasury rules mean that Scotland cannot access European Investment Bank (EIB) funds for SMEs unless the Scottish Government accepts a cut in its annual spending budget.

The Scottish Government is keen to access European funds in order to build its own Scottish Investment Bank (SIB).

Scottish Enterprise has already said it will commit 150 million of its equity investment resources to the SIB but Alex Salmond's administration is hopeful that European money can be used to increase the funds available to Scottish SMEs.

Other countries currently tap European Investment Bank funds for SMEs through a complex financial framework known as the Jeremie model.

However, the Scottish Government claims that Treasury budget rules prevent it from accessing funds in this way unless it accepts a corresponding cut to its budget.

Swinney has written to Liam Byrne, Chief Secretary to the Treasury, asking him to apply "flexibility" to its rules so that Scotland is able to apply for a slice of the EIB money.

Swinney said that the only way Scotland would be able to overcome the Treasury rules would be to set up a Jeremie structure in the private sector. However, the costs of this would be "prohibitive", Swinney said.

The Treasury last night denied Swinney's claims. A spokesman said regional development agencies in England have already succeeded in tapping EIB funds through a private-sector structure.

He said: "It's disappointing that the Scottish Executive is choosing to play politics with this, rather than doing what bodies in England have done in exactly the same position, which is getting on with providing support to SMEs with exactly the model that the Scottish Executive say they can't make work."