Inflation fall gives Scottish Government '£1bn budget bonus'

Published on Thursday 24 September 2009 22:13

THE Scottish Government has a windfall of almost £1billion to spend in next year's budget, according to Labour after research by independent advisers. They say this counters claims by SNP ministers that they are having to deal with "a real-terms cut".

Figures produced by independent researchers in the Scottish Parliament say that a fall in the rate of inflation has given ministers an extra 880million to spend. The government responded saying they had taken the correct rate of inflation into account and the real-terms cut still stood.

The figure has led to criticism by Labour of finance secretary John Swinney for claiming the budget represented a real-terms cut of 268m.

Labour's finance spokesman, Andy Kerr, dismissed the claims by the Scottish Government that it had factored in the reduction in inflation from 2.75 per cent to 1.5 per cent to come up with its figure. Mr Kerr said: "The fact is that the money for 2010-11 was decided back in 2008 based on an inflation of 2.75 per cent. This means that there is more purchasing power for the money than had been originally expected and it undermines the decision to cut the Glasgow Airport Rail Link and housing."

Mr Kerr went on: "Mr Swinney must have known about this, but chose to keep quiet. Now he has to explain himself."

He added: "This windfall is like a family going on holiday when the exchange rate improves against the pound giving them greater spending power."

However, the Scottish Government denied that there had been any mistake in presenting the budget as a "real-terms cut".

A spokesman for Mr Swinney said: "The reality is that the Scottish Government has a budget of 29.5351bn in 2009-10, and – taking into account 1.5 per cent inflation – the budget for 2010-11 will be 29.2668bn. That is a real-terms cut of 268.3m, or 0.9 per cent, and the first real-terms cut in Scotland's budget since devolution.

"Everyone knows budgets are falling because of cuts by the UK Labour government. If Labour in Scotland are still in doubt, they should speak to Gordon Brown, Alistair Darling or Ed Balls who are the ones imposing the cuts."