Spending review: New Forth bridge survives but big projects hit

Published on Wednesday 20 October 2010 18:25

FINANCE Secretary John Swinney has pledged the new Forth Bridge will go ahead as planned despite Scotland's capital spending budget facing a real-terms cut of 38 per cent over the next four years.

• An artist's impression of the new crossing

The cash available for big Scottish construction projects is set to fall, from 3.4 billion in real terms this financial year, to 2.3bn in 2014/15 as the Scottish Government braces itself for its overall block grant being slashed by almost 3bn over the next four years.

Mr Swinney warned that 12,000 jobs would be threatened by the falling capital spending alone, saying that Chancellor George Osborne's cuts had gone "beyond our expectations, particularly on swingeing cuts to the capital budget".

Mr Swinney said that the cut in capital spending would damage the recovery of Scotland's economy, which rallied yesterday with GDP figures showing 1.3 per cent growth in the second quarter of this year.

But the UK Government claimed Scotland had been spared the worst of the cuts, saying that Scottish front-line public services would not be as severely affected as those in England, Wales and Northern Ireland.

Nevertheless, the huge fall in the money available for large projects would appear to raise a big question mark over the future of the Forth Replacement Crossing, Scotland's largest-ever capital project that is expected to cost 1.72bn to 2.34bn.

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Despite that, Mr Swinney yesterday renewed his commitment to the project, which has also been backed by opposition parties in the Scottish Parliament. Mr Swinney said: "We have identified projects that are of a strategic nature that must go ahead.

The Forth Replacement Crossing is one of those projects."

Mr Swinney will not complete his spending review until next month but the cash squeeze will also put pressure on other planned capital projects such as the Borders railway and the Aberdeen bypass.

Supporters of a new Forth bridge believe the vast undertaking can be funded by dipping into future budgets or by the Scottish Parliament borrowing against capital.

Last night, Labour said it remained committed to the new bridge, but Ann McKechin, the shadow Scottish Secretary, said: "Major infrastructure projects are clearly going to be at risk from this settlement and some difficult choices will have to be made by the Scottish Government."

According to Treasury figures, in real terms the Scottish budget will fall from the 2010/11 figure of the 28.2b baseline to 25.22bn over the four-year period of Mr Osborne's spending review.Overall, that represents a real-terms cut of 2.979bn - the equivalent of a 10.6 per cent cut - over the whole period.

The cuts will see Scotland's budget fall by 900m next year, a figure that includes 370m in cuts that were delayed this financial year after David Cameron gave the SNP administration the option of delaying the pain until 2011/12.

Labour said Chancellor George Osborne's plan could cost 100,000 Scots jobs and plunge the country back into recession.

The 10.6 per cent cut was not as severe as the 12.3 per cent predicted by Crawford Beveridge in his Independent Budget Review commissioned by the Scottish Government and published in the summer.

But those figures were disputed by Mr Swinney, who said the accurate figure for the Scottish budget was 29.24bn, with the extra 1bn made up of cash spent on managing "depreciation".

Mr Swinney claimed that the Scottish budget would actually fall by 1.3bn in 2011/12, compared with the UK Government's figure of 900m for the same period.

The Chancellor's review will also see the amount of taxpayers' money used to fund the Scotland Office being cut from 8m to 7m in cash terms.

Control of council tax benefit will be devolved to Scotland from 2013, at the same time as it is handed over to local authorities in England.

Secretary of State for Scotland Michael Moore said: "For Scotland, this is a fair deal in tough times. Spending on front-line public services will be reduced by less than in England, Wales or Northern Ireland. There are no easy choices in the current economic climate.

"Scotland will pay its fair share towards reducing the record peacetime deficit we have inherited."