THE Scottish Government is set to lose an estimated £1 billion from its budget after George Osborne announced a new wave of austerity in a full departmental spending review.
The Chancellor has ordered unprotected departments to find £20bn of cuts by 2020 to help the UK government achieve a surplus in its budget.
Mr Osborne’s announcement yesterday came after the Conservatives introduced £12bn in welfare cuts in the Budget earlier this month.
The spending review means unprotected departments will lose around 40 per cent of their funding.
Scotland’s block grant – currently worth around £30bn – will be hit but because health and schools are protected areas of spending, the Treasury argued that it will be sheltered from the worst of the savings.
SNP Treasury spokesman Stewart Hosie said: “Spending departments may face cuts of up to 40 per cent. If that is true the Chancellor is clearly planning to take his axe to non-protected departments.
This spending review is the next step in our plan to eliminate the deficit, run a surplus and ensure Britain lives within its means”George Osborne
“This is clearly very worrying for the Scottish budget which will almost certainly come under substantial pressure in the spending review.”
He added: “This is the reason that we propose an alternative economic strategy which would have delivered substantial investment while still seeing the debt and deficit fall.”
The Treasury would not put a figure on cuts to the Scottish block grant but according to the spending allocations published in the Budget, a direct Scottish share of the cuts would be about £1.5bn.
This could be reduced to around £1bn because Scotland will receive its full share of health and schools cash.
A Treasury spokeswoman said: “Our long-term plan has created the conditions under which Scotland, as part of the UK, is thriving.
“This spending review is the next step in our plans to eliminate the deficit, run a surplus and ensure Britain lives within its means.
“All parts of Britain will need to play their part in making us more secure through finding efficiency savings whilst ensuring that spending is targeted at frontline services.”
She added: “The Scottish Government now has control of a range of taxes: if it wishes to raise additional revenue, it will have much greater scope than ever before to do so. It is for the Scottish Government to set out what their plans are.”
Other protected areas are the Department for International Development, including its headquarters in East Kilbride, and the Ministry of Defence which spends around 8 per cent of its £36bn budget in Scotland.
The review, which will be published on 25 November, will set out how the government will both invest in priority public services and deliver the £20bn of further savings required to eliminate Britain’s deficit by 2019-20.
Mr Osborne also wants to use it to prepare another sale of the country’s assets by identifying taxpayer-owned land which is surplus to requirements and can be used to help pay off the national debt.
Taxpayers still own over £300bn worth of land and buildings, with the Ministry of Defence alone owning approximately 1 per cent of all UK land – 227,300 hectares, roughly equivalent to 318,347 football pitches.
Mr Osborne said: “This spending review is the next step in our plan to eliminate the deficit, run a surplus and ensure Britain lives within its means.
“We’ll invest in our priorities like the NHS and national security.
“Elsewhere in government, departments will have to find significant savings through efficiencies and by devolving power, so people have a greater say over the issues that affect them and their communities. We’ll deliver more with less.”
However, Labour questioned whether Mr Osborne could be trusted to make his plans work.
Shadow chancellor Chris Leslie pointed out that the national debt now stands at £1.51 trillion and Mr Osborne had failed to meet any of his targets in reducing the deficit.
He said: “Under this Chancellor, the national debt has soared and he has failed to build a more productive economy based on higher living standards and better wages.”
Mr Leslie insisted that Mr Osborne had no plan for “sensible savings” to public services.
“Departments are not being given a clear sense from the Treasury of what to plan for in the spending review, particularly since we’ve seen three sets of spending plans in the last few months,” he said.
“Britain’s public services need a coherent plan to balance the books and put productivity first, not a Chancellor who chops and changes from month to month, ditching manifesto commitments on childcare, rail electrification and elderly social care.”
On asset sales Mr Leslie said the Chancellor needed to put forward a clear plan.
Foreign Secretary Philip Hammond – whose own department is largely unprotected from cuts – said the figures were just “a ranging shot”.
“Past experience would suggest that initial pitching by the Treasury should be regarded as aspirational and a ranging shot,” Mr Hammond told MPs on the Foreign Affairs Committee.
“But it is clear that to deliver the overall fiscal trajectory departments collectively will have to make substantial savings, double-digit percentage savings,” he added.
Mr Hammond said he expected his department would need to “downgrade” some of its activities to save money.
Treasury Chief Secretary Greg Hands is writing to departments to set out plans to achieve savings of 25 per cent and 40 per cent by 2019-20 – in a repeat of what happened at the start of the last parliament in 2010.
Giving evidence to the Commons Treasury Committee, Mr Osborne acknowledged that ringfencing spending on defence, schools, the NHS and international aid would mean deeper cuts elsewhere.