Philip Hammond will seek to reinforce the case for Scotland staying in the Union when he delivers the Budget today, by holding out tax breaks for the struggling North Sea oil industry.
The Chancellor will respond to mounting expectation about a second independence referendum with the announcement of an expert group to examine how the tax system can be used to boost production from ageing oil fields..
It follows the admission this week from a senior SNP economic adviser that high oil revenues were “baked into” the case for independence in the 2014 referendum campaign, and could no longer be relied on.
Mr Hammond is expected to draw attention to the impact of collapsing oil revenues by saying tax relief for North Sea oil is only possible thanks to the “stability and ongoing resilience” of the UK economy.
The Treasury said the Chancellor would use his Budget speech to give an “upbeat” assessment of the UK economy as the government prepares to trigger Brexit by the end of the month.
However, Mr Hammond is expected to argue that better-than-expected economic growth should be channelled into building “resilience” for the challenges ahead through a Brexit “war chest” of up to £60 billion.
There is also growing speculation he could announce modest tax rises, with the Treasury signalling it will not be “shirking the difficult decisions on tax and spending”.
New investment will be announced for social care, further education, additional school places, and university research, with Scotland receiving a windfall under the Barnett formula from spending announcements for England.
Shadow chancellor John McDonnell said the UK had seen “seven wasted years” under the Conservatives, with cuts to spending failing to bring down the national debt.
Mr McDonnell said: “Philip Hammond’s first Budget today cannot be used to make people worse off as part of his government’s risky Tory Brexit strategy.”
The SNP economy spokesman at Westminster, Stewart Hosie MP, said: “Philip Hammond must set out how he will support UK industries facing trade barriers, and how he will fill the black hole left by the loss of EU funding for our universities, for our businesses, and for key sectors of our economy like agriculture – all because his Tory colleagues have got the UK into a Brexit mess of their own making.”
Today’s Budget will be the last to take place in spring, with Mr Hammond announcing last year that it will move to the end of the year and replace the Autumn Statement..