Scottish Budget: Cost-of-living plans plunged into confusion amid fresh UK-Scotland funding row

SNP plans to tackle the cost-of-living crisis in Scotland have been plunged into confusion amid another row over UK Government funding for the Budget.

Kate Forbes is set to announce the final details of her Budget to MSPs in Holyrood on Thursday ahead of the final vote on the Scottish Government’s spending plans.

The finance secretary was also due to set out the details of the Scottish Government’s plans to tackle the cost-of-living crisis, following Chancellor Rishi Sunak’s announcement of a council tax rebate and energy bill loan last week.

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Around £290 million was expected from the announcement by the Treasury. However, the devolved governments questioned on Wednesday evening whether this represented additional funding.

Economy Secretary Kate Forbes has suggested £290m of consequentials may not be additional money for the Scottish Government's budget.

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On Twitter, Mark Drakeford, the First Minister for Wales, said there was “no extra money” despite last week’s announcement of £175m for the Welsh Budget.

In a tweet, Ms Forbes said Mr Drakeford’s comment “echoes the position for Scotland”, suggesting there was no extra funding for the Scottish Budget and any money dedicated to tackling the cost of living may have to come from other departments.

She said: “Nevertheless we will honour our commitment to allocate £290m to deal with the cost-of-living crisis in Scotland, with details announced tomorrow.

"It will require us to revise the latest Budget position I set out to the Scot Parliament last week.”

However, the suggestion this represented “no extra money” was rejected by the UK Government, with a source criticising the Scottish Government’s approach to a key Barnett consequential process.

It has been claimed instead of the £290m representing previously allocated money rebadged by the UK Government, the Scottish Government is facing a Budget hole due to a reduction in English health spending.

This change for the Budget for 2022/23 has emerged following the conclusion of the supplementary estimates process by the Treasury, which confirms final budgets and subsequent consequentials for government departments late in the tax year.

The reduction in health spending in England means the Scottish health budget will be lower, forcing the Scottish Government into a difficult situation around how it chooses to fund existing health commitments, while honouring its commitment to pass on “every penny” of the £290m to tackle the cost-of-living crisis.

The row comes as householders across Scotland brace for a massive hike in their energy bills. The announcement of a rise in the price cap by energy regulator Ofgem last week means average annual bills are set to rise by £693 from April.

A UK Government source said the Scottish Government had been given access to the estimates for this Budget process on the understanding they were estimates and not funding guarantees. The source accused the SNP of taking a budgetary “risk” by making spending promises based on those figures.

They said: “The extra £296m for Scotland announced by the Chancellor earlier this month as a result of the English council tax rebate is going to the Scottish Government in full.

“There has, however, been a downward revision of the amount the Scottish Government will receive from supplementary estimates, a completely separate source of Barnett funding.

“The Scottish Government can’t have it both ways. Scottish ministers wanted early sight of supplementary estimate figures. The UK Government has provided the information on the clear understanding that the figures are only an estimate.

“It’s up to the Scottish Government whether it wants to take the risk of making spending promises based on an estimate before the actual figures have been verified."

Despite this, it is not known whether the £290m of extra funding from the Chancellor’s announcement last week fully or partially covers the drop in health funding, or if it is far more than the drop in funding.

It also raises questions about which budgets and portfolios will miss out in the Scottish Budget due to the reduction in health consequentials and increased spending commitments by the finance secretary and First Minister.

A spokesperson for the UK Government said: “The Scottish Government will receive £296m of Barnett consequentials as a result of the council tax rebate announced by the Chancellor. This is new funding for the Scottish Government.

“People in Scotland expect both governments to be working together for them, their families and communities, so we will continue engage with them on this support. “

This was questioned by the Scottish Government, who said the £290m was now “not likely to be additional”.

A spokesperson for the Government said the Budget represented a “reduction in our estimated overall funding”.

They said: “The latest information suggests that the further £290m in cost-of-living funding announced last week is not likely to be additional to previous consequential funding indications from the UK Government.

“Despite this reduction in our estimated overall funding, the Scottish Government will provide £290m to help households struggling with the cost of living.

“The Cabinet secretary for finance and the economy will set out plans to further tackle the cost-of-living crisis as part of tomorrow’s stage three Budget Bill proceedings.”

The finance secretary has already announced £120m of additional funding for local authorities, criticised by authority leaders as not being enough for councils to cover a real-terms cut to their budgets, and £375m for business support.

In a letter to MSPs, Ms Forbes said £200m of this was “reprioritised” from the Government’s “expected consequentials budget”, with £175m being “made available by the Treasury”.

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