SNP say Scotland will lose millions from cuts

The Deputy First Minister said George Osbornes savings plan was completely and utterly unacceptable. Picture: TSPL

The Deputy First Minister said George Osborne’s savings plan was “completely and utterly unacceptable”, arguing that the Conservatives’ austerity agenda was rejected by the Scottish people at the general election.

Mr Osborne’s package of cuts, which will see billions of pounds knocked off Whitehall budgets, includes the selling of the UK government’s remaining stake in the Royal Mail.

The Chancellor said he would begin off-loading the 30 per cent holding – worth around £1.5 billion – within months.

Meanwhile, departments will have to find a further £2.5bn of cuts for this financial year – and are selling off assets worth around another £500 million.

The UK government argues that the cuts are required to meet its pledge to clear the deficit by 2018-19 – a promise that means the Chancellor must find a further £30bn of savings over the next three years.

The £30bn savings would include £12bn from welfare spending and £13bn from government departments.

Unveiling his proposal to MPs, Mr Osborne insisted they showed that ministers were “getting on with what we promised”.

“When it comes to living within your means, the sooner you start, the smoother the ride,” he said.

Treasury aides said the departmental cuts were a “first step” and equivalent to around 3 per cent of spending outside the protected areas of the NHS, schools and international aid.

Cuts will be made to grants to the higher education sector while cash is also being clawed back from local government public health funding. Mr Osborne’s announcement infuriated Mr Swinney, the Scottish Government’s finance secretary, who said it amounted to a cut of £170m to Scotland’s £30bn budget, or just under 0.6 per cent.

Mr Swinney said the UK government’s announcement would have a severe knock-on effect on Scotland’s budget.

He said: “This cut of around £170m to the Scottish budget this year is completely and utterly unacceptable. The Scottish Parliament has already agreed our budget for this year and that should be respected, not slashed as part of George Osborne and David Cameron’s ideological obsession with austerity.

“The people of Scotland made perfectly clear in the recent UK election that they rejected the Tories’ plans for more and harsher cuts, yet the UK government is planning to inflict £170m of even deeper austerity on Scotland this year.

“Scotland has already seen our overall budget cut by nine per cent and our capital budget cut by 25 per cent since 2010. Further cuts risk more damage to public services and will hold back economic growth, as underlined in the latest report from the OECD [Organisation for Economic Co-operation and Development].

“There has been no prior discussion with the Scottish Government about these plans – and all parties in the Scottish Parliament should now make clear that these cuts are unacceptable.

“The First Minister made it clear to the Prime Minister when they met in Edinburgh recently that the general election result means it cannot – and must not – be ‘business as usual’ as far as Scotland is concerned.

“The Chancellor’s actions today would appear to show that that message has not been heeded. The First Minister will be writing to all parties in the Scottish Parliament, urging them to stand firm against these cuts and I will be meeting the Chancellor on Monday to put forward an alternative to austerity.”

Aside from the Royal Mail, other asset disposals planned by the government include the Department for Transport selling off shares in land around King’s Cross with an estimated value of £345m.

The details emerged after the independent Institute for Fiscal Studies (IFS) again warned about the difficulty of finding the £13bn of cuts needed to eradicate the deficit by 2018-19.

The head of the think-tank, Carl Emerson, told a briefing it was “misleading” for Prime Minister David Cameron to imply the process would be “easy” and just meant “saving £1 a year in every £100 that government spends”.

Mr Emerson said: “While not inaccurate, these numbers give a misleading impression of what departmental spending in many areas will look like if the manifesto commitment to eliminate the deficit by 2018-19, largely through spending cuts, while not cutting spending in many areas, is to be met.

“Keeping to these, perhaps seemingly benign, spending totals will actually require deep cuts to some areas of government. This is because underlying pressures are increasing spending in other areas.

“Debt interest spending is forecast to rise as both government debt and the effective interest rate on that debt rises. Spending on public service pensions is forecast to rise as the numbers receiving such pensions grows. Spending on state pensions is forecast to rise as average state pension payments continues to rise. In addition, commitments to increase spending in some areas, and not to cut other areas, increases the size of the cuts required elsewhere.”

The protection being given to the NHS, schools and international aid meant other departments faced 15.3 per cent cuts over the three years between 2015-16 and 2018-19, Mr Emerson said.

In the House of Commons, shadow chancellor Chris Leslie claimed there was “panic in the Treasury”.

He questioned why the measures had been unveiled in a “shabby” way before MPs yesterday rather than in the Budget in March, adding it was further proof of Mr Osborne’s “hidden agenda”. Mr Leslie told Mr Osborne: “It sounds to me as though any semblance of a long-term plan has been totally ripped up, that we’ve got panic in the Treasury, that we’ve got chaos with in-year public spending decisions taken.

“Why didn’t you announce those in the March Budget if they were part of some sort of long-term continuum?

“Have you suddenly decided to rapidly change your course when it comes to public expenditure in that way, and why do it in such a shabby way?”

To laughter, Mr Osborne replied: “Only the Labour Party will think it’s shabby to make an announcement first in the House of Commons.

“We set out two weeks ago that we were going to find further efficiencies and savings in government. That is what we deliver today.”

Mr Osborne said there is a need to tackle “endemic weaknesses” in the economy which no government has been able to solve, explaining: “The fact is we do not export enough, that we are not productive enough, we don’t save enough, we don’t trade enough, we don’t build enough and we don’t see enough of that prosperity and opportunity produced by our economy shared across all parts of our United Kingdom.

“Now the Queen’s Speech addresses those weaknesses head on. The housing bill will see that more new homes are built and the tenants of housing associations get the opportunity to buy their own homes.”

The SNP’s Angus MacNeil told Mr Osborne that Scotland had “rejected the cuts agenda, the austerity cult that you are the high priest of”.

He suggested the Chancellor took economic lessons from the SNP.