Labour insists Holyrood set for public spending boost despite £40bn Budget gap

A Scottish Labour minister has insisted “there will be more money going into public services” at next week’s Budget - as the public braces for tax rises.

Michael Shanks, who is an energy minister in Keir Starmer’s government, has also acknowledged that placing too high a tax burden on the North Sea oil and gas sector could stop investment in renewables projects amid fears over Labour’s energy profits levy.

Shadow Scotland Minister Michael Shanks. Picture: Lisa Ferguson/National World.

Rachel Reeves will deliver her first Budget as Chancellor on October 30, having previously issued a stark warning over a £22 billion back hole in the UK’s finances. Reports suggest Ms Reeves is looking for up to £40bn of savings to avoid real-terms cuts to government departments.

The Chancellor has told her Cabinet colleagues that the UK government faces a £100bn shortfall over the next five years - raising the prospect of austerity measures continuing and public funding cut, with Labour vowing to stick to the same fiscal rules as the Conservatives.

Read more: Inside the Scottish Budget negotiations, as Greens want policies woven into SNP plans

But Mr Shanks, speaking on the BBC’s Sunday Show, has suggested more public funding is on the way for the Scottish Government ahead of SNP finance secretary Shona Robison delivering her budget to Holyrood on December 4.

Last month, Ms Robison announced around £500 million in public spending cuts to balance this year’s budget and has warned her spending plans for the next financial year look gloomy without a boost in funding from Westminster.

Pressed over a suggestion Ms Reeves will need to raise taxes including national insurance contributions by employers, income tax for those in England or inheritance tax, Mr Shanks told the BBC that “questions about tax will be answered in the Budget” and warned “there’s a lot of speculation going on”.

He said: “We were really clear in the manifesto that we don’t want to see any more taxes on working people - we spelled out exactly what that would look like. 

“We also were very specific on areas where we do want to see tax increases - on non-doms, on VAT on school fees. There will be much more announced in the Budget as well.

Chancellor Rachel Reeves's (Picture: Jonathan Brady/pool) | Getty Images

“The wider picture is important. Yes it’s about how we get more money into public services, but it’s also about how we grow the economy.”

Pressed over the outlook of Labour having no choice but to continue austerity, given the stark economic picture, Mr Shanks said: “We were clear all the way through the election campaign that there’s no return to austerity. 

“Public finances are in a very difficult place. There’s already more money going to the Scottish Government. There will be more money going into public services.

“But we’re really clear that you can’t just promise more and more money without being clear about how you raise that money.”

But the SNP has called on the Prime Minister to “be honest with voters” about the impact Brexit is having on the UK economy and public finances ahead of next week’s Budget - after Labour minister Tulip Siddiq admitted the government has already spent almost £24bn  as part of its 'financial settlement' agreement and will pay a further £6.4bn to Brussels.

SNP international affairs spokesperson, Stephen Gethins, said: "With the Labour government planning £40billion of painful austerity cuts and tax rises at the UK budget, it's essential that they are honest about the damage Brexit is doing to public finances.

SNP MP Stephen Gethins

"Sir Keir Starmer has blamed the Tories for the state of the economy but at the same time he's continuing Brexit, their most damaging policy, which is wiping billions of pounds from tax receipts and economic growth every single year.

"The Labour government must commission and publish a full assessment of the impact Brexit is having on the economy and public finances ahead of the UK budget - and be honest with voters about the impact their hard Brexit policy choices are having.”

Mr Shanks was also pressed over a story in Scotland on Sunday, revealing the GMB union has calling on the Chancellor to introduce a fairer tax regime for the North Sea oil and gas sector to protect jobs amid concern the UK government’s energy profits levy would warm investment in the energy sector.

The UK's North Sea oil and gas industry is concerned about Labour’s energy profits levy

He said: “I’ve spent a lot of time in Aberdeen since I became energy minister and listening to the industry, I hear their concerns. I know they have spoken to the Treasury on this as well.

“I think the question of balance is critical on this. When people are paying huge amounts more on their bills, they rightly expect governments to tax the oil and gas companies fairly. But quite rightly, the oil and gas companies are also saying that there’s a  balance where actually our investment is just not going to happen.”

Mr Shanks added: “These companies are also some of the biggest investors in renewable technology. Yes, oil and gas is one part of our story - it’s going to be part of our energy story for a very long time to come. 

“The North Sea is not shutting down anytime soon. But we recognise that transition is already underway - a third of the workforce has left the industry in the past 10 years. If we don’t plan for this transition now, we’re going to leave those workers high and dry.

“We’re really clear that yes, we support the oil and gas industry, but clearly we need to transition into those jobs of the future as well.”

But the Conservatives have accused Mr Shanks of “shutting down the North Sea oil and gas sector”.

Scottish Conservative shadow net zero and energy secretary, Douglas Lumsden added: “Labour’s shortsighted and unfounded sanctions of increasing the windfall tax, ending the investment allowance and opposing all new oil and gas licences means tens of thousands of skilled jobs are now hanging in the balance.

“Labour, just like the SNP, want to press ahead with killing off the oil and gas industry, forcing us to import expensive fossil fuels from overseas with a far higher carbon footprint.”