Nicola Sturgeon has angrily rejected claims by Treasury ministers that they have made a further £4.5bn concession in an effort to rescue the ailing £32bn deal on Scottish government funding.
With increasing signs that the agreement is on the brink of collapse, the first minister accused the Treasury of misleading the media by presenting an old offer, which still amounted to a substantial cut in funding for Scotland, as if it were new.
Her angry retort on Twitter follows mounting anxiety about the likelihood of an agreement being signed before the current parliament is dissolved on 24 March for the Holyrood elections in May. That uncertainty deepened when Sturgeon’s official spokesman said it was now “an open question” as to whether a deal would be done by then.
The divisions between Holyrood and the UK government deepened further after Labour, the Liberal Democrats and the Scottish Green party backed Sturgeon. They said the Scottish government was right to reject the Treasury’s proposals, leaving the Scottish Tories isolated 12 weeks before the Holyrood elections.
Sturgeon’s outburst came after Greg Hands, the chief secretary to the Treasury, told reporters on Thursday that the UK government had made a very generous offer that would effectively increase the support for Holyrood from UK taxpayers from April 2017.
The Treasury’s block grant, currently worth about £30bn, will be cut from April 2017 by roughly £15bn after Holyrood takes control of all income tax in Scotland, worth about £11bn, and is handed £4bn in VAT receipts from Scotland. It will also take on £2.7bn in new welfare spending powers.
Hands denied media reports that the £4.5bn concession had only just been made: he told the Guardian that it was part of a new formula tabled by the Treasury two weeks ago to increase the amount of extra tax support from UK taxpayers to help Scotland deal with its slower population growth and ageing population.
He said the formula, called the “comparability model”, effectively gave Holyrood a small share of taxes spent in England on England-only policy areas. If the formula had been used since devolution in 1999, Holyrood would have been better off, Hands argued.
Sturgeon insists that offer does not go far enough. She disclosed on Tuesday that the Treasury proposal was expected to cut Holyrood’s overall income by about £2.7bn over the next decade, about 0.8% of the budget, because it took little account of population differences.
The first minister’s spokesman said the Hands proposal was “unacceptable and simply repeats a UK government position which has already been rejected on a cross-party basis by Westminster’s Scottish affairs select committee, by the majority of Smith commissioners and by independent experts.”
The Smith commission was charged with formulating devolution commitments on further powers for the Scottish parliament.
Hands denied that the talks were now in deadlock and said he remained confident that a deal would be done. He had yet to see the details of the revised offer made by John Swinney, the Scottish finance secretary, during their talks last Monday, Hands added.
“I’m waiting to see the new offer. I’m sure discussions will continue shortly thereafter,” he said. “Our officials are talking on a daily basis. It is not as if the process has ossified in any way.
“The message I’m trying to get across is that the UK government offer is a very fair offer, it’s a very constructive offer and we’re looking to get a deal.”
The minister said the UK government had wider concerns about the Scottish government’s approach to the fiscal framework and its decision to tie the hands of an external fiscal body likened to Scotland’s version of the Office for Budget Responsibility, which polices UK government budget decisions.
In his latest letter to Swinney, Hands challenged him over his decision to kill off proposals by a Holyrood committee to give an independent Scottish fiscal commission greater powers to scrutinise Scottish government forecasting and spending decisions.
Opposition parties were furious to discover on Wednesday that SNP members of the finance committee had, at the last moment, vetoed recommendations that the commission should have greater powers to investigate government finances and to make its own assessments of Scotland’s GDP.
Hands said the failure to have independent assessments of Scottish GDP could present serious problems in future over Holyrood’s new borrowing and welfare powers. “We all have to have confidence in the robustness of both UK and Scottish figures,” he said.
This article was written by Severin Carrell Scotland editor, for theguardian.com on Thursday 11th February 2016 19.24 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010