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Nicola Sturgeon criticises proposed Scotland Bill funding deal as talks continue

Published 01/02/2016

First Minister Nicola Sturgeon said the original proposals and what has been tabled more recently 'would reduce the Scottish budget by potentially billions'
First Minister Nicola Sturgeon said the original proposals and what has been tabled more recently 'would reduce the Scottish budget by potentially billions'

Scotland stands to lose billions of pounds over the next few years under Treasury proposals for devolving new powers, the First Minister has warned.

Nicola Sturgeon criticised the current offer from the UK Government on the financial arrangements accompanying the Scotland Bill in advance of crucial talks in London.

The Bill, which arose from the recommendations of the post-referendum Smith Commission, will bring new powers over tax and welfare to Holyrood but the Scottish and UK governments have yet to agree on the fiscal framework underpinning it.

An agreement would set out how Scotland's annual block grant from the Treasury will be adjusted to take account of the new tax powers.

Scottish Finance Secretary John Swinney is meeting Chief Secretary to the Treasury Greg Hands for another round of negotiations.

Ahead of the talks, Ms Sturgeon highlighted support for the Scottish Government's position from Glasgow University principal Professor Anton Muscatelli.

Writing in the Herald newspaper, Mr Muscatelli said Mr Swinney's preferred option, a mechanism known as per capita indexed deduction, "provides a fair deal for both Scotland and the rest of the UK".

He said: " This method ensures that the simple transfer of the new tax powers would not in itself lead to an increase or cut in Scotland's budget.

"This is of crucial importance, as it retains the Barnett formula as the principal determinant of public spending in Scotland, something that was central to the Smith recommendations."

He warned that under an alternative method known as index deduction, Scotland could lose around £3.5 billion from its block grant in the first 10 years of the new powers.

Speaking on BBC Radio Scotland's Good Morning Scotland programme, Ms Sturgeon said: "From what we've heard from the Treasury, both the original proposals and what has been tabled in the last few days would still reduce the Scottish budget by potentially billions of pounds over the next few years and wouldn't live up to the principle that was at the heart of the Smith report, which is no detriment.

"That means that if over the next few years Scotland matches the economic performance of the UK, if we don't change tax rates, then we should be no better or worse off than if these powers had never been devolved."

She added: "I want to stress two things here. I want to get a deal. I want to have new powers, it is no secret that I would rather have many more new powers, but I want to have these powers so that we can use them. So I want to get a deal and we'll be continuing to work very hard to achieve that.

"Secondly, I'm not asking for any special favours here for Scotland. I'm simply asking for a fair deal and as First Minister I wouldn't be doing my job properly and I wouldn't be serving the people of Scotland well if I signed up to a deal that over the next few years would strip billions of pounds out of the Scottish budget regardless of the decisions the Scottish Government took.

"If we were to sign up to a deal, the kind of deal that is currently on the table from the Treasury right now that would take billions of pounds out of the Scottish budget over the next few years, then we'd be making it much harder not just for this Scottish Government but for any future Scottish Government to exercise these powers in the interest of the people of Scotland."

A UK Government spokesman said: "The UK Government is absolutely committed to implementing the Smith agreement if full. The powers being devolved to the Scottish Parliament will make it the most powerful devolved parliament in the world.

"From the outset our position on the fiscal framework has been clear - we stand ready to do a deal that is fair for Scotland and fair for the rest of the UK."

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