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Scotland budget to be protected as historic Holyrood deal finally reached

Funding to Scotland will stay at the same level for the first six years after the passing of the Scotland Bill following a landmark deal between the UK and Scottish governments.

Following months of negotiation between Scottish finance secretary John Swinney MSP and chief secretary to the Treasury Greg Hands MP, the two governments have agreed that Westminster funding to the Scottish government will no longer be measured by the Barnett Formula, but overall funding will be at least as high for the next six years.

The Scottish Government will also get new borrowing powers and £200m to implement its additional fiscal responsibilities in the Bill, which is due to come into force next year.

Immediately after the agreement was reached, first minister Nicola Sturgeon told MSPs the deal was “much harder work than it should have been”, but that it would not allow “a single pound, or even a penny, to be taken from the Scottish government’s budget”.

Once the Bill, which will enter report stage on 29 February, passes, Scotland will have full control over income tax, a share of revenues from VAT, new capital borrowing powers, and more authority over its benefits regime.

Prime minister David Cameron said: “This is a significant day for devolution. The agreement is a major milestone in delivering a powerhouse parliament for Scotland and will enable us to meet our commitment to make Holyrood one of the most powerful devolved parliaments in the world.

“We have reached a deal which is fair to Scotland and fair to the whole of the UK. It delivers accountability to the Scottish Government and transforms politics in Scotland. It means May’s Holyrood elections can be fought on the issues which matter most: how the Scottish Government should use these extensive new powers, rather than what they are.”

The arrangements are due for review in the next Parliament.

Negotiations to reach this point have been turbulent, with Swinney at one point threatening to block additional devolved powers to Holyrood unless there was an acceptable finance deal.

Last year the House of Lords Economic Affairs Committee called for the Scotland Bill to be shelved until the two countries could scrutinise the devolution fiscal framework underpinning it.

(Image c. Danny Lawson)


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