PHILIP Hammond will today hail £350 million of Budget consequentials for Scotland, saying they show the "benefits of the Union in action" as he talks up the resilience of the UK economy ahead of the start of the Brexit process.
In his first economic statement, the Chancellor will also announce the establishment of a new expert panel to consider how tax breaks can be shared with smaller companies to help sustain the North Sea oil and gas industry as it begins to move from production to decommissioning.
Treasury sources stressed how the move had come about following calls for reform to the rules on tax relief from the industry body, Oil and Gas UK, and from Derek Mackay, the Scottish Finance Secretary.
On the eve of the Budget, the UK Government has been given a boost with the Paris-based Organisation for Economic Co-operation and Development upping its 2017 growth forecast for Britain from its November forecast of 1.2 per cent to 1.6 per cent.
Today alongside the Budget, the Office for Budget Responsibility, the Government’s independent economic forecaster, is also expected to increase its predictions on growth for this year.
This will enable Mr Hammond to give an upbeat assessment of the future of the economy as Theresa May prepares to trigger Article 50 to begin the withdrawal process from the European Union by the end of this month.
The Chancellor will emphasise how the UK economy is built on “resilience” and that his Budget will lay the building blocks of a successful post-Brexit Britain.
He will make clear that the Government will continue to bear down on the deficit and will not shirk the difficult decisions that still need to be made on tax and spending but Mr Hammond will also emphasise his desire to continue with an infrastructure investment programme and that, recognising 10 years on from the financial crash that people are still feeling the pinch, will pledge to do everything he can to “help ordinary working families get on”.
Acknowledging the concerns of many parents that their children will not enjoy the same opportunities in life that they have had, the Chancellor will say the Government will “tackle this challenge head on” by investing in young people's chances to go to a good school and get the qualifications they need for the jobs of the future.
Although some analysts have calculated higher tax receipts could give Mr Hammond a £45 billion windfall over the next five years, the Chancellor has made clear there will be no Budget giveaway as he builds up a Brexit contingency fund to ensure there is “gas in the tank” for the coming years.
While he has signalled extra support for hard-pressed local authority social care services and firms hit by big rises in business rates south of the border, it is expected these measures will be paid for through limited tax rises such as an increase in National Insurance for the self-employed.
The Government has already pointed to a £500m boost for education in England, which will lead to a Barnett Formula consequential of £50m for the Scottish Government. The Chancellor is also widely expected to announce an emergency fund to help English local authorities cope with the demands on social care. This is likely to be at least £1bn, giving Edinburgh another £100m.
A senior Whitehall source said, taking into account all the Barnett consequentials, the total for Scotland “will be about £350m”.
The Treasury noted how this money built on the £800m boost to the Scottish Government’s capital budgets in the Autumn Statement.
“The Chancellor believes these are benefits of the Union in action with the Scottish Government having the flexibility to make its own decisions but ultimately it is the UK’s stability and ongoing resilience that allows this investment to happen,” a source explained.
However, Mr Mackay made clear: “Any change in spending must be seen against the context of the huge cuts we are already facing.”
He explained the UK Government was planning for an additional £3.5bn of spending cuts for Scotland in 2019/20; “at precisely the point when the UK’s departure from the EU could occur is disastrous. I say clearly to the Chancellor: this is the wrong time for austerity”.
He added: “We need to see investment and support for economic growth from the UK Government at a time when Brexit poses a self-inflicted and unprecedented risk to the UK economy, public finances and consumer confidence,” he declared.
For Labour, John McDonnell also called for an "urgent change of direction from the Tories after seven wasted years of economic failure".
And the Shadow Chancellor urged the SNP Government to use Holyrood’s new tax powers to ensure Scotland took a “different path from Tory austerity”.
"The Nationalists should get behind Labour's plan to use the powers of the Scottish Parliament to stop the cuts and invest in our valued public services," he insisted.
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