JOHN Swinney is facing a potential £1billion budget squeeze because of unexpected costs relating to major building projects.
The Finance Secretary has confirmed that a number of Scotland's biggest construction schemes remain classed as public sector projects, meaning the full costs must appear on the Scottish Government's balance sheet.
The news, revealed in a statement to MSPs, raises the prospect of the Scottish Government's capital budget being swallowed up by existing schemes, leaving less cash for new transport links, hospitals and other vital developments when he unveils his spending plans at Holyrood next month.
Mr Swinney told MSPs he would try to amend funding mechanisms for the projects, including Aberdeen's new £745million bypass, but admitted he was discussing "budgeting implications" with the Treasury.
The schemes are being constructed under the Scottish Government's Non Profit Distributing (NPD) mechanism, a type of public private partnership in which developers put up a large slice of the finance and are paid back out of public funds over a number of years.
As such, they were intended to be classed as private sector schemes, keeping the up front costs off government accounts.
However, they were re-classified by the Office for National Statistics following a change to EU accounting rules last year.
In a statement to MSPs, Mr Swinney said it had become clear a "rapid reversal" of the ONS ruling would not be possible, though efforts to change the funding mechanism to meet the rules would continue.
He added: "The Scottish Government also continues to discuss with the Treasury the budgeting implications, including for our capital spending plans, and I intend to reflect the outcomes of these discussions in the budget."
Others schemes which have fallen foul of the new EU rules include a £200million hospital in Dumfries and the £150million replacement for Edinburgh's Sick Kids Hospital.
All are underway and will not face delays.
Gavin Brown, for the Scottish Conservatives, said: "We would have preferred to have more detail today from Mr Swinney although he indicated that the ONS decision is unlikely to be reversed quickly.
"By implication, that means that he will have to do something with the finances in the coming weeks and months if he is to deliver on his pledge to deliver the project on time and on budget."
A string of smaller schemes, which had been delayed as a result of the accounting changes, were given the go ahead after changes to their funding mechanism, Mr Swinney said.
The Scottish Government's capital budget this year is £2.6billion.
It can also borrow up to £2.2billion for capital investment.
A Scottish Government spokeswoman said: "The ONS decision on the AWPR project has been the subject of detailed clarification with ONS, some of which remains on-going.
"The issues involved are complex and further work is required to review options for the potential amendment of the AWPR project and potentially other NPD projects."
Meanwhile, Nicola Sturgeon faced calls to set up a Scottish version of the Office for Budget Responsibility, the independent budget watchdog.
Speaking during First Minister's Questions, Scots Labour leader Kezia Dugdale said the SNP's pre-referendum oil forecasts were out by 6000 per cent.
Ms Sturgeon said the planned Scottish Fiscal Commission would be able to veto her own government's forecasts.
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