Chancellor's Budget savings mean £250m cut in Scots funding

UK Political Editor

Wednesday 20 March 2013

A FRESH round of Whitehall cuts to pay for capital investment projects will mean Scotland's £28 billion annual block grant will be reduced by £250 million in the next two years.

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MICHAEL SETTLE UK POLITICAL EDITOR

Today, the Chancellor will tell MPs bigger-than-expected underspends across UK Government departments will mean there is scope for shaving an extra 1% off non-protected budgets for 2013/14 and 2014/15.

This will result in a saving of £2.5bn for the next two years which will be ploughed into capital projects – the details of which George Osborne will give in his statement to MPs at lunchtime.

Full details and analysis will be published on HeraldScotland as the Chancellor speaks. It will also mean there will be an extra £1.2bn of savings in 2015/16. This will be used as a "downpayment" as part of the £10bn of cuts needed that year. The Chancellor will announce in June where the remaining £8.8bn of departmental cuts will fall. While the additional cut is 1%, because the large budgets for schools, hospitals and overseas aid are being protected, the knock-on effect on Scotland's annual block grant amounts to only 0.2%, or £50m, a year. However, the additional 1% cut in Whitehall budgets comes on top of others – the 1% cut for next year and the 2% cut for the following year, announced in the Chancellor's Autumn Statement last year. This means the total reduction to Scotland's budget for 2013/14 will be £100m and for 2014/15 £150m – a total of £250m. The prospect ministers will have to make deeper spending cuts was revealed by Mr Osborne at yesterday's Cabinet. No 10 suggested there was agreement "this was the right thing to do". However, some of the Chancellor's colleagues, including Philip Hammond, the Defence Secretary, and Theresa May, the Home Secretary, have been lobbying to stave off further cuts to their budgets. They appeared to have succeeded as Mr Osborne said permission had been granted for the MoD to roll over unspent cash – worth £1.6bn during the next two years – which is more than the total value of the 1% cut to its budgets in 2013/14 and 2014/15. Also, police grants in England will not be affected by the cuts for 2013/14; a victory for Mrs May as these account for two-thirds of the Home Office budget. The Cabinet also had an update from Treasury Minister Lord Deighton, whose job it is to accelerate the delivery of major infrastructure projects. The Chancellor will refer to this and is expected to give details of bringing new projects forward. David Cameron's spokesman said the underspends reflected the "success secretaries of state across the board have had ... on bringing departmental resource spending down". However, Chris Leslie for Labour said a rise in capital spending of £2.5bn compared unfavourably to cuts of £12.8bn in infrastructure investment. The Shadow Treasury Minister said: "Business groups, the IMF and Vince Cable have all said now is the time to invest, at record low interest rates, in building homes, road and schools to create jobs now and strengthen our economy for the future." l Thousands of civil servants will be going on strike over pay and pensions today. Picket lines will be set up outside UK Government departments as well as the Houses of Parliament, while a rally will take place at Westminster. The PCS union said 250,000 members will join the walkout, which will also hit jobcentres, tax offices, border patrols at ports and airports, and courts. PCS leader Mark Serwotka said: "We warned more than two years ago austerity wouldn't work and we were right. Francis Maude, the Cabinet Office Minister, said the strike was "futile and irresponsible".

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Chancellor's Budget savings mean £250m cut in Scots funding

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