Gordon Brown yesterday ticked off the Scottish Government for suggesting Scotland was �underfunded� as John Swinney went to the Treasury and accused it of shortchanging Scotland.

Gordon Brown yesterday ticked off the Scottish Government for suggesting Scotland was "underfunded" as John Swinney, Holyrood's Finance Secretary, went to the Treasury and accused it of shortchanging Scotland by hundreds of millions of pounds.

Mr Swinney emerged from the meeting pledging to take the matter to the body charged with dealing with inter-governmental disputes - for the first time in this way.

At his Downing Street press conference, the Prime Minister commented on Mr Swinney's trip to see Yvette Cooper, Chief Secretary to the Treasury, and defended the 30-year-old Barnett Formula on how public expenditure is allocated.

Mr Brown said it had been "sustained by all governments, Conservative and Labour, and is generally based on the idea that the needs of the different parts of the UK should be taken into account".

He decried the "idea we should either offer more money from the public expenditure settlement or refund something the Scottish administration wishes to introduce".

He added that he did not believe it was right for "the SNP administration to come to London to say Scotland is underfunded when we try to be fair to all parts of the UK".

The Treasury believes Scotland receives a good financial settlement. The annual Scottish grant from London is £27bn a year - to rise to £30bn in the next couple of years.

Earlier, Mr Swinney, who had accused the Treasury of trying to "bully" the Scottish Government over funding, met Ms Cooper for 45 minutes.

A Treasury source said the meeting was "friendly" and "constructive", but the Finance Secretary emerged frustrated and made clear he would be complaining to the joint ministerial committee (JMC) when it meets next month.

Mr Swinney's spokesman said: "The Treasury trying to lay down the law to the Scottish Government and Scotland - as if we were just another Whitehall department - cannot possibly be the last word on the matter, no more than the proposed cash grab' of council tax benefit money from Scotland as a result of council tax abolition can be acceptable."

Mr Swinney had requested the Treasury meeting after the Ministry of Justice allocated an extra £1.2bn for prisons in England; a review suggested some 13,000 extra prison places were needed. As this came from reserves, it did not produce a so-called Barnett Consequential, which would have given Scotland £120m.

The Treasury source said that Whitehall disputed there was any comparable need in Scotland and pointed out how the Scottish Government's own budget plans made clear it had "adequate provision" for the prison population.

However, Mr Swinney's spokesman argued Scotland had a record prison population, more than 8000, with three new jails being built: "Under the Barnett Formula, prisons spending has a 100% comparability factor, which means that this money should unquestionably generate Scotland's full and fair entitlement."

The Treasury source noted Mr Swinney "implicitly accepted council tax benefit was not part of the Scottish block grant" and added: "The Chief Secretary made clear she wanted to be as helpful as possible."

However, last night Mr Swinney commented: "The Treasury is not acting in an even-handed fashion towards Scotland - on prisons spending or council tax benefit."