The Treasury has backed down in a confrontation with the �Scottish government over delays to building projects that could have cost Scottish jobs.

The Treasury has backed down in a confrontation with the Scottish government over delays to building projects that could have cost Scottish jobs.

Earlier this month, the Sunday Herald revealed Scottish ministers feared Treasury inaction would stop them accelerating major capital projects in order to help the economy through the coming recession. Alex Salmond, the first minister, warned Westminster's silence on whether it would permit the extra spending by granting so-called "capital cover" was threatening jobs.

The Treasury had said it would grant capital cover to new hospitals, roads and school buildings south of the Border, but was silent on whether it would extend it to Scotland, Wales and Northern Ireland.

A civil service paper prepared for Salmond warned: "The present apparently different regimes north and south of the Border are difficult to defend and explain. The impact in Scottish investment programmes and on the real economy would be very severe."

The issue had arisen because new international accounting rules will apply from next April. However, last week, Yvette Cooper, chief secretary to the Treasury, wrote to John Swinney, the finance secretary, and said the changes would be treated equally on both sides of the Border.

Complaining about a lack of information from Scotland about the issue, she said: "We have not imposed any delays in capital spending in Scotland. Our approach to the introduction of the new IFRS accounting standards is the same in Scotland as in England."

The argument between Edinburgh and London was sparked by incoming changes to the rules on public private partnership and private finance initiative (PPP/PFI) projects. From April 2009, the long-term costs of the schemes will move "on balance sheet" for the first time. The intent is to make the government's books more transparent.

All existing PPP/PFI will receive capital cover from the Treasury, effectively government permission to exist, but there was doubt about whether new projects would also receive it.

Ministers are anxious to bring forward new capital projects, including £100 million in extra affordable housing, to secure construction industry jobs.

The Scottish Futures Trust, which Salmond hopes will provide cheaper alternatives to PPP/PFI, is also dependent on Treasury capital cover.

Salmond and Swinney asked in vain for clarification from Jim Murphy, the Scottish Secretary, in October.

A spokesman for Swinney said: "This is an important clarification, as all capital projects are due to come on balance sheet.

"We have a £35 billion infrastructure investment plan to invest in schools, hospitals and transport, and it is vital that Scotland gets fair treatment from the Treasury over capital cover."