LAST ditch talks are due to take place between the Treasury and Scottish Government officials, as both sides insisted the other must compromise if a deadlock over a financial settlement underpinning new powers for Holyrood is to be broken.
John Swinney, the finance secretary, is expected to travel to London this week for a final face to face summit with an initial deadline for agreeing a fiscal framework already having passed on Friday. With both parliaments in recess, ministers are preparing for intense negotiations in the days ahead.
Greg Hands, the Chief Secretary to the Treasury, said that the parties were "nearly there" over an agreement but warned that "the ball is now fully in the court of the Scottish government" over whether to accept it and pass a "final hurdle".
However, sources close to Mr Swinney insisted that it was Mr Hands who should prepare to give way over key issues, with the SNP maintaining that the Treasury position flies in the face of the "no detriment" principle agreed by the Smith Commission.
The fiscal framework will underpin new tax powers that are set to be transferred to Holyrood under the Scotland Bill by calculating Holyrood's adjusted block grant. Nicola Sturgeon has insisted the deal on the table from the UK Government will cost the devolved administration £3 billion over the next decade.
The key area of dispute is around population growth, with the Scottish Government insisting that it should be compensated if, as predicted, its population grows slower than the rest of the UK. The Treasury, however, believes that it is being asked to transfer unreasonable levels of tax revenues from England and Wales north when the cash will be needed to pay for public services there.
David Phillips, of the Institute of Fiscal Studies, told the BBC's Sunday Politics Scotland that while both sides had reasonable arguments, there would need to be "goodwill" on both sides just to reach a "fudge" agreement.
Mr Hands said it was not fair that billions of pounds should "continue to flow to Scotland" from increased tax receipts south of the border after income tax is devolved and insisted his position was "logical and fair." He said that the Scottish Government should manage some of the risks from population growth.
He added: "The Scottish Government’s deal would mean the Scottish Government benefitting from billions of pounds from the growth in income and other taxes in the rest of the UK, long after these taxes have been devolved, whilst keeping all devolved taxes in Scotland to themselves.
A Scottish Government sourced admitted the talks, which continued between officials over the weekend, are "not in a good place" with the original deadline having passed on Friday. A new deadline of February 23 has been set by Holyrood's devolution committee.
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