Salmond takes £1bn demand to Westminster

ALEX Salmond is demanding an extra £1bn from Westminster in an attempt to protect the Scottish economy from the worst excesses of the global financial crisis.

As the Scottish economy is swept up by worldwide financial turbulence, the First Minister has identified money held in the UK Treasury that he believes should be handed over to Scotland to boost the economy.

Salmond will convene a special Economic Cabinet on Tuesday in an effort to drive his proposal forward and exert some influence over an economic situation that is already out of control.

His plea for more money will infuriate those who believe that Scotland already receives more than its fair share of funding from the Treasury. Salmond's opponents will also interpret the move as another SNP bid to drive a wedge between Holyrood and Westminster.

The First Minister has earmarked a series of funds which he believes should be subjected to the Barnett Formula, the controversial mechanism that allocates Scottish funding and results in Scots receiving £1,500 per head more of public spending than the English.

"We are facing extraordinary and highly volatile circumstances, and everything that can be done must be done to protect jobs, investment and household incomes," a spokesman for the First Minister said.

"The SNP Government's priority is protecting Scotland's economy. We should also be in a position during these difficult times to use Scotland's resources much more fully. That's why the Economic Cabinet will identify additional resources which could form a potential £1bn programme of investment to help reflate Scotland's economy, including accessing Scottish Government funds currently held at Westminster.

"At a time when the UK Government's own budget rules have effectively been set aside in an attempt to get to grips with the financial and banking crisis, it makes every sense for the tight and unfair Westminster controls on Scotland's budget to be relaxed – so that we can invest in a package to support the real economy and stave off the threat of recession."

All Cabinet secretaries and junior ministers with portfolios looking after transport, climate change, enterprise, energy and tourism will attend the meeting to be held during the parliamentary recess next week.

Ministers will claim the Barnett Formula should be applied to the London Olympics regeneration spending fund, action that would result in Scotland receiving £33m per year until 2013. And, if applied to the £1.2bn Carter Review of Prisons Spending in England and Wales, the formula would net Scotland £120m.

Similarly, there would be £40m of Barnett consequentials for Scotland between 2008 and 2011, if the formula were to be applied to police and firefighter commutation costs south of the border.

Salmond will also call for the relaxation of Treasury restrictions that are currently preventing the release of more than £120m from the Fossil Fuel Levy surplus.

Another source of income would be found by bringing forward the Scottish Government's £42m underspend, which is currently held at Westminster until 2011.

According to the SNP, a further £476m, which Scotland lost out on as a result of the suspension of the Council Tax Benefit mechanism, ought to be made available. The mechanism was introduced at the outset of devolution so that the Treasury could claw back money from the devolved administrations, which were expected to charge a higher council tax than England. In reality, Scottish council tax rates and rents increased at a lower rate than south of the border, resulting in money being paid out to Holyrood.

To the anger of the SNP, the arrangement was ceased in 2005 in exchange for a one-off £57m payment. The SNP estimates the resulting loss has been running at £100m per year.

Salmond envisages that the cash will build on the package announced in August during the Donald Dewar lecture, when plans to bring £100m of affordable housing investment and £180m from European structural funds into the Scottish economy were announced.

Last night Andy Kerr, the Labour shadow finance secretary, said the package was a reheated and recycled set of discredited demands.

Kerr said: "You have to ask what is the point of the SNP? All they do is constantly refer to others when they want something done and it is usually the UK Government. It is dishonest to claim for funds that are not available.

"Meanwhile Labour has spelt out clearly once again to Alex Salmond what he can do. He should abandon his proposals for the Scottish Futures Trust and get on with capital programmes and infrastructure development. The Parliament's Economic committee was told last week by representatives from the construction industry that delays in SFT were creating a black hole in Scotland's infrastructure programme.

"Labour has given Alex Salmond specific examples of what he could start with such as trunk road maintenance, Scottish Water improvements, Bishopbriggs prison and investment in skills and training. It is entirely in the SNP's hands. What Scotland needs now is a government that can act instead of reheating old, unfounded grievances."