JOHN Swinney sparked further tension with Westminster yesterday when he claimed 9,000 jobs could be lost in Scotland as a direct result of efficiency savings announced in the Budget.
Scotland's finance secretary said Alistair Darling's announcement would result in a cut to Scotland's block grant of £500 million – part of a £5 billion cut across all government departments. Labour claimed the true figure was £367 million.
While Mr Swinney said he understood the need for savings, he argued that it was wrong to take so much from public spending next year, just when the economy was starting to recover. But Labour ministers insisted that every part of the public sector had to find savings to help revive the country's finances.
The clash over the extent of the cuts planned for Scotland overshadowed other sections of the Budget that will help industries north of the Border, including the oil and gas sector. The Chancellor said the Scottish block grant for 2010-11, would be £35.5 billion, £700 million more than this year but £367 million less than expected.
Mr Swinney argued the actual cut was £500 million as a result of changes to the health budget last year which, he claimed, had deprived the Scottish Government of £129 million this year.
But whatever the exact size of the reduction, all politicians were agreed that the Scottish budget was not going to increase as much as anticipated due to the demands for efficiency savings. Instead of asking departments to make the savings and then allowing them to reinvest the money in front-line services, Mr Darling has simply taken the money away at source.
It was this that particularly infuriated Mr Swinney, who has already asked his own departments to make savings, but has allowed them to reinvest this money in their own services.
Mr Swinney said: "This Budget is deeply damaging for Scotland. The Chancellor said you cannot cut your way out of recession and that taking money out of the economy at this critical time would damage key public services; yet that is precisely what he is imposing on Scotland.
"A £500 million cut to the Scottish budget will impact on our ability to deliver those services people need as Scotland moves officially into recession." He added: "These cuts could see approximately 9,000 people losing their jobs."
Mr Swinney said thousands of jobs could go in the construction industry due to the reduction in capital spending used for big infrastructure projects such as schools and hospitals.
But UK ministers derided Mr Swinney's analysis of the figures and his determination not to accept the sort of efficiency savings being imposed on every other government department.
Jim Murphy, the Scottish Secretary, said: "The Scottish Government has to find efficiencies of equivalent to £367 million next year, but that should be achievable given the UK government is finding nearly £5 billion of efficiencies without any reduction in front-line services."
Scottish Labour politicians also disputed Mr Swinney's claims of a £500 million cut.
Andy Kerr, the party's finance spokesman, said: "It is only common sense that Scotland plays its part like the rest of the UK. Scottish families and Scottish businesses know this."
Derek Brownlee, for the Conservatives, said both the main parties had to face up to what the Budget meant.
"Labour must accept responsibility for the mess they have created and the SNP must accept that the Scottish budget will be lower than expected," he said.
"Scottish Conservatives will work in the Scottish Parliament to ensure that the impact of the spending squeeze on key public services is minimised, and that spending which promotes economic growth is protected."
Other parts of the Budget drew mixed reactions.
Jacqui Watt, chief executive, of the Scottish Federation of Housing Associations, said: "The SFHA is very disappointed the Chancellor's touted £1 billion package to boost housing did not include any significant money targeted at new-build affordable housing.
"This is a huge missed opportunity to create thousands of jobs and homes in communities that desperately need them."
And the Scottish Building Federation called the measures to support the construction sector "far too little, far too late".
Michael Levack, chief executive of the federation, said: "The new money the Chancellor announced for housing and home insulation – none of which will benefit Scotland – is a drop in the ocean compared to the amount of spending he could have stimulated in this area on both sides of the Border if he'd had the courage to cut VAT on home improvements to 5 per cent.
"By our calculations, this could have been as much as £330 million in Scotland alone over the next 12 months – almost ten times the boost per head of population provided by the new home insulation programme."
Liz Cameron, chief executive of Scottish Chambers of Commerce, welcomed the doubling of capital allowances and some other measures.
But she said: "Less welcome is the news that fuel duty will increase by 2p in September and by 1p above inflation next April. This will increase the cost of transport and doing business in Scotland, particularly in our rural areas – a cost which businesses can ill-afford at this time.
"Similarly, the news that alcohol taxes are to rise by 2 per cent will come as bad news to many businesses in the licensed trade, hospitality industry, tourism and food and drink sectors."
Meanwhile, Save the Children said it was "hugely disappointed" that more had not been done for children in poverty. Douglas Hamilton, head of the charity in Scotland, said: "The government's own target of halving child poverty by 2010 is no longer achievable.
SCOTTISH REACTION IN QUOTES "The STUC believes a golden opportunity has been missed to introduce a timely and targeted fiscal stimulus to save current jobs and create new ones. We also remain very concerned at the timing and size of proposed efficiency measures."
Grahame Smith – Scottish Trades Union Congress "A duty increase during a recession is a real blow and follows last year's duty rises on Scotch, the largest since the 1970s.
The government should be supporting all UK businesses, including Scotch whisky distillers, who have the potential to help drive the economy out of recession."
Gavin Hewitt – Scotch Whisky Association "There is little in this Budget to boost business within the convenience store sector."
John Drummond – chief executive of Scottish Grocers' Federation "The Budget projections look like a triumph of hope over experience. Despite having to drastically downgrade his forecast for growth this year, the Chancellor still expects the economy to rebound over the next two years."
Russell Hills – Head of tax at KPMG in Scotland "It is a relief the flexibility in making tax payments, of which many Scottish small firms have already taken advantage, is to continue. But the fuel duty rise will make it hard for rural and other business road users to keep moving in the downturn."
Andy Willox – Federation of Small Businesses in Scotland "The additional taxation on spirits and alcohol will make it harder to argue for fairer taxation on Scottish exports in overseas markets."
Iain McMillan – CBI Scotland "The SFHA is very disappointed that the Chancellor's touted £1 billion package to boost housing did not include any significant money targeted at new-build affordable housing. This is a huge missed opportunity."
Jacqui Watt – Scottish Federation of Housing Associations
BUDGET 2009: FULL COVERAGE•
Slideshow: The Budget in graphics•
Darling bounces UK deep into debt•
Britain to sink into £1 trillion debt hole next year•
Darling throws petrol bomb at recovery hopes•
Analysis: Chancellor's projections for growth a real gamble•
Energy: Boost for North Sea fields is welcomed but detail needed•
Whisky: Few cheers as duty rise comes at the worst time, say whisky leaders•
Leader: Wait-and-see Budget shows lack of leadership•
Cartoon by Iain Green