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Anas Sarwar has challenged John Swinney to use a £1 billion underspend in the SNP Government's accounts as Scotland braces for the impact of the UK Budget later this month. The Scottish Labour leader used the example of cash he described as "lying in the Scottish Government's bank account" when asked if Holyrood faced a billion pound spending cut as a result of Rachel Reeves' spending plans. Sarwar spoke out after the UK Chancellor gave her clearest indication yet that tax rises are on the way when she announces the Budget on November 26. Reeves declined to recommit to her party's manifesto commitments not to raise income tax, national insurance or VAT, saying "we will all have to contribute". Speculation is rife the Chancellor will rip up a Labour manifesto commitment and impose a 2p hike on the basic rate of income tax as a result of the worsening economic outlook. The rate of income tax paid by workers in Scotland is set by Holyrood but a hike elsewhere in the UK could still have a negative impact on public spending north of the Border. Scots earning more than £30,300 already pay more in income tax than workers living in England, Wales and Northern Ireland. But the respected Fraser of Allander Institute has now warned that a 2p increase in the UK basic rate could reduce the block grant Holyrood receives from Westminster by as much as £1 billion. The think-tank explained: "The Scottish Government gets to keep income tax revenues and decide on rates, but spending decisions at UK level – which flow into the block grant – are based on UK Government decisions about tax rates." This means Holyrood's spending could be subject to a Block Grant Adjustment (BGA) - a deduction that attempts to capture what would have happened in the absence of devolution. Asked by the Record if Reeves' Budget could hammer public spending in Scotland, Sarwar pointed to the record devolution settlement the SNP Government had received since Labour took power last year. He said: "This obviously all speculation ahead of the Budget. My conversations with the Chancellor and the UK Labour Government will continue. "Look at the damage done under the Conservatives and by austerity across the country. "We can't see a return to austerity. And that poses challenges as well as opportunities for the Chancellor." Asked if he was concerned by public anger at tax rises contributing to a drop in public spending, Sarwar added: "Income tax is wholly devolved, that's the decision of the Scottish Government "I don't think John Swinney would take kindly to a UK Government suggesting he increase income tax in Scotland. "There has been £5.2 billion in additional money to the Scottish Government since Labour came into Government. A billion pound of that is lying unspent in the Scottish Government's bank account. "That's a billion pounds that could make to our public services." Shona Robison, the SNP Finance Secretary, said: "We are calling on the UK Government’s Budget to deliver more funding for those public services, infrastructure, and cost of living support – including by abolishing the two child limit in Universal Credit. "Scotland has been short-changed in the past, and we must not be left as an afterthought in the UK Government’s Budget. Under the current arrangements Scotland has to wait and see what impact the Chancellor’s decisions will have for us. Fundamentally, its only with the powers of independence that we can fully support our public services and deliver a stronger economy that works for everyone." To sign up to the Daily R ecord Politics newsletter, click here
