British government agrees deal with Scotland over new spending powers

British government agrees deal with Scotland over new spending powers

Russell Cheyne

The agreement ends a dispute over how much money the devolved government will receive in future from the British Treasury. That paves the way for new tax and spending powers to be handed to Scotland as part of a major devolution deal.

The British government thus complies with a last-minute promise to Scotland made by the major London-based political parties before the independence vote, when polls indicated that Scots might vote to leave the United Kingdom.

Voters in Scotland ultimately rejected independence by 55 percent to 45 percent. But the success of the pro-independence Scottish National Party in Britain's general elections in May 2015, when it took 56 out of 59 seats in parliament, revived speculation it might push for another referendum.

The Treasury said the new agreement laid the ground work for the Scottish parliament to become "one of the most powerful of its kind in the world," while ensuring the deal was fair to taxpayers in the rest of the UK.

"The Scottish Government will get new borrowing powers – so that it can manage its budget effectively and invest up to 3 billion pounds in vital infrastructure, while being accountable to the Scottish people for its decisions," the Treasury said in a statement.

The Scottish government also welcomed the deal, saying it was fair, and ensured that the budget would not be reduced during a six-year transition period in which new tax powers would be handed over.

Scotland holds elections for its devolved parliament, Holyrood, on May 5.

(Reporting By Elisabeth O'Leary)