The Scottish Government is set to receive an extra £300 million to cover a planned increase in employer national insurance contributions, the BBC has learned.
Last week, Treasury officials reportedly told their counterparts in Edinburgh they were due to receive between £295m and £330m extra – although the Scottish Government said the tax rise would cost them £500m.
The Chancellor last month announced a change to the UK budget aimed at increasing funding for public services.
A British government source told the BBC that “hundreds of millions of pounds” were heading to Holyrood.
They said: “In total, Holyrood will have more than £5 billion extra to spend from the UK budget.
“There are no more excuses, Scots expect results from the SNP and use this money to reduce NHS waiting times and improve outcomes in our schools, not to fill a budgetary black hole created by years of financial mismanagement and waste.”
Chancellor Rachel Reeves said Scotland would receive £3.4 billion in extra funding in 2025-26 when she outlined her budget plans – although she suggested this did not include compensation for the National Insurance and urged Holyrood ministers to spend the money “wisely”.
The UK government said additional funds would be provided on top of the £3.4 billion to offset additional staff costs.
The Scottish Government is also set to receive an extra £1.5 billion this financial year 2024-25 – although it said this was in line with its budget expectations.
National Insurance contributions are the UK's second largest source of income, after income tax.
It is paid by workers and the self-employed on earnings and profits, and by employers in addition to the salaries they pay.
Of course, this affects public sector employees who work for the Scottish Government.
Around 600,000 people are employed in the Scottish public sector, representing 22% of the total workforce – compared to around 17% for the UK as a whole.
This fueled concerns at Holyrood that Scotland could be harmed if compensation for the national insurance increase was not proportional to its public sector.
Scottish Finance Secretary Shona Robison had urged the Treasury to provide what she called “clarity” on how any mitigation could work.
Speaking earlier this month, Ms Robison said: “The UK Government's increase in employers' national insurance could hamper services in Scotland to the tune of around £500 million – and the more we let's look at this announcement, the more it worries us.
“With the Treasury failing to provide clarity on any mitigation process at the time of the budget release, services across Scotland are feeling increasing confusion and concern at the very time they need to be able to plan ahead. advance.”
A Scottish Government spokesperson said the Scottish Parliament had agreed that the UK Government would repay the cost of the change – “over £500 million”.
They said: “This UK Government policy risks hampering economic growth and harming public services and, although discussions with the Treasury are ongoing, we still have no certainty regarding the Scottish budget.”
