Spending Review: Nicola Sturgeon welcomes tax credit U-turn

Scotland's first minister has welcomed a U-turn by the chancellor on tax credit cuts.

George Osborne announced in his Autumn Statement that he was scrapping plans to save £4.4bn by cutting tax credits.

Nicola Sturgeon tweeted her congratulations to "all of those who kept the pressure on the Chancellor" over the issue.

Mr Osborne also announced "significant increases" in money for major capital projects in Scotland.

• BBC Scotland political editor Brian Taylor on how the spending review is going down at Holyrood.

• Follow reaction to George Osborne's Autumn Statement

• At-a-glance: Spending Review key points

The chancellor said the Scottish government's block grant would reach almost £30bn by 2019-20.

And he said the spending review included an increase in capital funding for the Scottish government of £1.9bn through the block grant.

He said this was an increase of 14% in real terms over five years, in addition to the Scottish government's ability to borrow up to £2.2bn for capital investment.

Revenue budget

But the Scottish government said its revenue budget - which covers day to day spending - would be cut by 5.7% in real terms over the next four years.

Mr Osborne told the Commons that he had received representations that the changes to tax credits should be phased in.

But he added: "I've listened to the concerns. I hear and understand them. And because I've been able to announce today an improvement in the public finances, the simplest thing to do is not to phase these changes in, but to avoid them altogether."

Ms Sturgeon welcomed the change of policy, but said there was now a need to scrutinise the impact of housing benefit cuts.

Scottish Labour leader Kezia Dugdale tweeted that "350,000 Scottish families can rest a little easier this Christmas thanks to Labour pressure on tax credit cuts".

Mr Osborne set out how he intends to make £20bn of spending cuts and £12bn of savings on welfare, telling MPs that the Spending Review was designed to make Britain "the most prosperous and secure of all the major nations of the world".

Referring to the Scotland Bill on new devolved powers for Holyrood, the chancellor said: "We have delivered our vow to implement the Smith Commission Agreement in full. The Scottish government will now have to make the hard choices that we have had to in order to protect front-line services for the people of Scotland."

Mr Osborne angered SNP MPs in the Commons when he claimed an independent Scottish government would have been forced to make "catastrophic cuts" to public services as the result of a 94% drop in oil and gas revenues.

The Office of Budget Responsibility (OBR) said its forecast for oil revenue in 2015/16 was £130m, which the Conservatives and Labour have contrasted with the estimate of up to £7.5bn that was cited in the Scottish government's independence white paper.

Oil revenues for the year 2014/15 were £2.2bn, the OBR said.

The chancellor also signalled the UK government was "ready to reach an agreement" with SNP ministers over the funding framework, which will determine how much cash Scotland receives from Westminster in years to come.

Talks on this are taking place between the two administrations, although the Scottish government has warned it could block the new powers if it believes the deal is unfair.

John Swinney will unveil his Scottish budget next month

Speaking ahead of the statement, Scottish Finance Secretary John Swinney insisted that the Conservatives were "engaged in austerity of choice, not necessity".

Mr Swinney is due to give details of the Scottish government's budget plans for 2016-17 next month.

SNP Treasury spokesman Stewart Hosie said that the chancellor's "complete and humiliating U-turn on tax credit cuts shows that we were right to keep the pressure up to the last minute highlighting the damage that would be inflicted by changing the tax credit system and calling on George Osborne to reverse his proposal."

He added: "The chancellor has finally realised that the changes would have had a devastating impact on the incomes of thousands of low-paid families - as we have consistently said.

"Instead of running up the white flag as Labour did, it shows once again it is the SNP who are the real, and only effective opposition to the Tories."

Labour's shadow Scottish secretary, Ian Murray, said the U-turn on tax credit cuts "underlines the total chaos of the chancellor's management of the public finances".

'Skilled jobs'

He added: "In the last parliament, he said he would balance the books and he failed. This has been the slowest economic recovery on record and it has put people's livelihoods at risk.

"It has been based on low pay, insecure jobs and zero hour contracts. We need investment to grow the economy and create higher skilled jobs for the future."

Scottish Tory leader Ruth Davidson welcomed the decision to scrap tax credit cuts and urged Scottish ministers to make use of the increase in capital funding.

She said: "This spending review hands the Scottish government a 14% real terms increase in capital spending up till 2021.

"The SNP needs to put shovels in the ground immediately so we too get the new homes, the better transport routes, and the high quality schools that people are waiting for.

"The spending review also makes it clear that there absolutely no case for the SNP hiking up taxes on working families when new powers are transferred to it."