GLEN COE, SCOTLAND - MARCH 24: A Union Jack and Saltire flags blow in the wind near to Glen Coe on March 24, 2014 in Glen Coe, Scotland. A referendum on whether Scotland should be an independent country will take place on September 18, 2014. (Photo by Jeff J Mitchell/Getty Images)
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The Scottish government has accused the UK government of seeking to alter the way it calculates how much money to transfer to Edinburgh, despite the Treasury’s insistence that there is “no prospect” of any changes to the formula.

Only a small proportion of the £30bn annual block grant paid to the Scottish government would be affected by the alleged proposed alteration to the “Barnett formula” under which it is calculated. And the Treasury insists its plans are in line with an approach agreed by both sides in 2012.

But any change to the Barnett formula, which allows Scottish per capita public spending that is considerably higher than the UK average, will be highly sensitive given Scotland’s looming referendum on independence.

Scottish Nationalists say the Barnett formula is likely to be changed or scrapped to Scotland’s fiscal cost if it votes to stay within the UK on September 18.

Danny Alexander, UK Treasury chief secretary, has insisted that no UK political party intends any alteration to how it is calculated.

“Within the UK, there is no prospect for change to the Barnett formula,” Mr Alexander said last month.

But the Scottish government says the Treasury is seeking to change the formula to account for the devolution of control of nearly £400m worth of land and building transaction tax and landfill tax under the 2012 Scotland Act.

The UK government said in 2012 that when the taxes were devolved in 2015 there would be a “one-off reduction which will then be deducted from the block grant for all future years”.

A spokesperson for John Swinney, Scotland’s finance secretary, said the Treasury was now seeking to change this approach to one in which it would cut slightly all of the Barnett formula “consequentials” used to calculate the block grant each year.

This would mean that the impact on the block grant of devolving the taxes will be influenced by future UK government spending decisions.

“For all their protestations of not trying to change the Barnett formula, they are trying to change the Barnett formula,” the spokesperson said, adding that the likely effect would be to reduce the value of the remaining block grant to Scotland over time since landfill tax is a declining revenue.

The Treasury insists that its proposal to cut Barnett consequentials is consistent with the “one-off reduction” agreed in 2012. It believes a simple cut to the block grant would not properly reflect the impact of forgone UK tax revenues even if it is indexed to inflation as suggested by the Scottish government.

“We are continuing to discuss an appropriate and equitable block grant adjustment for fully devolved taxes with the Scottish government,” a Treasury spokesperson said.

The dispute is likely to feature in appearances by Mr Alexander and David Gauke, Treasury exchequer secretary, before Scottish parliamentary committees on Wednesday.

The ruling Scottish National party said the proposals for the block grant exposed a “Treasury charade”.

“They are simultaneously proposing changes to the Barnett formula whilst trying to pretend nothing will change,” the SNP said. “The UK government should be honest about its plans and admit that its wants to change the Barnett formula and that Scotland would suffer as a result.”

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