The Treasury will provide no more than £330 million to the Scottish Government to cover the impact on the public sector of the increase in national insurance.
Chancellor Rachel Reeves announced in her October 30 Budget that employer contributions would increase, but the UK Government would mitigate the impact on the public sector in England.
Immediately, the Scottish Government called for £500 million to cover the increase to the Scottish public sector, which employs more people and usually on higher wages.
At the time, it was understood there would be talks between the two governments, but on Monday the Treasury said Scotland would be given a population share of the cash used in England to mitigate the cost to the public sector.
It is understood this figure ranges from £295 million to £330 million.
Scotland’s Finance Secretary Shona Robison said the funding offered “simply won’t cover the cost of this hike” and there could be “irreparable damage” caused to services in Scotland if the funding is not fully reimbursed.
Ms Robison suggested more than £500 million would be needed just for those directly employed by the public sector, rising to £750 million when indirect employees such as those in childcare, colleges or social care are factored in.
“That Labour are trumpeting that they could reimburse less than half of this sum and expect people in Scotland to celebrate is beyond belief – and shows a complete disregard for public services in Scotland,” she said.
“Clearly, the Labour Government expect the shortfall of hundreds of millions to be absorbed by cuts to Scotland’s public services.
“Let me be clear, that is nothing less than Westminster austerity through the back door.
“Labour need to fully fund their decision to avoid irreparable damage to our public services in Scotland.
“With just over a week until the Scottish Government announces its budget for the coming financial year, we need urgent and formal clarity from the UK Government that they will do so.”
A spokesman for the UK Government said: “The Budget delivered more money than ever before for Scottish public services and the Scottish Government receives over 20% more funding per person than equivalent UK Government spending.
“It is for the Scottish Government to allocate this across its own public sector and meet the priorities of people in Scotland.
“It will also receive additional Barnett funding on top of this record £47.7 billion settlement as part of support provided in relation to changes to employer national insurance.”
Ms Reeves’s budget provided an extra £3.4 billion for next year, which the Scottish Government will likely have to use to cover the remainder of the increased costs to the public purse through the national insurance hike.
