END austerity to protect growth, Scottish Government finance minister Derek Mackay has warned Chancellor Philip Hammond ahead of next week’s Budget.

In a letter to the Treasury chief, Mackay says he has set out a “comprehensive case for a better settlement for Scotland.”

He tells the Chancellor to use the Budget to “recognise the serious challenges we are facing as a result of Brexit” and to “bring forward substantial measures to boost the economy and ease the pressure on the public sector and those who work in it.”

Mackay also says it’s vital Hammond ensures “Scotland gets its fair share of funding after the DUP deal” that saw the Government pay £1bn to the Northern Irish party as they scrambled to form a government after the chaotic snap election saw Theresa May lose the Tories their majority.

In his letter, the Scottish finance chief says the deal between the Tories and the DUP was a “notable” example of the UK Government showing “flexibility in their approach to austerity.”

And that the deal saw “£1 billion of additional resource was provided to Northern Ireland for devolved areas of spend, without any additional funds being provided to Scotland or any other part of the UK.”

He adds: “It is imperative that all budget decisions are made in accordance with existing funding agreements, such as the Statement of Funding Policy. Our officials continue to pursue discussions over the appropriateness of the way in which the UK Government decided to provide the additional financial support for Northern Ireland, with the aim of reaching a satisfactory outcome for Scotland and the rest of the UK.”

In July, the Welsh and Scottish Governments started the formal dispute resolution process over the deal, with both devolved administrations saying their should be consequential funding because of the deal with the DUP.

The Finance Secretary also uses his letter to ask Hammond to “ensure a fair deal for Scottish Farmers through allocation of Common Agriculture Policy convergence uplift to Scotland” He also argues for the Scottish Police and Fire Services to recover their £35m annual VAT bill.

Mackay said: “Scotland is suffering from the economic uncertainty caused by impending Brexit, ideological cuts and economic incompetence from the UK Government

“Across so many policy areas, the short-changing of Scotland is increasingly blatant and contemptible. This budget gives the Chancellor an opportunity to repair some of the damage and put right injustices that the Government he belongs to have created.

“The Scottish Government remains steadfast in its opposition to the UK Government’s austerity agenda which disproportionately hurts the poorest and most vulnerable in society.

“The Chancellor must reverse his plans to cut an additional £3.5bn, halt his £600m reduction for Scotland’s Railways and finally address the issue of Police and Fire VAT that has cost Scotland’s emergency services £140m to date.

Meanwhile, the Treasury are risking a backlash from small business if rumours of a radical shake up of VAT rules are confirmed.

Economists believes Hammond could raise up to £2bn a year by bringing the £85,000 threshold for VAT down to around £25,000 mark, close to the EU average.

The change in rules would hugely impact small business — around 55 per cent of firms with less than 250 employees are currently outside the VAT net.

Crossing the threshold can add an extra £17,000 to a company’s bill.

A recent report by the indicated that reducing the threshold from £85,000 to £43,000 would affect about half a million businesses and increase Treasury receipts by £1bn to £1.5bn a year.

A decrease in the threshold to £25,000 could raise up to £2bn.

Mike Cherry, chairman of the Federation of Small Businesses, said: “Any reduction of the VAT threshold against the current backdrop of unprecedented uncertainty and spiralling costs will have a hugely negative impact on growth within the small business community.”