THE Scottish Government will likely delay plans that would see VAT raised in Scotland given over to Scottish ministers, because of fears it would result in a “significant hit to the Scottish budget”.

Finance secretary Derek Mackay was due to take control of almost £6 billion in VAT revenues as part of the new funding settlement agreed in the wake of the Smith Commission.

That deal sees the Scottish Government take in the first 10p of standard rate of VAT, and the first 2.5p of the reduced rate.

In return, the block grant would have been reduced accordingly.

But ministers said the methodology for calculating exactly how much money should come to Scotland had “enormous risk” attached to it, particularly given Brexit uncertainty.

Mackay told MSPs on Holyrood’s finance and constitution committee that officials in Edinburgh and London had spent two years trying to find a reliable model to calculate the VAT revenues to assign to Scotland.

“We have not found a way that addresses that issue of risk, which is compounded by Brexit uncertainty,” Mackay said.

He stressed that he still wished to see the devolution of VAT powers, but added: “It’s not a devolved power as it stands, it’s an assignation which carries disproportionate risk because of the uncertainty and lack of data.

“The level of risk is such that we’re not a position to sign that off.”

First Minister Nicola Sturgeon told a meeting of committee conveners in Holyrood: “It’s based on estimates and while that, in normal times, would give rise to concerns anyway, at a time where there is such instability largely because of Brexit, proceeding on that basis could – in the Scottish Government’s judgement – result in a significant hit to the Scottish budget.

“It’s about a way of calculating the Scottish budget that has enormous risk attached to it and it isn’t sensible to allow that to be done on the proposed methodology at a time where there is so much volatility in some of the factors that drive this.”

The Fraser of Allander Institute has previously warned that the accuracy of estimates could be out by “a couple of hundred million either side”.

The Scottish Tories accused the SNP administration of being a “return-to-sender government”.

Murdo Fraser said it was the “hallmark of a grievance-driven, incompetent” government.

He continued: “It’s bad enough that she handed back social security powers earlier this year, then suddenly decided she wanted nothing to do with control over air departure tax this week.

“Now we learn the SNP government doesn’t even have the wherewithal to cope with the VAT assignment it so furiously demanded previously.”

Labour’s James Kelly described it as a “climbdown”.