Chancellor unveils 'significant' cash increases for Scottish projects

Mr Osborne announced the sums in his spending review and autumn statement - which also included a u-turn on plans to cut tax credits.

He said he could abandon the controversial tax credit cuts of £4.4 billion because of improvements in public finances.

Scottish Tory leader Ruth Davidson praised Mr Osborne for listening to concerns about the impact of reductions in tax credits.

"He has shown once again that it is the Conservative Party, north and south of the border, which is on the side of working families," she said.

SNP depute leader Stewart Hosie said that it was a "complete and humiliating u-turn" by the Chancellor.

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."

But Mr Hosie claimed the UK Government "has still not backed down on cutting £12 billion from the welfare budget and is seeking to now take money from those on housing benefit".

He stated: "We do not want the Chancellor to have solved one problem by creating another as he continues to hit the same low-income families who rely on housing benefit as he continues to pursue his ideological-driven austerity agenda."

Scotland's First Minister Nicola Sturgeon said on Twitter: "Well done to all who kept pressure on Chancellor to drop tax credit cuts. Now need to scrutinise housing benefit cuts #AutumnStatement."

From April 2017 Holyrood will have power over income tax rates and bands north of the border, with MSPs also being handed powers over some benefits.

The changes are being brought in following the Smith Commission on devolution, which was set up in the wake of last year's independence referendum.

Mr Osborne 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 frontline services for the people of Scotland."

He 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.

The Chancellor told MPs the devolution legislation "meets the vow made by the parties of the union when the people of Scotland voted to remain in the United Kingdom".

He added: "It must be underpinned by a fiscal framework that is fair to all taxpayers and we are ready now to reach an agreement - the ball is in the Scottish Government's court. Let's have a deal that's fair to Scotland, fair to the UK and that's built to last. "

But Scottish Deputy First Minister John Swinney insisted: "The Chancellor has continued with ideologically driven austerity of choice. Scotland will see almost 6% of the day-to-day budget that pays for public services slashed as a result of this Chancellor's statement.

"The Scottish Government has consistently demonstrated that the UK's deficit and debt can be brought down without the need for huge public spending cuts.

"These cuts are damaging, needless and will hit the poorest hardest."

He welcomed the "victory over tax credits", saying this meant "250,000 families in Scotland can breathe a sigh of relief after the proposed cuts were scrapped by the UK Government".

Mr Swinney continued: "This U-turn demonstrates it was right to maintain pressure on the Chancellor to rethink this damaging proposition.

"We will continue to do everything within our power to protect the most vulnerable from the UK Government's austerity measures - austerity of choice, not necessity - but we want to use our powers and resources to lift people out of poverty, not just continually mitigate as best we can.

"That will be our focus as we draw up spending plans ahead of the Scottish Budget next month."