PHILIP Hammond's Budget pledge of £2 billion extra for Scotland has been dismissed as a "con", with the Scottish Government insisting more than half is restricted cash that must be repaid.

First Minister Nicola Sturgeon said the headline figure “has much less to it than meets the eye”, arguing Scotland still faces a real terms cut in next year’s spending.

But Treasury sources insisted the Scottish Government has “freedom” over how to use the funding, with money supplied in a similar way in previous years.

Sketch: How Fun-time Phil sugared the pill in a taxing budget

The Chancellor said spending decisions made in the Budget would mean £2bn for the Scottish Government in what is known as Barnett consequentials.

But £1.1bn of this is in the form of financial transactions – money that can only be used for certain purposes and must be repaid. Only £350 million consists of spending for day-to-day public services.

Writing on Twitter, Ms Sturgeon said: "Taking account of today's announced changes, next year's Scottish Government revenue budget is still facing a real terms cut of £239 million – imposed by the UK government."

She also said Mr Hammond’s announcement of an immediate £350 million cash injection for the NHS in England translates into just £8m for Scotland.

Scottish Finance Secretary Derek McKay said the Budget deal for Scotland was a "con".

He said: "Scotland's resource block grant for day-to-day spending will fall by over £200 million in real terms next year and while money for the NHS in England should see a proportionate share come to Scotland, cuts in other UK departments mean that instead of receiving over £30 million this year, the Scottish Government will receive only £8 million - a fraction of that spending.

"The reality is that over £1.1 billion of the money being promised to Scotland over the next four years are loans that the Scottish Government cannot spend directly on frontline public services and that have to be paid back to the Treasury."

Sketch: How Fun-time Phil sugared the pill in a taxing budget

He added: "The reality of today's budget is that Scotland continues to be hit by UK austerity and the decision to leave the EU.

"I have consistently argued for a better settlement for Scotland, and this budget does not reflect that."

He told The Herald financial transactions could “only be used for things like loans and equity”, adding: “We welcome any additional resources, but when it comes with strings attached, and it’s not that traditional resource, it presents challenges when you’ve still got to invest in schools and hospitals and roads and bridges and the infrastructure of a country.

“We are still being short-changed, we’ve still got less capital than we would like to be able to invest in Scotland.

“We’re still getting ripped off in terms of our share. I’ve now got a list of grievances with the UK Government – how they are short-changing this country.

“And that’s why arbitrary figures, when probed, just show them up as being pretty empty, frankly.”

The Treasury said financial transactions could be used to “stimulate private sector investment in infrastructure projects”, help small businesses access finance, or could be loaned out to individuals directly such as in the form of student loans or help-to-buy schemes.

It said it was for “the Scottish Government to decide how best to target this investment according to local needs and priorities”.

Economists said the challenge remained for Scotland to balance the books on the back of a real terms squeeze.

Sketch: How Fun-time Phil sugared the pill in a taxing budget

Graeme Roy, director of the Fraser of Allander Institute at the University of Strathclyde, said the Chancellor had been faced “with a much weaker outlook for the UK economy than he had even believed just back in March”.

He added: “In response, he announced a series of new measures designed to help boost productivity and support the housing market.

“As a result, the Scottish budget is on track to receive additional resources of just over £2 billion between 2017-18 and 2020-21.

“Over 80 per cent of this boost is in the form of capital, with the majority in the form of financial transactions.

“Financial transactions is funding for things like support for help-to-buy schemes and other types of loan/equity initiatives.

“So whilst they represent a boost to the Scottish Budget, the government is constrained in how they can be used.

“The Scottish resource budget is to receive more modest – but still positive – consequentials of around £350 million.

“As a result it remains on track to be squeezed in real terms over the next two years.

“The challenge therefore remains for Derek Mackay as to how best to balance the resource budget with major commitments like additional support for the NHS, more money for childcare and public sector pay uplifts all to be paid for.”

Scottish Tory leader Ruth Davidson said the Budget “delivers for Scotland”, and insisted the extra cash meant the SNP must “look again at their reckless plans to raise income tax in Scotland”.

She said: “The budget hands the SNP government a £2 billion Barnett bonus.

“It’s funding that could now be used to help solve Scotland’s housing crisis, to upgrade infrastructure, and to support our schools and hospitals.

“That extra funding also means that SNP ministers must look again at their reckless plans to raise income tax in Scotland.

“As a result of the Chancellor’s decisions today they are getting £2 billion extra funding to help meet their own spending commitments.

“With income tax and stamp duty being cut south of the border, there is a growing tax gap between people in Scotland and elsewhere in the UK.

“The SNP can’t keep hitting Scots in the pocket – and need to hold off further tax rises in the Holyrood budget next month.

“The case for raiding the pay packets of ordinary Scottish families has collapsed.

“The Chancellor has delivered for Scotland. As we look ahead to the Scottish budget next month, it’s now vital that the SNP government follows suit.”

Sketch: How Fun-time Phil sugared the pill in a taxing budget

But Scottish Labour leader Richard Leonard branded it a “failing Budget, on a failing economy from a failing government”.

He added: “They are rudderless and without a plan to grow our economy, help our industries and create the work of the future. This Tory Government is a driverless vehicle. This budget is insufficient, inadequate and insincere.

“This budget reminds us how years of Tory failure have damaged our economy. We urgently need a long-term industrial strategy which will invest in Scotland's future and investment in our public services.

“Scotland’s economy is stagnating; growing three times slower than the rest of the UK. Behind every downgraded economic forecast delivered by the Tories, there are more families suffering, having to get by on insecure work and pensioners unable to heat their homes.

“This budget offers no solutions to help the far too many people who are struggling to make ends meet.

“Any changes which try to lessen the brutal impact of the disaster that has been the Tory Universal Credit roll out will be too little too late. It is simply unacceptable that thousands of people will continue to suffer from callous and cruel Tory welfare cuts.

“We cannot continue with an economy where the richest 1 per cent own more than the poorest 50 per cent put together. We cannot continue with an economy where people in work struggle to make ends meet, to put food on their table and pay the rent. We cannot continue with an economy that sees 260,000 children in Scotland growing up in poverty.

“This broken system needs real and radical change that benefits the many and not only the few at the top - not just for now but for the long term."

Scottish Liberal Democrat leader Willie Rennie said: "It speaks volume when this government plans to spend more money on Brexit than the NHS."