Scottish Labour have accused the Scottish Government of "financial incompetence" after it emerged ministers have handed back around 158 million euros (£134 million) of unspent European Union funding.

The accusation was put to Deputy First Minister Kate Forbes by Jackie Baillie at First Minister's Questions today following a report on the matter by Holyrood researchers in the wake of a newspaper article last weekend which said £450 million of money not spent would be repaid to the European Commission.

"On Sunday, it was revealed that the SNP will effectively hand back up to half a billion pounds of funding that should have been spent on crucial economic and anti poverty projects across Scotland," said Ms Baillie.

"That is simply a scandal and it happened when Kate Forbes was Finance Secretary. 158 million already handed back because of SNP failure to meet annual expenditure targets. A further 136 million not spent by the deadline of the end of 2023 and a further 280 million still to be claimed. All confirmed today by the independent experts at the Scottish Parliament, and this is just the latest example of SNP financial incompetence."

Ms Forbes was standing in for First Minister John Swinney who is in Normandy to mark the 80th anniversary of the D Day landings.

She hit back at Ms Baillie's claims and said there was "no evidence" in the Scottish Parliament Information Centre's (Spice) report on the £450 million pound claim. 

"We said that very clearly earlier this week. And the Spice report also indicates that £450 million is not one that they recognise," she said.

"First of all final expenditure figures will not be known until the programme formally closes in 2025."

She added she did expect the the final figures to be markedly different from elsewhere in the UK, or from previous programmes.

"So our commitment is to spend as much of the money as possible and of course the irony of the question, is that the Labour Party have no intention of ever returning Scotland to Europe, and therefore depriving us of European funding indefinitely," she said.

Ms Baillie hit back saying while it is likely Scotland is due to return 28% of the funding, Wales is on course to return 9% of its money, England 6% and Northern Ireland 2%.

The EU funding pot is earmarked for schemes to boost employment, education, training and social inclusion as well as those aimed at supporting small and medium-sized businesses are among the areas to lose out on the greatest share of investment.

The programme closes this month which means the funding is almost certain to go unspent and be lost.

The loss of such a significant tranche of funding will intensify pressure on the SNP, whose ministers have regularly criticised Westminster cuts as “nothing short of a betrayal of public services across the UK”.

In April, the former first minister Humza Yousaf introduced a higher-rate income tax band in an attempt to plug a funding shortfall of around £1.5 billion, between day-to-day spending commitments and capital projects.

The EU funding scheme, which was replaced by the UK shared prosperity fund after Brexit, was listed as running from 2014 until 2020 but money could still be allocated until June of 2024.

It has been used to fund a series of Scottish projects, including £16.3 million to help low-income, lone-parent or workless households in Argyll and Bute, Dundee, Glasgow, Inverclyde and North Ayrshire.

The Sunday Times reported last weekend that Scotland has been suspended from applying for the funding on five occasions. An EU report in 2015 said a suspension had taken place because of “deficiencies in first-level management verification, audit trail” and “irregularities regarding eligibility of expenditure, rules on audit trail”.

It their blog today Scottish Parliament researchers said EU figures show that the value of the Scottish structural fund programme is now €783.4 million compared to an initial value of €941 million. 

They reported the Scottish Government has confirmed the reduction of £134m is because of Scotland failing to meet the annual expenditure targets set by the European Commission.

The Scottish Government has confirmed to Spice it will make a further two claims to the European Commission for payment of the structural fund programmes with the first claim likely to be submitted in late July.

As at 4 June 2024, around two-thirds (64%) of the revised €783.4 million had been paid out to the Scottish Government, with €280 million (36%) of the revised total remaining to be claimed.

However, even after these further claims are taken into account, figures provided to Spice by the Scottish Government show that around €136 million of the updated value of the programme has not been committed to lead partners with the end of 2023 deadline now passed. The Scottish Government has told Spice that it is continuing to work with the European Commission to explore ways to ensure it is able to use as much of the funding allocated to Scotland as possible.