Government spending in Scotland is set to rise by more than �4bn in the next three years as a result of the chancellor's spending review.

Gordon Brown unveiled across-the-board increases in government spending on Monday in an effort to improve public services.

The extra resources he announced were targeted at specific areas of need south of the border, such as education.

It is now for the Scottish Executive to translate this into the best possible public services for the Scottish people

Helen Liddell Scottish Secretary

Under the Barnett funding formula - which governs the allocation of Treasury cash north of the border - any additional cash is included in Scotland's block grant.

Mr Brown announced that overall spending in Scotland would rise by �1.5bn in 2003-04, followed by increases of �2.7bn and �4.1bn in the following years.

That will set the spending limits at �19.7bn, �20.9bn and �22.3bn respectively.

It is then up to ministers in the Scottish Executive to decide where the additional money will be spent.

That process is likely to take some time and specific announcements about spending may not come until after the parliamentary recess.

Public services

Scottish Secretary Helen Liddell described the spending settlement as "excellent".

"Our successful management of the economy and sound public finances have meant that we can provide substantial additional resources for Scotland," she said.

"It is now for the Scottish Executive to translate this into the best possible public services for the Scottish people."

Alex Salmond: "Funding gap"

She also argued that the Barnett Formula "continues to provide a fair, transparent and flexible basis for deciding spending plans in Scotland".

However, the Scottish National Party said the "Barnett squeeze" meant spending would increase by less in Scotland than in England.

Its Westminster leader Alex Salmond said: "The only guarantee for Scotland is that our share of UK spending will continue to fall - and that London control will continue to pauchle Scotland's budget.

"While spending on English education will go up by 6% a year, the Scottish increase will be little over half that - and rises in English health spending will be well above Scots health spending too.

"Overall, the funding gap between Scotland and England will be 2% - the equivalent of �300 for every man, women and child in Scotland over the CSR period."

Financial independence

He also said that Mr Brown had failed to rule out any further changes to the Barnett Formula which would reduce Scotland's share.

Mr Salmond argued that the Scottish Parliament needed full financial independence.

Liberal Democrat MP John Thurso said his party was "winning the argument" over increased investment in public services.

"It is now up to Liberal Democrat and Labour ministers in the Scottish Executive and MSPs in the Scottish Parliament to make sure this money is invested wisely," he said.