NICOLA Sturgeon has said that Scotland needs the full powers of an independent nation in order to block a "cost of living crisis" created by Tory policies.

The First Minister was responding to a proposal from Anas Sarwar during First Minister's Questions which would see money benefitting the poorest in Scotland.

The Scottish Labour leader said the country is facing a "cost of living crisis" as furlough comes to an end, Universal Credit (UC) is set to be cut and the energy price cap is set to rise.

It comes as the UK Government has announced £500 million in grants to help families struggling with the cost of living as prices rise and UC cuts, with around £40m expected to be given to Scotland through the Barnett formula.

The First Minister insisted it was an “insult” and a “disgrace” that the UK Government was only making £500m available via the new Household Support Fund, as she claimed the upcoming reduction in Universal Credit would cost families £6 billion.

Sarwar called on Sturgeon to enhance the Scottish Government's winter fuel payment for pensioners by £70 and is saying that targeted support can be given to struggling families through the means that the Scottish Parliament already has and this new money.

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Sturgeon said that she was surprised to hear Sarwar talking about the policy positively since it was an announcement that came as the UK Government was "taking £6bn out of the pockets of the lowest-income families" through cuts to UC.

She said that every penny that the Scottish Government receives from the policy will go towards supporting low-income families.

However, she said it is not possible for the Scottish Government to continue "mitigating the impact of reserved policies from a limited and finite devolved budget".

Sturgeon said that doing this means that devolved responsibilities are hit hard by mitigating policies Westminster brings in as the Scottish Government does not have the ability to borrow money and has to operate from within a set budget.

She added that Scottish Labour should back the SNP's call to have all social security powers devolved to Holyrood and asked Sarwar to say where the money for a new payment should come from within the Scottish Budget.

Sarwar did not respond to the call to back more devolved powers but said that he wasn't welcoming the Tory policy as a relief to UC, but said that the £41m should be used to "make a difference" and get into people's pockets "before it's too late".

Sturgeon said: "Every penny of the £41m will go to help directly low-income families.

"Anas Sarwar says that that's where he thinks the funding for his proposal should come from. He announced his proposal before we knew about that £41m. So I'm assuming - and maybe I'm getting it wrong in terms of what exactly his proposal is - that the £70 payment is over and above that.

"All I'm saying to him is tell us where you think that money should come from. Every penny of the £41m - assuming it does come from the UK Government because sometimes the consequential don't turn out to be exactly what they appear - every single penny will go to helping low-income families. That will be in addition to the other sources of support that I've just outlined: the £130 support payment, the doubling of the carers allowance, the seven benefits that don't exist anywhere else in the UK that Social Security Scotland is already delivering.

"We do act to use our powers and our resources, but this cost of living crisis is being caused by UK Government decisions that they are taking within their reserved powers and we can't go on raiding a finite devolved budget to mitigate the impact of those. We need to get these powers out of the hands of the UK Government and into the hands of this parliament.

"As long as Anas Sarwar prefers keeping these powers in the hands of Boris Johnson he will not have the credibility he wants to have before this chamber."

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In response to the £500m in new grants to help the poorest, SNP Westminster leader Ian Blackford tweeted: "To put this Tory con-trick into perspective - Scottish families could lose around £460million from the Universal Credit cut alone, while getting just ~£40m back from a discretionary fund if you're lucky.

"That's like having £100 stolen from your pocket and just £8 handed back."