JOHN Swinney has warned there has “never been a time of greater pressure” on public finances as he set out savings of £500 million in planned spending in the wake of public sector pay awards.
The Deputy First Minister said the new pay agreements had led to a bill of £700m, which meant “taking money from elsewhere”.
He updated MSPs on the “initial steps” in managing public finances on Wednesday afternoon, speaking in Holyrood’s debating chamber and writing to the Finance Committee.
He said public sector pay, along with the cost of supporting displaced Ukrainians - which he hoped "no one in the chamber begrudges" - together with rising costs due to inflation were placing “enormous strain” on the budget.
Swinney, who is currently acting as Finance Secretary, said the current Scottish budget had simply not foreseen the current levels of inflation, adding: “Indeed, in all of my experience now, and during my previous tenure as Finance Secretary, there has never been a time of greater pressure on the public finances.”
He told MSPs in the chamber: “Difficult choices must be made.
“There is no unallocated cash. There is no reserve that has not been utilised.
“Every penny more on one policy is a penny less on another policy.
“I have therefore written to the Finance Committee setting out around £500m in reductions in planned spending and forecasting that we have made in recent weeks.”
This includes a £53m reduction in employability schemes, he said, and a £37m reduction in the budget for concessionary fares.
His letter to the Finance Committee set out further areas where the Government would make savings or require additional income.
This included utilising £82m in consequential funding as a result of the UK Government’s cost of living announcements from spring 2022.
There was also a £120m “reprioritisation” of local government capital spending.
Swinney said inflation was just two per cent last summer, but now it is more than 10% and “predicted to go higher still”.
He said the Scottish Government would publish the emergency budget review within two weeks of the UK Government holding a similar budget review planned for later this month.
He added: “Further savings will be required to balance the budget, particularly if inflation continues to rise.
"And, the majority of our spend cannot be changed at this stage of the financial year. It is contractually committed or supports vital programmes.
"In short, what I have set out today is just the beginning of the hard choices."
It comes after Swinney wrote to the UK’s new Chancellor calling for him to “urgently” address the cost-of-living crisis.
He urged Kwasi Kwarteng to meet with him “as soon as possible” to discuss “priority issues”.
In a letter to the new Chancellor, Swinney said: “In order to urgently address the crisis faced, it is clear that the UK Government must intervene and use reserved powers and financial resources to support our citizens and businesses.”
He added: “The Scottish Government has taken substantial action to ameliorate the unprecedented adversity that our citizens face, however, we are limited by the devolution settlement and our fixed budget in what we can do.
“Most of the key policy levers that can address this crisis sit with the reserved powers of the UK Government.
“Given this context, I ask that you urgently cancel the proposed increase in the energy price cap in October.
“This course of action is supported by energy companies and advice organisations and came to the fore in a recent meeting hosted by the First Minister.”
