John Swinney has set out “savings” of £615m, as he published his emergency budget review.
The Deputy First Minister said the measures are necessary to tackle rising inflation and economic uncertainty.
The sum includes £400m of spending “reprioritisation” within the health and social care portfolio, in order to support a pay offer for staff.
The emergency budget review was first announced in early September, when additional savings of £500m were set out.
Despite the UK Government’s fiscal statement being due on 17 November, Swinney said he would “wait no longer” to outline his own proposals.
Changes to the Scottish Government’s tax rates will only be contemplated after this date, Swinney said.
The acting Finance Secretary said inflation meant the Scottish Government’s budget is now worth £1.7bn less than when it was first published in December.
He told MSPs: “Taken together, these decisions and those already set out in September, total almost £1.2bn.
“They are not decisions we would wish to make, but in the absence of additional funding from the UK Government they are decisions we are compelled to make.
“They ensure a path to a balanced budget, whilst also prioritising fair public sector pay offers and recognising that this is critical to the delivery of key public services.”
In the budget review document, £116m of Covid-related costs was allocated for “reprioritisation” within the health and social care portfolio.
A further £70m was identified from “social care and National Care Service re-profiling”, with £38m earmarked from mental health funding.
Conservative MSP Liz Smith said she acknowledged the “difficult circumstances” around the Scottish Government’s budget.
She asked him: “Does he really think that now is the appropriate time for his Government to be proceeding with the National Care Service Bill, which has drawn so much criticism from virtually every stakeholder and which Audit Scotland is predicting to be costing £1.3bn?”
The Deputy First Minister said it is necessary to reform the care system.
He said: “What would be the biggest single thing that would help productivity in this country is if we have a sensible approach to population growth and migration.
“That has been abruptly halted for us by the total folly of Brexit.”
Labour’s Daniel Johnson said “chaos” from the UK Government had made the situation more difficult. He also hit out at External Affairs Secretary Angus Robertson’s recent trips abroad.
Johnson said: “I note that the Cabinet Secretary for External Affairs has travelled to eight countries in as many months, clocking up almost 22,000 air miles.
“What cost control measures are being applied to the expenditures of members of the Government and civil servants?”
Swinney said the Government is committed to transparency.
He added: “We can’t be insular, we’ve got to be in contact with the rest of the world.”
Holyrood's Finance Committee responded that “difficult choices” lie ahead around how to balance the books in the upcoming full Scottish budget; due on 15 December.
The committee noted that recent pay rises agreed with public sector workers had been funded partly through a headcount reduction, stating that this should be done in a co-ordinated way which minimises impact on public services.
The MSPs also called on the UK Government to help bring about economic stability and recognise the impact of inflation on the Scottish Government’s block grant.
Committee convener Kenneth Gibson said: “Our committee accepts that the Scottish Government faces difficult choices in balancing its approaches to spending and taxation – especially if it’s to maintain financial sustainability and support households and businesses through the cost-of-living crisis.
“An open and honest debate with the public about how services and priorities are funded is now needed, including on the role of taxation in funding wider policy benefits for society.”
On the challenges facing the public sector, Gibson said: “We acknowledge the challenge the Scottish Government faces in identifying additional money to fund public sector pay rises which respond to inflation.
“The UK Government should also recognise the impact of inflation on the Scottish block grant.
“We ask for assurances from the Scottish Government that it will approach reducing the public sector headcount in a systematic, transparent, and co-ordinated way.
“This should be done in tandem with the public service reform agenda with a view to minimising any impact on the delivery of public services.”
As for the Scottish business community, there was a mixed response to Swinney's statement.
Liz Cameron, chief executive at the Scottish Chambers of Commerce, said: “Concerns have been expressed over the impact of new regulations being brought in at a time where they face intense cost pressures, so the commitment to seek a balance is a step in the right direction.
“We will continue to engage with Ministers on how to redress the balance to ensure Scottish businesses are not burdened with additional regulations during this current economic crisis.
“The scale of the challenge means we need a joint UK-wide response which makes the Chancellor’s announcement on 17 November absolutely critical, particularly on how support for energy bills will be managed beyond April 2023.”
The Federation of Small Businesses’ Scotland policy chair Andrew McRae welcomed Swinney retaining the lifeline Small Business Bonus Scheme and moves to ease cashflow by urging all public sector bodies to pay all small business invoices without delay.
“Changes to the planning system to prioritise applications which help businesses diversify or adjust their operating arrangements will free firms to innovate and adapt – unlocking investment potential.
“While we maintain there should be a moratorium on all but the most essential new rules, it looks like there’s room for a serious conversation about the proportionality and consistency of regulation and we look forward to details of the promised taskforce.
McRae added: “On the other hand, this was undoubtedly a review delivered against a very sombre backdrop and there’s no doubt that savings will have to be made – indeed, there will be £3.3m less across the finance and economy portfolio.”
David Lonsdale, director of the Scottish Retail Consortium, said: “There was little by way of immediate relief for the costs crunch facing firms – the only fixed point in a world of flux for retail seems to be rising supplier and government-related costs which are difficult to absorb and add to the pressure on shop prices.
“Hopefully, this can be addressed in next month’s Scottish Budget – in particular, the business rate set by ministers remains onerous and has escalated to a 23-year high.
“An inflation-matching hike in the business rate next Spring would add £65m to Scottish retailers’ rates bills, sapping investment and making rejuvenation of our high streets and retail destinations even harder.”
Leon Thompson, UKHospitality Scotland's executive director, commented that while the statement recognised the challenges faced by the hospitality sector, nothing was offered by way of help.
“Our businesses cannot be at the back of the queue in the Scottish Government’s annual budget in December – this will jeopardise jobs, investment and the ability of Scotland’s economy to recover.”
“Sadly, calls for a rethink of the Local Visitor Levy - which will only slow and weaken recovery - and regulations around public health policy, that will see our businesses picking up the cost, were not heeded.
“Moving forward, it is heartening that the Scottish Government intends to create a regulations taskforce, as this may be a way to help remove and minimise of the impact of future regulations and avoid further unintended moves that may lead to business prevention.”
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