Budget ‘throws local spending into doubt’

Finance secretary John Swinney will today unveil his long-awaited spending plans for the next three years, in which he is expected to confirm that budgets across the public sector will be frozen, as austerity measures across the UK hit home.

At the same time, the Scottish Government will spell out how it intends to fund numerous costly spending commitments, including a five-year council tax freeze and a pledge to keep pace with English university funding without the help of tuition fees.

Mr Swinney is expected to say that infrastructure projects across Scotland will be prioritised by ministers in the belief that they can maintain employment and help stave off a double-dip recession in Scotland.

But council leaders said the finance secretary had asked them to take the strain by borrowing cash for the next two years to pay for their own capital projects. The money, amounting to about £220m, would normally have come to them from Edinburgh, but it is understood ministers want the funds to pay for their own commitments.

The move comes after the UK government slashed the Scottish Government’s own capital budget, and as Scottish ministers try to find ways to honour commitments to pay for the new £2 billion Forth crossing and the embattled Edinburgh tram project.

Labour council leaders last night claimed they were being punished to help the SNP fulfil its election pledges.

Gordon Matheson, Labour leader of Glasgow City Council, said Glasgow was being ordered to run up debts “so that Mr Swinney can build a bridge on the other side of the country”.

He added: “Mr Swinney is attempting to pull a fast one [by indicating] that he is going to cut Glasgow’s budget to pay for Edinburgh’s tram fiasco.”

Jim McCabe, the Labour leader of North Lanarkshire council, added: “We have not signed up to this. I’m here to deliver for the people of North Lanarkshire, not to deliver an SNP manifesto.”

The row is certain to be only the first spat over what is an unprecedented spending squeeze on Scottish budgets, covering the next three financial years until 2014. Mr Swinney is expected to confirm that the cash grant he receives from Westminster will be frozen throughout that period, amounting to a real-terms cut in spending power.

Yesterday, the finance secretary said the public sector would be expected to deliver further efficiency savings over those years, in order to ensure that the raft of costly government pledges can continue to be afforded.

He said: “Set against the deep cuts to Scotland’s budget from Westminster, the Spending Review for the next three years will intensify our focus on value for money and continue to squeeze every penny out of every pound to get the best, most efficient and most effective public services.”

The Scottish Government published new figures in which it claimed that the public sector had delivered £2.2bn savings in 2010-11. A further 3 per cent of savings have been ordered by ministers for this financial year, with more expected to follow.

However, some public sector leaders have warned that the efficiency savings are now translating into cuts to the front line.

Those savings have seen the number of Scottish Government employees fall by 20,000 between 2008 and 2011, and Mr Swinney said at the weekend that further losses could not be ruled out. “I also can’t give a guarantee that there won’t be any reduction in public sector employment,” he said. Mr Swinney may also choose to extend the current public sector pay freeze, although before the May election he guaranteed that it would not be frozen for the entirety of the current parliament, which runs until 2016.

The Spending Review comes against a backdrop of warnings from local government chiefs that they cannot cope with rising demand for services with the expected flat budgets. In June the chief executive of the Convention of Scottish Local Authorities, Rory Mair, claimed that “demand [for public services] is killing us here, not simply the loss of resources.”

Mr Mair warned: “A combination of belt-tightening, efficiencies and symbolic reorganisation will not solve the problem. No-one should pretend that further rounds of 2 per cent per year cuts will solve the problem.”

The SNP government is expected to announce an increase in spending on measures to reduce pressure on services, such as by boosting home care for the sick and elderly in the hope of keeping them out of costly hospital care.

The Spending Review comes a year after the UK government published the headline budget cuts for departments across the country. The Scottish budget in 2014-15 will be £3.3bn lower in real terms than the peak spending year of 2010-11, as a result of the UK government’s efforts to reduce the country’s national debt.

Richard Baker, Scottish Labour’s finance spokesman, said yesterday: “John Swinney has talked a lot about the importance of investing in infrastructure projects to stimulate growth, but he is actually cutting funding for local authority capital spending in the hope that they will borrow to plug the gap. This may help him proceed with some of his priorities, but it raises big questions over the delivery of other local infrastructure priorities.”

He added: “Some local authorities are already under such financial pressure that further borrowing may not be a simple option for them. It is becoming increasingly clear that this Spending Review will see the SNP passing a great deal of pain to local authorities and that the principles of parity of esteem with local government are history.”

Opposition parties said last night that today ended a long wait for voters wanting to know how Scotland’s public sector would be funded for the years ahead.

Scottish Liberal Democrat leader Willie Rennie MSP said: “The government need to show that they can pay for the promises they made in May. They have dodged and delayed long enough. In particular they need to show how they can pay for their five-year council tax freeze. In these difficult times it is a big question about whether it is the best use of money to give most to the richest people in the biggest houses in Scotland.”