Doomsday budget to cut public spending

THE recession has forced Scottish ministers to draw up a "doomsday budget" that could involve slashing spending on schools, hospitals and public services by almost £2.3bn.

Finance Secretary John Swinney is warning public sector chiefs that their budgets face being frozen until 2014, as the UK Treasury attempts to rein in spending.

After inflation, the freeze would be equivalent to a 10% cut in spending on education, health and transport in Scotland, threatening every school, hospital and road project in the country.

Ministers have so far restricted themselves to predictions of a 500m cutback in spending in 2010, but Swinney has now privately prepared a longer-term analysis ahead of the UK Government's budget in April.

It predicts there will be no extra cash coming to Scotland from the Treasury until the middle of the next decade.

The Finance Secretary is now demanding that massive savings be made across the public sector before the cuts kick in next year.

UK Government borrowing will soar beyond 100bn in the next financial year as Alistair Darling approves plans to spend his way out of the recession. The cutbacks will be enforced across the UK budget as ministers attempt to balance the books by 2015.

The knock-on effects for the Scottish budget now look set to be stark. One senior Scottish Government source said: "It means very aggressive cuts over a number of years. This is an illustration that public expenditure within the devolved settlement will be flat by comparison to the past ten years."

But Labour last night upped pressure on the SNP, saying it was doing too little to prepare for the lean patch ahead. Labour claims that if Swinney were to follow their savings plan, he could find the cash in his own coffers.

The SNP Government will today open up a new front in the row over spending, claiming that the previous Labour administration has saddled the country with a 30bn bill for PFI projects. Over the next five years, Swinney must pay out 4bn to meet the cost of the deals.

Meanwhile, next week, Local Government chiefs will reveal the vast cost of new Equal Pay legislation, which means women workers in the public sector must be paid the same as men. Figures from 18 of Scotland's 32 local authorities show the deal will cost them 340m to implement.

Swinney's 30bn annual budget must also meet the increasing costs of public sector pension costs, and pay increases over the coming few years.