'Hatchet gang' to find cuts in Scots services

• John Swinney during the presentation of his 30bn budget in parliament yesterday. Picture: Jane Barlow

An independent panel, which will look at all aspects of expenditure, is to carry out a five-month review to identify the painful cuts that must be made as a result of the economic crisis.

The establishment of an "Independent Budget Review" was agreed by the Scottish Parliament as a key part of finance secretary John Swinney's 30 billion budget.

The review is likely to look at privatising or mutualising Scottish Water in order to free up the 150 million subsidy received by the public body.

The SNP government has traditionally opposed such a radical move, but it is one of many politically difficult options that will be explored by the panel of three independent experts who will be appointed next week.

The creation of the review body was a key demand of the Conservatives during the negotiations that led to Mr Swinney's budget being passed by a majority of MSPs at Holyrood.

Public spending across the board will be considered by the expert panel, which will report to parliament by the end of July. It is similar to one introduced in the Irish Republic that cut thousands of jobs to make savings of billions of euros.

The efficiency drive will look at expensive policies such as free personal care for the elderly, the initiative introduced by the previous Labour-Liberal Democrat administration. The cost of that has almost doubled to 257m since it began in 2002.

Other areas under threat will include policies introduced by the SNP government, such as its move towards free prescriptions and free school meals.

The increased use of the private and voluntary sectors to provide services traditionally supplied by local authorities will be explored, as will private sector involvement in the NHS – something to which health secretary Nicola Sturgeon has been ideologically opposed.

A Scottish Government source said ministers accepted the new review body made "a virtue out of necessity", given that economists have calculated Scotland is facing a budget fall of 3.35bn over the next three years.

At Holyrood, Mr Swinney said the Scottish Government had to take "tough decisions" this year, with 2010-11 marking the start of a "real tightening of public spending".

The finance secretary went on: "I believe we need to put in place a mechanism to enable dispassionate assessment of some of the choices we face and the priorities we must establish."

Derek Brownlee, the Scottish Conservatives' finance spokesman, said: "We have to make billions of pounds of spending cuts, and you can't do that without pain.

"This panel will look at absolutely everything – there are no restrictions within its remit.

"We are talking about a fresh look at first principles. It will raise important questions about the balance of spending and raise questions about the size of the state."

The SNP and the Tories were joined by the Greens and independent MSP Margo MacDonald in voting for the budget: it was passed by 66 votes to 45, with 14 Lib Dem abstentions. Mr Swinney's refusal to reinstate funding for the Glasgow Airport Rail Link (Garl) led Labour to vote against.

However, business leaders were not convinced that the budget did enough to protect Scotland from the severity of the financial crisis.

CBI Scotland director Iain McMillan said: "Given the extent of the fiscal stringency required over the next few years and the pressing need to sustain investment in and support for economic growth, we remain convinced that the spending plans for the coming year are inadequate.

"A far bolder approach was required to making savings and to protect, rather than cut, important GDP-enhancing investments in infrastructure. The decision not to reinstate the key Garl transport project, and all the economic and environmental benefits that would bring, is particularly disappointing and short-sighted."

The Lib Dems abstained, as they had not been given a explicit enough commitment to their demand for a 5 per cent cut in public sector "fat cat" pay. That was an option that Mr Swinney was "considering".

Commitments to Lib Dem demands for 20m for college places and 10m to help firms access cash through the Scottish Investment Bank, as well as support for post offices, ensured that they did not vote against the budget.

The package of measures in the budget included 220m invested in business through the Small Business Bonus Scheme, 31m for housing and 10m towards a Green Party demand for a home insulation scheme for 90,000 homes.

The finance secretary said there would be a 2m boiler scrappage scheme, and he revealed plans for 15,000 modern apprenticeships in 2010-11.

The Tories' demand for all public expenditure over 25,000 to be put online was also met.

IRISH PARALLEL

THE Scottish Review on Public Expenditure has parallels with an Irish committee, set up in 2008.

Ireland suffered particularly badly from the credit crunch and had to come up with a plan to eliminate its vast post-crisis deficit by 2011. In response, the government appointed a four-man panel to offer advice. It was soon nicknamed the "Bord Snip" in Dublin – an acknowledgement of its role in hacking public spending.

The committee reported last year and suggested some severe cutbacks amounting to 5.3 billion in savings, including 17,300 job cuts and a 5 per cent drop in social welfare. It led to an emergency budget before Christmas which set out huge reductions in spending on welfare, day-to-day spending and payroll expenditure.

While the Scottish committee is unlikely to offer quite such radical proposals, its remit allows it to study everything in an effort to cope with the coming cuts.

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