Eddie Barnes: This week John Swinney must perform the ultimate balancing act

FOR John Swinney, the man who has to deliver the toughest spending review since the onset of devolution, there is one small upside to the timing of this demanding test of his political skills: father to a three-week-old baby, he might not have had much sleep recently anyway.

This Wednesday, the former SNP leader will take his turn in the spotlight. "The Budget is a defining moment for John Swinney," says his opposite number on the Labour benches, Andy Kerr. For a decade since the advent of devolution, it has been the task of the Finance Minister of the day to find ways of spending all the extra cash he kept receiving from London. For a while, one of the biggest issues was taunts from the press about how big his under-spend had been. Not this year.

Three weeks ago, it was confirmed that the Edinburgh administration's grant of nearly 30 billion will fall by 1.2bn next year. And that is just the start: over the next four years, the Scottish Government's "resource spending" - which pays for health, education and council funding - will fall by 7 per cent. Its "capital grant" - used to pay for infrastructure - will drop by 38 per cent.

And, as if things weren't complicated enough for Swinney, his statement next week will come a mere 169 days before the next Scottish Parliamentary elections when voters are likely to head to the polls with the impact of public sector cuts in their thoughts.

For Swinney, next week represents the ultimate political high-wire act. The 46-year-old will be very conscious of the need for the SNP Government to be seen to be making the tough calls necessary. But, at the same time, this is a Nationalist administration about to go into an election on the grounds that independence offers a way through the age of austerity.

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One senior Nationalist figure comments: "There is always a fine balancing act of trying to advance the Nationalist perspective and at the same time being seen to be acting properly in the context of devolution. That is a very difficult job. But John is the right guy to do that. He will judge the mood very well. At the same time, no-one is asking him to stop being a politician." So can Swinney keep his balance? Or might next week see him tipping too far one way or the other? Might he, in other words, become the man who loses the SNP the election?

Contrasting feelings ahead of the review were emerging from the SNP over recent days. According to one minister, St Andrew's House has been notably amicable. "A very senior civil servant told me the other day he had never seen a government that was so united and where he had seen so little in-fighting." Allegations of stand-up rows between Nicola Sturgeon and Swinney are denied.But within SNP ranks at the Scottish Parliament, and outside the ministerial magic circle, there is less equanimity. "Nicola has got what she wanted, which is for health to be protected, so everyone else is getting squeezed," grumbles one. "(Education secretary] Mike Russell's not a happy camper at all."

But frankly, if tensions weren't running high with budgets being cut, it would be a little spooky. For it is not just ministers who require placating; it is the rest of the public sector too. University chiefs say Scotland's reputation could be damaged if their budget is cut. Council leaders, who receive the bulk of their cash from Swinney, raise warnings of meltdown in local services. As we report today, even Cardinal Keith O'Brien and the leaders of the Kirk and Episcopal churches have got in on the act, calling for the overseas aid budget to be protected. Into this minefield treads Swinney.

Even before he unveils his cuts, the Finance Secretary has already courted controversy this weekend. Despite having been given the exact amount of money that the UK Government is allotting to Scottish public services over the coming four years, Swinney is only providing figures for next year, 2011-12. First Minister Alex Salmond says he'll offer figures for the following two years next September, after a hastily convened review of public finances (which reports, conveniently, just after the election). For opponents, the move is a blatant attempt to avoid revealing the full scale of the reductions ahead of the election. One notes: "A 4 per cent cut over one year sounds a lot better than a 12 per cent cut over three years. It's just a way of getting through the election."

Labour, in particular, is incandescent, arguing that the decision prevents local authorities and others from being able to plan properly. Kerr adds: "The Scottish Government now knows exactly how much money it has for the next three years, so they need to give everyone else the same certainty." Labour's opponents hit back by noting that Chancellor Alistair Darling decided not to set out four-year spending plans prior to May's general election. That's different, says Labour. The SNP this time knows exactly how much it is getting. Furthermore, they note how ministers in the Welsh Assembly are pressing ahead with a three-year plan - so why can't Swinney?

Together with the strategy of a one-year deal, Swinney is also aiming to avoid any of the headlines which can so afflict a government faced by cuts (witness the unholy mess Nick Clegg is in over the tuition fee U-turn). He has already over-ruled an Independent Budget Review, which considered cuts, by guaranteeing that free personal care and pensioner benefits should stay in place. A populist pledge to scrap prescription charges continues.It appears that Swinney is going to ask for most of the pain to come from a pay freeze to be implemented from next year, more stringent efficiency savings of around 3 per cent, and a cut in council spending.

All this manoeuvring leaves Swinney open to the criticism that he is putting off the really tough calls - such as, for example, getting students to pay for their university education - until after the election. But the hard political truth is that while opponents may accuse governments like the SNP of producing "election budgets", experience suggests that just a political approach ends up working. Speaking of which, this week will see Swinney unveil the big election cherry: the council tax freeze.

As Swinney declares today, despite the cuts, the SNP will pledge to go into next year's election on the back of a pledge to freeze council tax for the next two years. This is on the back of a deal with local government, which saw it frozen for the previous three. The freeze is becoming increasingly costly, but for the SNP it represents a key dividing line with Labour. Scottish Labour leader Iain Gray has backed the freeze up till now, but has now suggested that councils should be given "flexibility" in the face of cuts.

That dividing line is now fast becoming a chasm, with Labour councils, notably Glasgow, deeply opposed to a continued freeze. For its council leader, Gordon Matheson, Swinney's call for a freeze in the midst of huge cuts is akin to "cutting our own throats". "This so-called deal removes the option of increasing council tax revenues to help protect services, leaving councils with no option but to make straight cuts to balance their budgets," he told Scotland on Sunday. Matheson and other senior Labour figures believe it is now morally unjustified to put a tax freeze which delivers just a few pounds a week to most homes before vital local services. They appear almost certain to knock back any offer of a deal.

Swinney, we can assume, will not be overly bothered. For, as the same Labour figures concede, it puts Labour in a difficult political position ahead of May's election. One Labour council source says: "Swinney will get a deal with SNP local authorities and he will say he has signed a historic concordat with them to freeze council tax, but that unfortunately Labour didn't want to know. We have taken a principled view but we know we need to be careful about looking like we've abandoned a deal."

Labour will this week seek to paint the SNP as a party which puts politics before country. A sharper political message on how under-funding of councils is hitting the classroom can also be expected. But Swinney will provide covering fire. The freeze, he argues, is part of a "social contract" with voters. It is the sweetener to go alongside the pill of the necessary pay freeze.Swinney is also appealing to the national interest with his decision to take money away from the resource side of his budget, and add it to the capital side - as was recommended earlier this year by an Independent Budget Review, led by former Scottish Enterprise chair Crawford Beveridge. Extra capital spending at a time of recession is supported by economists as a way of keeping the economy going. The move is a nod to the Scottish Government's stated priority: that of boosting Scotland's economic growth. But, as ever, the politics is never far behind. Might the money be used over the coming months to kick start popular school building projects across the country? Only time will tell.

To this short-term strategy, the SNP is also expected to couple its argument for independence. Alongside its spending plans this week, the SNP will publish a paper alongside the spending plan documents on what it could have done this year, had it had more powers. The paper will give Salmond the space to put forward the radically different approach he has taken to the recession to both Labour and the Conservatives.

Both parties, he argues, want to cut too deeply and too quickly. The Tory/LibDem coalition, he argues, is motivated by an electoral timetable which demands they get the worst of the cuts out of the way well before their next date with the voters in 2015. Had Scottish ministers got borrowing powers akin to the UK Treasury, the SNP will argue, they could have spared Scots the pain.

Will voters really accept such a sunny view of things? Ministers believe so. "People know where the cuts are coming from," says one SNP minister. "People know it is not our fault," he adds. Meanwhile, the SNP has already pre-empted questions about why, if the cuts are so bad, they don't use the Parliament's existing tax raising powers to soften the blow: senior figures revealed last week that the contract between Holyrood and HM Revenue and Customs which compels HMRC to administer such a change apparently ran out in 2007, and no-one has got round to renewing it. It would take ten months to get it up and running.

The SNP's strategy is in place, but with such deep cuts to enforce, Swinney cannot avoid upsetting some sections of society this week. Nor can his party rest easy in the assumption that people will not blame them for cuts. Plus, the very nature of prioritisation ensures there will be winners and losers, with the latter likely to rage. The Finance Secretary is believed to have honed his speech already this weekend. But there might be plenty of sleepless night still ahead.