Pay freeze 'to save 10,000 Scottish jobs'

• John Swinney says public sector wage pain necessary Picture: Jane Barlow

The move will be part of a new "social contract" for Scotand to help Scots cope with the biggest reduction in state spending for generations.

On Wednesday in his long-awaited spending review the Finance Secretary will confirm that he is to impose a one-year freeze on the pay of all teachers, police, NHS workers, firemen, and civil servants earning over 21,000 a year from next April.

With local government chiefs also preparing a zero per cent increase, it means the pay packets for the majority of the country's near 600,000 public sector staff will remain static, with only those on low pay offered rises. A further one-year freeze is expected to come next summer to bring Scotland in line with England.

In an article in Scotland on Sunday today Swinney claims the freeze will save 300 million next year, equivalent to 10,000 jobs. He unveils his full spending plans for 2011-12 on Wednesday when he will spell out how he intends to find 1.2 billion of cuts from his block grant following cuts imposed by Westminster.

Swinney also pledges to secure a council tax freeze for next year as part of the new "social contract" with the nation to trade wage rises for employment and reductions in household bills.

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In the article Swinney says: "The council tax freeze, along with other measures such as scrapping prescription charges, will make the pay restraint that is necessary fairer and more acceptable," he declares. "And that restraint will enable us to protect employment, by maximising the resources available to invest in front line services and economic recovery."

He adds: "In return for an understanding that pay restraint is required, we can relieve pressure that people face with their household bills. That will enable us to preserve jobs, and is the essence of the Scottish social contract that we seek in these difficult times."

However, Scotland on Sunday understands that Labour-led councils are preparing to knock back Swinney's call for a council tax freeze, insisting that rises of around 1.5 per cent next April are required to protect schools from the worst of the cutbacks. Labour also accused Swinney last night of putting together an "election budget", after the SNP confirmed that the finance secretary will set out details only for 2011-12 this week.

Confirming there was "no deal" on a council tax freeze next year, the Labour leader of Glasgow City Council, Gordon Matheson, said: "They (the Scottish Government] are hiding secret cuts from the people of Scotland and providing no leadership when it is so desperately needed.They are strangling local government and planning to tighten the noose further in future years."

Swinney is expected to impose tougher efficiency savings on government departments, and pledge a 25 per cent spending cut on the senior civil service over the next four years.

He is also planning to raid departmental budgets to boost spending on capital projects such as school building and other infrastructure work.

University chiefs said last night that they feared the worst, amid widespread expectation that their 1bn grant will be cut. Councils are also expecting a major cut in the grant they receive.

However, Swinney is expected to offer a small increase in spending to the NHS, in line with the UK Government's own policy. The SNP is also expected this week to step up its campaign for independence, publishing a paper showing what could be done if Scotland were independent.

However, the UK government today heralds its own plans to offer more powers to the Scottish Parliament, as it prepares to publish a new Bill which will hand substantial new tax raising powers to Holyrood.

Scottish Secretary Michael Moore says it will be "the largest transfer of fiscal powers out of London since the creation of the United Kingdom".