John Swinney: "Hard choices will need to be made"

"ON Wednesday I will outline the SNP Government's budget for next year. It is the most challenging budget I have yet had to present - indeed, it is the most challenging budget in the history of devolution.

No-one is under any illusions about the scale of the cuts being imposed on us by the UK government.

Two-thirds of those cuts are the legacy of the previous Labour administration, while the remaining third is the result of the actions of the Tory-Liberal Westminster government which is cutting too far and too fast.

That cuts agenda threatens a Scottish economic recovery which, between April and June this year, saw the strongest GDP growth of any major world economy bar Germany.

Therefore, we will do everything within the powers we currently have to safeguard that recovery, and to protect jobs and household incomes across Scotland from the worst impact of those Westminster cuts.

The scale of the challenge we face was made clear last month when Chancellor George Osborne announced his Comprehensive Spending Review, which cuts Scotland's budget by 1.3bn next year. Hard choices must be made, but it can be easier for all who live here, and cohesion maintained within our communities, by developing a "social contract" with the people of Scotland.

Council tax soared massively in previous years, under both Labour and the Tories, which is why the SNP took the decision when we came to office in 2007 to freeze the Council tax across Scotland.

Thanks to our partnership with local councils, that freeze has now been delivered for three years running - and has brought much-needed relief to households in every part of the country. If that help with household bills was a welcome boost in better times, it has become absolutely essential in the current economic climate.

Labour leader Iain Gray has said he thinks council tax bills should rise, just as people across Scotland are having to deal with pay restraint and rising household bills looming through a rise in VAT. We disagree: that's why we have said we want to continue the council tax freeze for the next two years.

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. And that restraint will enable us to protect employment, by maximising the resources available to invest in front line services and economic recovery.

Salaries account for approximately 55 per cent of Scottish Government revenue spending. Pay restraint can save nearly 300 million in the budget - protecting some 10,000 jobs in Scotland next year.

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.

As well as pay restraint, other measures such as reducing senior civil service costs and removing bonuses will also be needed.

Amid the tough choices which this week's budget will outline, one thing above all is crystal clear: the financial damage inflicted on Scotland by the UK government means that we literally cannot afford to cede economic control to Westminster.

There is no point in having a pocket money parliament when the pocket money runs out.

And the next age of self-government must see Scotland take charge of its own future, with independence and financial responsibility. That way - with the economic powers other nations take for granted - we can take decisions in Scotland, for Scotland, and develop a growth strategy as the only alternative to a decade or more of Westminster- imposed cuts.