Spending review: SNP says Scots to keep pay rises

George Osborne's axe could miss Scots civil servants. Picture: Reuters

Hours after the Chancellor told public sector workers that their annual “progression” payments are to be axed in 2015, Scotland’s finance secretary, John Swinney, gave a clear hint that he would take a different path, insisting governments had to “take the workforce with us” as cutbacks were administered.

A final decision will not be taken until September when the Scottish Government unveils its next spending statement. But sources within the administration yesterday suggested that a different approach was being signalled ahead of that budget.

The decision to axe the automatic pay rises was a key element of Mr Osborne’s spending statement yesterday, which provided line-by-line plans for all government departments in 2015-16, the period immediately after the next General Election.

He also unveiled savings in the welfare bill, capping housing benefit, tax credits and disability benefits.

A new seven-day wait before claiming unemployment benefits will be introduced and all job seekers will be made to attend the job centre every week.

In total, the Chancellor itemised £11.5 billion of cutbacks for the financial year which begins a month before the next General Election. It will be for the next government to sign the cuts off, but Labour has said it will broadly stick by the Chancellor’s spending plans for that year should it win.

England’s £110bn NHS budget was protected and Mr Osborne also largely kept the huge £50bn education budget out of any cutbacks.

Due to the workings of the Barnett Formula, which determines the amount of public spending in the devolved regions of the UK, this sheltered the Scottish Government from the worst of the cuts too.

In total, the overall Scottish block grant will fall by only 1.5 per cent from the previous year, to £25.7bn – compared to 10 per cent cuts to the Treasury, the Cabinet Office and England’s Justice Department.

The Scottish Government has also been given extra borrowing power by Mr Osborne.

SNP ministers will have access to increased capital spending powers of about £296 million in 2015/16, which can be spent on infrastructure.

But the decision to protect public sector pay increases could be costly for the Scottish Government, with independent reports having suggested that the practice of automatic payments costs upwards of £200m a year to fund.

Progression payments are awarded to staff as they move up a defined pay scale, usually on the basis of length of time served. Mr Osborne claimed that, in some cases, some members of staff were receiving 7 per cent pay rises, a practice which he said was often “deeply unfair”.

He announced that annual incremental pay increases in the civil service would be axed in 2015 and a fresh push made to remove automatic pay rises for time served in NHS, prisons and police. The armed forces will be excluded from the changes.

“Progression pay can at best be described as antiquated; at worst, it’s deeply unfair to other parts of the public sector who don’t get it and to the private sector who have to pay for it,” he told MPs in the Commons.

However, in Scotland, the decision for civil service, NHS workers, prison staff and the police will be primarily for Scottish ministers to make. For council workers, including teachers, the responsibility rests with local authorities.

Mr Swinney has so far copied Mr Osborne’s public sector pay restraint, freezing inflationary rises over the last two years, as the Scottish Government seeks to cope with its own cutbacks.

However, he signalled a clear change of direction yesterday on increases linked to progression.

Speaking on the BBC, Mr Swinney said: “We will resolve our issues when it comes to the setting of our budget in September. But any government has to recognise the importance of taking the workforce with us which is a major issue any government has to face.”

On Mr Osborne’s bid to find fresh savings in the welfare budget, Mr Swinney added that the approach merely “shunted the problem onto the Scot Government and local authority partners”.

If a decision to keep progression payments is confirmed, it will mark a controversial gap opening up between public sector workers. Civil servants in Scotland who work for the UK government – such as in the Department for Work and Pensions, or in the Department for International Development – will receive lower pay rises than public servants employed by the devolved administration.

There would also be questions raised about the affordability of the move. Local authority chief executives have already warned that the annual increases cost “tens of millions of pounds each year”.

Scottish Secretary Michael Moore yesterday welcomed the announcement of more borrowing powers for capital spending in Scotland. He said: “The Scottish Government has asked for additional capital resource and the UK government has delivered it. They must now use it to invest in Scotland and help the economy grow.”

However, business leaders last night said that the extra – borrowed – cash available in 2015 would only put the Scottish Government’s capital budget back to where it had been prior to the spending squeeze.

Liz Cameron of the Scottish Chambers of Commerce said: “The introduction of £296m of capital borrowing powers for the Scottish Government in 2015-16 will still only result in an overall annual capital budget of £3.3bn, which is equivalent in cash terms to the annual capital budget the Scottish Government had before the last Comprehensive Spending Review in 2010-11.”

SNP figures argued that the evidence of further cutbacks under a UK government running up to and beyond 2016 made the case for independence at next year’s referendum. Stewart Hosie MP, the party’s economy spokesman said “This current round of cuts takes us to 2016 and [Mr] Osborne today promised they will continue for years to come, so a Yes vote next September is now even more important to ensure we no longer have a discredited, failed Westminster Chancellor of a government we didn’t vote for and don’t want squeezing hard working families in Scotland.”

Scottish Labour finance spokesman Ken MacIntosh, meanwhile, described the plans as “a disaster for Scotland”.

Scots Tory figures said they accepted that growth had been “disappointing” but argued that the UK government had succeeded in cutting the deficit by a third since coming into power.