Scotland could be thawing out the council tax freeze

First Minister John Swinney told ITV News Correspondent Peter Smith that the people of Scotland have to 'face up to some very challenging circumstances'

"This is going to hurt" isn't exactly a vote-winning slogan, but the British public are getting used to hearing it from their political leaders these days.

After the prime minister warned of "painful" decisions lying ahead in the autumn, Scotland First Minister John Swinney said he will be forced to make hundreds of millions of pounds worth of cuts to his own budget this year.

"We've got to face up to some very challenging circumstances," he told ITV News in an interview on Thursday, ahead of the SNP conference this weekend.

"[It is] arising mainly out of the effect of inflation on our budget," the first minister explained.

"We've had sky high inflation, and what that does is undermine the value of public finances we've got available."

But economic inflation may not be the only contributing factor. Scotland also has a notably inflated public sector when compared to the rest of the UK.

Scotland has a bigger public sector workforce per capita than anywhere else in the UK, and has the highest capital spending per capita.

And the Scottish public sector is already paid more than the rest of the UK, taking up a significant chunk of the money available to the Scottish government.

The independent Scottish Fiscal Commission has already said the Scottish government is to blame for "much of the pressure" on the public finances currently.

They say this, in large part, comes down to public sector pay deals in Scotland being more generous than other parts of the UK.

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And yet, when I asked Mr Swinney about this, he was adamant he doesn't see merit in cutting the public sector to make the necessary savings.

In fact, he wants his public sector paid more to help build "a high wage economy", in his words.

So, where does that leave the Scottish government in terms of options?

They don't have borrowing powers. They cannot run a fiscal deficit under the rules of devolution so they are legally obliged to balance the books.

What they do have is power to raise tax.

The Scottish government has already raised taxes to a level that now means anyone earning more than £26,562 in Scotland pays more income tax than they would if they lived elsewhere in the UK.

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There is huge pressure, even from within the SNP, for them not to use that lever again, though the soft-right of the party feels there's only so much people can be squeezed on income tax.

I asked Mr Swinney explicitly if he is willing to rule out lifting the council tax freeze to generate more funds, and he would not.

"We've still got to see the budget settlements that come our way," he replied.

Read into that what you will.

Scotland's finance secretary, Shona Robison, is expected to reveal the plan for savings and cuts next week in a speech to Holyrood.

Don't be surprised if the "council tax freeze" is already being thawed out at this weekend's SNP conference.

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