The "size and shape" of Scotland's public sector will need to change, Shona Robison has said.
Speaking to BBC Scotland's Sunday Show, the Finance Secretary was unable to guarantee that there will be no compulsory redundancies following Tuesday's budget, though said she believed they could be avoided with "workforce controls."
READ MORE: Scottish Budget: FM to escape revolt amid SNP 'high stakes'
According to the Fraser of Allander Institute, inflation and generous public sector pay deals, a council tax freeze and £100m to cut NHS waiting lists has left the SNP facing a £1.5bn black hole in the country’s finances.
The Deputy First Minister said there would need to be "tough choices" made in her tax and spending plans.
The Scottish Government are now widely expected to introduce a sixth income tax band aimed at those earning between £75,000 and the £125,140 additional rate threshold.
Ms Robison told the programme: “Part of the problem we have is that our budget, indeed all the devolved administration's budgets haven't been inflation proofed. So that has essentially reduced the Scottish Government's spending power by about a billion.”
The Finance Secretary also criticised Jeremey Hunt’s Autumn Statement, describing it as a budget for tax cuts rather than public services.
She said that most of the Barnett consequentials coming to the government in Edinburgh were because of tax relief for businesses, suggesting she may follow suit, though there is no legal obligation on her to do so.
The minister said the fiscal drag - where rising wages lift workers into higher tax brackets - had helped improve income tax receipts.
“Actually if you look at the data from HMRC, that continues to be the case. But the pressures on our budget are considerable when you consider that the money for public services is tiny for next year, so we have those difficult decisions to make.
“The decisions we've made on tax previously, we estimate have raised about a billion pounds that wouldn't have been there had we followed UK government tax policy so that money is important, but of course, we have to take other steps in order to make sure we balance our budget.”
READ MORE: Tories warn against tax hikes amid claim average Scot now pays more
Asked how many redundancies there would be in the public sector, and where those cuts might come, Ms Robison said she was confident there would be no compulsory job losses.
She said: “It's very important that in setting out the fact that public sector will have to to change in terms of its size and shape, that we do that with the unions and our staff side in taking that forward.
"I'm not going to arbitrarily announce a figure that will worry people, we will do that in partnership and we will maintain our no-compulsory redundancy policy, which is important.”
Asked if that was a guarantee, she added: "We absolutely want to maintain no compulsory redundancy, that is an important principle.
"We believe we can make the changes to the public sector that have to be made, on the basis of doing that in partnership with the unions."
The minister said there would be "workforce controls," which would likely involve a recruitment freeze and possibly voluntary redundancies.
"Some areas of public sector will continue to have to grow, but many other areas will not and we'll do that in a managed proper way that doesn't worry people and doesn't put jobs at risk," she said.
Ms Robison said the council tax freeze was staying and she promised it would be “fully funded.”
The Fraser of Allander Institute has suggested the cost of the surprise pledge, announced by Humza Yousaf at the SNP conference in October, would be around £400m.
The Deputy First Minister said the Government would work with councils on “a fair analysis of what a council tax freeze will be based on.”
She said this would involve looking “across the board,” suggesting that some councils who had planned on a significant hike to council tax may not get what they were hoping for.
Ms Robison refused to confirm or deny the new tax band ahead of Tuesday’s statement to parliament.
However, she told the programme that the “decisions that we have made previously have been based on those with the broader shoulders paying a bit more.”
She added: “The social contract, of course means that for that additional tax that some people pay, they get free tuition, free prescriptions, better child care.”
READ MORE: High earners facing new tax hike in Holyrood's toughest budget
Scottish Conservative shadow secretary for finance and local government Liz Smith said: “Shona Robison’s increasingly desperate attempts to blame the UK Government for the enormous black hole in the SNP Government’s finances are fooling no one.
“Her government has received the biggest block grant ever from Westminster, as well as £545millon in Barnett Consequentials from the Chancellor’s autumn statement.
"The estimated £1.5billon gap the finance secretary is trying to plug is down to a mix of her uncosted public sector pay deals and council tax freeze, industrial-scale SNP waste and the sluggish growth their economic policies have led to."
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