The Deputy First Minister said the new pay agreements had led to a bill of £700 million, which meant “taking money from elsewhere”.
He updated MSPs on the public finances on Wednesday afternoon, speaking in Holyrood’s debating chamber and writing to the Finance Committee.
Mr Swinney told MSPs in the chamber that the current Scottish budget had simply not foreseen the current levels of inflation, adding: “Indeed, in all of my experience now, and during my previous tenure as Finance Secretary, there has never been a time of greater pressure on the public finances.”
As well as the £700 million on enhanced pay offers, he said refugee support schemes following the outbreak of war in Ukraine had resulted in costs of £200 million which the Scottish Government had not planned for.
Difficult choices must be made
Mr Swinney, who is currently acting as Finance Secretary, continued: “Difficult choices must be made.
“There is no unallocated cash. There is no reserve that has not been utilised.
“Every penny more on one policy is a penny less on another policy
“I have therefore written to the Finance Committee setting out around £500 million in reductions in planned spending and forecasting that we have made in recent weeks.”
This includes a £53 million reduction in employability schemes, he said, and a £37 million reduction in the budget for concessionary fares.
Mr Swinney’s letter to the Finance Committee set out further areas where the Government would make savings or require additional income.
This included utilising £82 million in consequential funding as a result of the UK Government’s cost of living announcements from spring 2022.
There was also a £120 million “reprioritisation” of local government capital spending.
Responding to Mr Swinney’s statement, Scottish Conservative MSP Miles Briggs suggested the Scottish Government should apologise for the strike action taken across the country over the pay disputes.
The Lothian MSP said: “There was one word missing from this statement, and it was ‘sorry’.
“Sorry to the people of Edinburgh, of Scotland, for the impact which these strikes have had on their lives, especially here in the capital.”
He added: “Ministers didn’t listen, and after year-on-year cuts to council budgets, were limited in their ability to address these local issues.”
Mr Briggs also called on the Scottish Government to “invest in jobs, not a referendum”, referencing the £20 million allocated for spending on the proposed second independence vote.
Labour’s Daniel Johnson called for “greater clarity, honesty and transparency” over the government’s choices.
He asked: “Can (Mr Swinney) set out what plans he’s asked civil servants to examine, and when he will confirm both when they will be put in place and the timelines for implementing them?”
The Deputy First Minister replied: “The budget process will go through the normal process of parliamentary scrutiny, and the ultimate budget revisions will go to the Finance Committee in due course.
Scottish Liberal Democrat MSP Willie Rennie pointed out that £82 million of the savings is Barnett consequentials from the UK Government as part of cost of living announcements in the spring.
He said: “I think people deserve to know what the real impacts will be on rural communities, on trading funds, and of course, on employability schemes.”