Image source, Getty Images

• Around £500m in planned spending cuts is being proposed by the Scottish government as part of an emergency review of its budget
• The cuts include the cash available for employment schemes and free bus travel because demand is lower than expected
• There are new curbs on recruitment in some areas.
• John Swinney says that public sector pay demands, help for displaced Ukrainians and growing inflation meant that the budget is at its "absolute limits of affordability"
• The deputy first minister says urgent action from the UK government is overdue in the cost of living crisis
• He specifically calls for the PM and chancellor to cancel energy price rises, help struggling families, and help fund the impact of public sector pay increases and inflation

• Tory MSP Miles Briggs says Mr Swinney should apologise for the bin worker strikes and calls for a rethink of cash being allocated for indyref2
• For Labour, Daniel Johnson calls for more 'transparency'
• Lib Dem MSP Willie Rennie asks for details of the impact of the cut on rural communities and training schemes

That's all from the live page team today, have a lovely afternoon.

John Swinney's £500m of budget savingspublished at 16:06 British Summer Time 7 September 2022

16:06 BST 7 September 2022

Glenn Campbell
BBC Scotland Political Editor

The deputy first minister John Swinney has announced half a billion pounds worth of budget savings at Holyrood.

The cuts include the cash available for employment schemes and free bus travel because demand is lower than expected.

There are new curbs on recruitment in some areas.

The Scottish government is also slowing down infrastructure spending to free up some extra cash for local government.

Mr Swinney told MSPs the devolved budget was at the limits of affordability as a result of inflation, higher than expected public sector pay deals and new spending to support Ukrainian refugees.

He said the Scottish budget has never been under greater pressure and warned of further cuts to come.

The deputy first minister called on the UK government to make more resources available.

The Conservatives said ministers should shelve plans for another independence referendum, for which £20m has been allocated in the next financial year.

Image source, Getty Images

Scottish Liberal Democrats MSP Willie Rennie says £82m of what John Swinney calls savings are actually Barnett consequentials from the UK government.

The party’s former leader asks for more details of the proposed cuts to establish what the impact will be for rural communities, training funds and employability schemes.

The deputy FM says the government will engage in proper parliamentary scrutiny on the proposed reductions.

He says he can "reassure" Mr Rennie the government is trying to take a set of decisions that "minimise the impact on individuals" as they make judgements about "where we think it is appropriate to reduce funding".

Daniel Johnson says of the £500m of cuts outlined today, the deputy first minister is also hinting at £1.7bn of cuts.

"We need greater clarity, transparency and honesty," says the Scottish Labour MSP.

He asks to know the total funding shortfall that the Scottish government is planning for, and asks Mr Swinney to confirm whether there needs to be a 30,000 reduction in public sector headcount.

Mr Swinney explains the £1.7bn was the cut in the value of the budget due to inflation.

The additional cost of public sector pay is around £700,000 he says.

He adds that Holyrood will be able to scrutinise any changes in the budget caused by the UK government.

Image source, Getty Images

Scottish Conservative MSP Miles Briggs says there is one word missing from John Swinney's statement, "sorry".

He highlights the impact of strikes - particular by refuse workers for 12 days during the Edinburgh Festival - and says his party warned ministers that councils would be unable to meet pay demands but they "didn’t listen".

Mr Briggs highlights the £53m of cuts to employability schemes in Mr Swinney's statement, and asks if he will rethink the money being allocated towards indyref2 and invest it in jobs instead.

The deputy first minister says he "deeply regrets" the disruption caused to the people of Edinburgh and other parts of the country.

It would have helped, he says, if the Conservative leaders in Cosla had not voted to offer a 3.5% pay increase, "as opposed to the 5% offer the government had made possible to be funded".

Their "playing of politics" directly caused the industrial action in Edinburgh he adds, and "they should be ashamed of themselves".

Mr Swinney says he needs time to set out the emergency budget review.

The deputy first minister explains the UK government may reduce some of the devolved budgets.

He insists the Scottish government simply don't have control of the necessary levers and he calls for the prime minister to take action immediately.

"We will make the hard choices, but only the UK government can act to end this crisis. They should do so and I encourage them to do so now."

John Swinney says these decisions are not ones the government would have wanted to take.

But he says it is important that the scale of challenge is clearly understood, particularly by anyone negotiating further pay deals.

"These individual savings are small amounts in themselves, but together they add up to a significant reduction in expenditure, enabling that money to be invested in addressing the financial challenges we face," he adds.

The deputy first minister moves on to setting out £500m worth of reductions in planned spending and forecasting made in recent weeks.

These include:

• £53m in the budget for employability schemes
• Utilising funding of £56m generated by the ScotWind clearing process, that will be reinstated in future years for the' just transition'
• £33m of ring-fend agricultural funds – to be returned in future years
• A reduction of £37m in the budget for concessionary fares

The government made these savings on services that “have the least impact on public services and individuals”.

Mr Swinney says these decisions "have not been easy and they will not be without consequence”.

Given the circumstances of acute labour shortages, historically low unemployment and soaring inflation, they are "unavoidable", he adds,

Image source, Getty Images

"The Scottish budget is at the absolute limits of affordability," continues the deputy first minister.

Mr Swinney turns to public sector pay and says the lowest paid must be the priority.

He says: "My job is to fund low paid workers' pay claims."

Police officers have agreed a 5% deal, while in ScotRail Aslef have also agreed a similar deal.

NHS negotiations are ongoing, along with some of the largest organisations, he tells the chamber.

"The enhanced pay offers that have been made, excluding direct local government contribution, total approximately £700m."

Mr Swinney points to the local government pay settlement achieved, with more money for the lowest paid.

This proposed settlement means additional savings must be found, he adds.

Image source, Getty Images

Mr Swinney says he will outline the impact of the "cost crisis" on the public finances and the steps the Scottish government will take help people.

He says: "There has never been a time of greater pressure on our finances."

Mr Swinney says the budget did not forsee the levels of inflation we are seeing and he points out it is now more than 10% and predicted to go higher still.

The budget is worth £1.7bn less than it was in December, he points out.

The emergency budget review must identify funding to cope with inflation driven cost rises and aim to support those who most need help.

It must do this using only the fixed powers of the Scottish Parliament, he says.

Image source, Getty Images

Mr Swinney says Westminster has the powers that can change household budgets.

The deputy first minister argues there has been no substantive action taken to help people in business.

"Urgent action is overdue," continues Mr Swinney, who adds: "I urge the prime minister and the chancellor not to wait another day before setting out their plans".

John Swinney begins his statement a little later than advertised, saying the cost of living crisis represents an unprecedented challenge.

Mr Swinney outlines these "cost crisis" challenges and points out the UK is facing a recession.

The deputy first minister is standing in for Finance Secretary Kate Forbes who is on maternity leave.

John Swinney will now update MSPs on public sector pay talks amid an emergency review of the Scottish government’s budget.

The deputy first minister is expected to outline how Holyrood’s spending power has been hit by rising inflation, and how measures to support households with the cost of living will be paid for.

Yesterday Nicola Sturgeon announced extra help including a freeze on rents and rail fares - but warned that other plans would need to be cut to balance the books.

Image source, PA Media

Strikes that had been due to close hundreds of schools and leave bins unemptied across Scotland next week have been called off.

A new offer will mean a 10% pay rise for the lowest paid staff instead of special cost of living payments this year and next.

Non-teaching school staff in 11 council areas had been due to go on strike for three days this week.

Refuse workers had also been due to begin a fresh round of strikes.

The Unison, GMB and Unite unions all said they had suspended their industrial action while they consult their members on the pay new offer, and that they were recommending the deal is accepted.

It follows an 11-hour meeting between unions and council leaders that was hosted by First Minister Nicola Sturgeon in Edinburgh.

• Read more here
• Why is everyone going on strike?

This summer the battle lines have been drawn between UK workers and their bosses again in a way not seen since the 1980s.

Thousands of workers across many different industries including rail, telecoms, ports and the postal sector have walked out angry that the pay rises they're being offered go nowhere near to matching their rising food and energy bills.

The public face cancelled trains, delayed deliveries and possibly worse, with teachers, doctors and nurses discussing possible strike action later in the year.

Why are the strikes happening? Click here to find out.

Analysispublished at 14:37 British Summer Time 7 September 2022

14:37 BST 7 September 2022

Glenn Campbell
BBC Scotland Political Editor

Nicola Sturgeon’s plans to freeze rents, ban evictions and raise the child payment to £25 a week have made the headlines.

But these announcements were prefaced with a very stark warning from the first minister - that the Scottish government is getting short of cash.

That rising inflation has reduced their spending power and that larger than expected pay deals for public sector workers and other cost-of-living help will also limit what they can spend elsewhere.

In short, “hard choices” lie ahead and the Scottish government won’t be able to do everything it would like.

That may not only mean rejecting new demands but potentially delaying or dropping some existing commitments.

The first minister did not give details. It seems that is being delegated to her deputy, John Swinney, who is due to make a separate financial statement shortly.

Image source, Getty Images

The cost-of-living crisis has dominated Nicola Sturgeon's plans for the year ahead at Holyrood - both in the actions her government plans to take, and the pressure it has put on its budget.

The first minister's annual "programme for government" announcement came hours after the new prime minister was sworn in up the road at Balmoral.

What Liz Truss decides to do will have a huge bearing on the response to rising prices and fuel bills in Scotland.

But what can Ms Sturgeon's government do with the powers it has - and how does the developing crisis impact on its ability to respond?

Click here to find out.

Image source, Getty Images

John Swinney is returning to one of his old jobs, standing in for Kate Forbes as the Scottish finance secretary heads off on maternity leave.

The former SNP leader is Scotland's longest-serving deputy first minister, as well as one of Nicola Sturgeon's most trusted allies.

So how has his political journey brought him full circle back to the finance brief?

Our political correspondent Philip Sim has all the answers.

Good afternoon and welcome to our live coverage of the statement on public sector pay and emergency budget review.

John Swinney, who is standing in for Kate Forbes, will deliver the statement from 2.50pm.