John Swinney considers public spending cuts

The Scottish government has put economic growth at the heart of its plans

The Scottish government is considering public service spending cuts in order to put more cash into capital projects like housing and transport.

Finance Secretary John Swinney said moving resources from revenue to capital budgets was "one option" to boost economic recovery.

And with £3bn of cuts to the Scots budget in the coming years, Mr Swinney said he could not rule out job cuts.

His comments came ahead of the SNP's first budget since the election.

In the face of UK government deficit-reducing spending cuts, Holyrood ministers said their budget would shrink by £3.3bn - or 11% below the 2010-11 level - in the next three years, while the capital budget, which pays for infrastructure projects like roads and schools, would drop by 36%.

Mr Swinney told BBC Scotland's Politics Show his government would put economic growth at the heart of its plans, while accusing UK ministers of failing to take action on securing recovery from the recession.

But Chief Secretary to the Treasury Danny Alexander said it was time the SNP started making the kind of difficult spending decisions taken by the UK government.

Speaking ahead of his budget announcement on Wednesday, Mr Swinney said: "A transfer from revenue into capital is one of the options available to us - recognising that capital expenditure is the engine of economic growth and the engine of economic recovery.

"That's what's so disturbing about the approach being taken by the United Kingdom government.

"What they have done is cut our capital budget by 36% over the spending review - now, that is a malicious reduction in capital expenditure and the Scottish government will be doing everything in its power to try to counter that."

Mr Swinney also said the 12-month public sector pay freeze would need to be extended, but promised it would not last for the whole of the current, five-year parliament.

The finance secretary also said there was a standing guarantee against compulsory job cuts in the Scottish government and the NHS, but added: "I also can't give a guarantee that there won't be any reduction in public sector employment."

Mr Swinney has also promised "radical" reform to public services, including more collaborative working and efficiency savings.

The Scottish government has already announced its intention to move towards a single police force, as well as a national fire and rescue service.

But the finance secretary ruled out "re-ordering public sector architecture" - the kind of action which may include council mergers.

Budget vote

Speaking from the Liberal Democrat conference in Birmingham, Mr Alexander said the coalition was having to cope with a deficit inherited from the previous government.

He said: "By taking a tough stance on the deficit, we're ensuring low interest rates in the UK - that is helping to keep people in their homes, helping to keep workers in their jobs, it's delivering real benefits to Scotland as part of the United Kingdom."

Mr Alexander said more money was being put into capital spending than previously, adding: "What I hope is that we'll see the Scottish government being willing to take some of the difficult choices we made, for example, to put more money into transport.

"As a Highland MP, I see the state of the A9, the state of the railways between the Highlands and the central belt - we had big promises from the SNP on those things - nothing has happened."

Now in majority, rather than minority, government, the SNP no longer has to barter with opposition parties to implement their policies in return for votes when it outlines its budget plans.

MSPs are expected to vote on the spending proposals for 2012-13 in the spring.