A senior figure in social housing is urging the Scottish Government not to make more cuts to the sector after John Swinney warned £77.5million allocated to fund a pay award to refuse workers would mean reduced public spending elsewhere.

The First Minister welcomed the announcements on Monday by trade unions to suspend strike action but warned of “very difficult” decisions and said portfolios from which the money would come would be identified.

He stated the scale of the “reductions” will be set out in a statement to the Scottish Parliament next month.

Last year, finance secretary Shona Robison cut spending by £200m on housing, sending shockwaves through homelessness charities. The Scottish Government later declaring a national housing emergency.

Ministers blamed the reduction in spending to an almost 9% cut in the Scottish Government’s capital budget from Westminster.

Former First Minister Humza Yousaf announced an £80m increase to affordable housing over two years in May just before he resigned.

Sally Thomas, chief executive, of the Scottish Federation of Housing Associations, told The Herald: “Repeated hammer-blow cuts to the affordable housing budget have left the social housing sector at a crossroads and plunged the country into a housing emergency. 

“It would be unconscionable for the Scottish Government to further cut the housing budget at a time when 10,000 children are living in temporary accommodation and there are nearly quarter-of-a-million people on a waiting list for a social home.

“Whilst we acknowledge that the Scottish Government is in a difficult financial position, it does have the power to invest in our public services, provide a fair deal for workers, and significantly invest in affordable rented housing. 

“The UK Government must also use its own Budget to invest in our public services, including significant capital investment for Scotland.”

A walk out by members of Unite, GMB and Unison was suspended on Monday after the Scottish Government intervened by allocating £77.5 million funding to allow local government body Cosla to make an improved offer.

An overall 4.27% rise will be put to members of the three unions, with the deal also resulting in £1,292 for the lowest paid workers with the Scottish local government living wage increased by 5.63%.

It meant that the eight days of strike action by staff at 26 of Scotland’s 32 councils will not go ahead from today.

Ms Robison on Monday urged union members to “strongly consider” the new offer and said it “represents the absolute limit of affordability”.

She said: "In order to fund the offer, we will have to move money from elsewhere in the budget and reduce funding for other programmes. We are taking on significant, additional financial pressure and have been clear painful choices have had to be made to fund this pay deal."

David Phillips, of the independent think tank the Institute for Fiscal Studies, said it should not necessarily be the case that the extra money for the pay awards would mean cuts in other areas.

He said when the Scottish Budget was passed in February 2024, £266m had yet to be allocated, though added that since then, this money may have been earmarked for particular services, though it not yet been done formally.

Mr Phillips added that the Chancellor's Spending Audit last month could mean some £500 extra funding for the Scottish Government in part because of the pay rises announced by Rachel Reeves for teachers and some NHS workers in England.

"The Chancellor Rachel Reeves’ Spending Audit will mean more money for the Scottish Government this year – although this probably won’t be formally confirmed until the UK budget," he said.

"The biggest is the announcement of an extra £6 billion for various pay rises (after netting off £3 billion of savings within departmental budgets to help pay for them). 

"Alongside Barnett consequentials from other increases in English spending (including £1.5 billion for non-pay NHS costs), the Scottish Government could see a boost to its funding of £500 million or so." 

He added: "This doesn’t mean that the Scottish Government won’t face difficult budgetary choices – it will be facing many of the same pay and other pressures as the UK government (apart from asylum costs). 

"But it does mean that the Scottish Government probably does have funding not yet allocated to specific services, unless the Scottish Government very rapidly decided how to allocate the extra funding coming its way post-Spending-Audit. 

"There will still be trade-offs: money not spent on this pay deal for councils could have helped address pressures elsewhere. But it’s not necessarily the case other areas are seeing cuts to their previously agreed funding to pay for this deal." 

The Scottish Government was approached for comment.