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"Extremely bleak", says the First Minister of Scotland's public spending prospects.

Alex Salmond today sought to draw a distinction between cuts from either Labour or Conservative governments after the next election, and on the other hand... well, that's less clear.

But expect to hear lots more about the cost of renewing Britain's nuclear deterrent, and what could be done with that money instead.

This was brought on by the report by auditor general on Scotland's spending choices. Robert Black wasn't telling us anything startlingly new - not, at least, to readers of The Ledger.

But his advice carries rather more weight than this or any blog. And you could sense from First Minister's questions at Holyrood that its publication crystallised a definite shift of tone and direction for Scottish politics.

It makes it more difficult for efficiency savings to be used as an avoidance mechanism for difficult political decisions. Robert Black noted that the efficiency savings are being achieved, but they don't go far enough.

And he pointed out that there's still much we don't know about productivity in the public sector - the link between spending, activities, performance and outcomes - without which it's hard to see where and how to improve it.

So the new battleground is in answer to the question of what government should and should not - what it can and cannot - continue to fund for everyone. What should it abandon completely, and where should it means test or target?

Pensions challenge

How, asks Robert Black, will decisions be made between competing priorities, and what will success look like in public service delivery?

Where would it be better to spend now to deliver recurring savings in the future? Have we got the balance right between long- and short-term changes?

Are public service managers doing enough to break down barriers between them, and working in partnerships? Do we have to reshape the organisations themselves, starting with councils, health boards, police and fire boards?

What, continues the Audit Scotland report, are the implications of an ageing workforce for the staffing of front-line services? That's not talking about the cost of more elderly people with growing health demands, but a question that gets at the difficult issue of public sector pensions.

And here's a tricky question, cannily worded: "Does the public sector have a sufficiently flexible workforce to allow jobs to be changed? Is there a need for skills development and an improved understanding with the unions and staff about the needs and opportunities for re-designing how services are provided?"

Those words represent a can of worms for public sector unions, while carefully avoiding talk of job cuts. It holds out the opportunity for service reform without the provocative challenge of a target for slimming the public sector.

Intensive care

Scotland is not alone in facing this question, of course. The rest of Britain has been slow to reach a consensus around the reality of looming public sector spending cuts, but it is ahead of Scotland in its appreciation of the choice between universal and targeted spending - or at least the consequences of the universal approach which has been Holyrood's default for a decade.

And two neighbours are facing language about cuts that is much more brutal than Robert Black's.

Ireland has just been told by the OECD (rich country's economic club) that its problems are likely to require a return to student fees, bigger class sizes, cuts in civil service jobs as well as in civil service salaries.

On Thursday, the finance minister confirmed the country remains "stable, in intensive care" with credit rating agencies bearing down on Dublin. Ahead of a budget in December, the Prime Minister has said public sector pay cuts are inevitable.

Manx advantage

And the Isle of Man has recently been shocked by the imposition of a sudden shift in its tax position, as the Treasury in London sharply reduces its hand-back of VAT receipts.

The island's government budget is being cut by 10% next year and by 24% within two years, without much sympathy from Chancellor Alistair Darling, who sees it as a tax haven.

There may be lessons for Scotland from the middle of the Irish Sea on how to handle big cuts.

But there's another lesson for those hoping to design a change in Holyrood's tax powers: if the Isle of Man is any guide, don't assume the Treasury will help making the transition a smooth one.

That's particularly for those, like the Manx, who use corporation tax to give themselves competitive advantage - precisely the preference of quite a few people in the debate over Scottish constitutional powers.