THE Scottish Government will need to “reset” its spending plans against a forecast £1 billion black hole in its budget, the Finance Secretary has warned.

Shona Robison, who is also the Deputy First Minister, outlined Scotland’s gloomy financial outlook to MSPs in a statement on Thursday.

She warned the country was in the most challenging economic climate in the history of the Scottish Parliament and that the Government would target its spending to prioritise what she called the state’s three core missions: “equality, opportunity and community”.

Spending which makes a “less meaningful contribution” to those missions will be deprioritised, Robison warned, meaning cuts in certain areas come the next Scottish Government Budget.

READ MORE: First Minister felt 'emotional' at admission Police Scotland 'institutionally racist'

The Finance Secretary also outlines three “pillars” which would shape the Government’s approach. These are growing the economy, targeting spending to areas of top priority and cutting elsewhere and “updating” tax strategy – likely to mean higher rates for the better-off.

But the Government was criticised by the Scottish Trades Union Congress (STUC), who accused ministers of a "worrying lack of ambition" and called for tax reform sooner. 

And the Greens could push the SNP to explore a new tax band for high earners, with a propsal for a rate for those earning between £75,000 and £125,000 a year.

Scottish Government said it estimated that due to inflation, pay increases and the lack of further funding from the UK Government, current day-to-day spending requirements, on things like public sector wages, could exceed its funding by £1bn in the next financial year, and by £1.9bn in 2027-28.

The gap between capital spending commitments and funding could rise to 16% in 2025-26.

In a statement, Robison said: "Today I have outlined our strategy for managing these challenges, doing all we can within our powers to ensure public finances are on a sustainable path.

"We will have a laser-like focus on spending, ensuring it targets equality, opportunity and community. We will generate economic growth, supporting businesses to invest and create new jobs while increasing tax revenues to invest in better public services.

"And we will continue to build the most progressive tax system in the UK, ensuring the burden of taxation is placed on those with the broadest shoulders.

“There can be no escaping the difficult choices ahead, but by following the plan outlined today we can provide a more prosperous and fairer future for the people of Scotland.”

Scottish Greens finance secretary said the Government should be "bold" with tax policy. 

He said: "With huge cuts to our budget from Westminster our options are limited. We certainly can’t just cut services to close the gap, and nor would we want to.

“So, we need to be bold with tax policy, which is why the Scottish Greens are proposing a new tax rate for those earning between £75,000 and £125,000 a year."

STUC general secretary Roz Foyer said: "The Cabinet Secretary for Finance is in a slightly better budgetary position than was predicted this time last year. However, she rightly points out that UK Government austerity and its manufactured cost-of-living crisis continue to hit Scotland hard. 

“However, this is not an excuse for inaction. There is a worrying lack of ambition from government ministers which cannot be condoned.

“Tax reform cannot be kicked down the road for another year. To protect services and pay, the Scottish Government must make good on the First Minister’s pledge to leave no stone unturned in seeking to raise additional income by rebalancing wealth. This means committing now to the policy changes required to introduce wealth and property taxes as the STUC has advocated.”