Scotland’s Finance Secretary faced criticism today over the weak performance of the Scottish economy and the government’s ability to meet its spending commitments despite the range of powers at Holyrood’s disposal.

Shona Robison spelled out that spending could exceed funding by £1 billion in the next financial year, and by £1.9 billion in 2027-28.

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

Ms Robison warned there would be “tough decisions” – interpreted as spending cuts – while there is also more talk of a new tax band on those earning between £75,000 and £125,000, promoted by the SNP’s Green party partners.

Green MSP Ross Greer rejected using public service cuts to close the gap and said “we need to be bold with tax policy”.

The Finance Secretary blamed the squeeze on inflation, pay increases and the lack of further funding from the UK Government, but opposition MSPs poured scorn on the minister’s reasons for lacklustre growth.

Tory finance spokeswoman Liz Smith said the documents accompanying the medium term financial strategy, delivered by Ms Robison, provide “further proof of the very precarious situation facing the Scottish economy, most especially the very significant gap between projected expenditure and income.”

She added: “It is yet more proof of the SNP’s utter failure when it comes to addressing the really big issues that have been flagged up by economists and forecasters for the whole of the last decade and all we get is an excuse that it is the problems of Westminster.”

Compared with last year’s statement, Ms Smith said the SNP was failing to resolve the imbalances in the economy and low productivity and ensuring Scotland is far more competitive than is currently the case and “worst of all” was not boosting economic growth.

Ms Smith asked the Finance Secretary to accept that Scotland is the highest taxed part of the UK, causing “serious detrimental affect on innovation, jobs and growth”.

She said the Scottish Fiscal Commission, the tax watchdog, had recently warned that the government does not have the revenue flow required to meet expenditure despite being the highest taxed part of the UK.

She warned that the proposed tourist tax would add to the problems of costs faced by the hospitality industry which was still not receiving the relief on business rates offered to business in England.

Tory MSP Murdo Fraser noted that the Scottish economy had grown at half the rate of the UK, while Labour’s Daniel Johnson also said jobs and wage growth had been slow compared to similar regions. Alex Cole-Hamilton, the Liberal Democrat leader, said “it is clear cuts are coming” and highlighted low productivity as a cause for concern. He asked why £46m had been cut from the universities budget.

Ms Robison defended the government’s record by denying the high tax claim, asserting that 52% of taxpayers in Scotland will pay less in 2023-24 than they would if they were in other parts of the UK.

“If the Tories want to cut tax they have to accept the impact on Scotland’s public finances,” said Mr Robison, explaining that this would mean cuts to budgets and services. She said the cut to the universities budget was in order to meet the teachers’ pay deal.

On business rates she said the small business bonus scheme was the “most generous in these islands” while the visitor levy has been supported by the Scottish Tourism Alliance. She said it was for local councils to decide whether to introduce the tax.

She also said it was not credible for the Tories to make criticism when it opposed the government’s request for more powers to enable it to drive economic growth.

Ms Robison said: “We are steadfast in our commitment to tackling poverty, building a fair, green and growing economy, and improving our public services to make them fit for the needs of future generations.

“But we must recognise that our current financial situation is among the most challenging since devolution, driven by the Covid pandemic, the war in Ukraine and the recent period of high inflation.

“Our funding remains largely based on decisions made by the UK Government, but they have failed to take the steps required to inflation-proof our budgets, and their decisions from Brexit to the disastrous mini-budget have made matters worse. This is creating substantial pressure on our public services, which we have no choice but to address.

“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.”

The exchange came as the Scottish Fiscal Commission said that it now forecasts that the economy will remain largely flat this year rather than fall into the shallow recession predicted in December.