Holyrood is expected to receive a large uplift in its budget from Westminster to counter claims of continuing austerity.

Sources have indicated that Rachel Reeves, the Chancellor, will unveil the increase in Barnett consequentials — the funding formula that sees money flow from the Treasury to Holyrood – when she addresses the Commons today.

Funding for Scotland will see the biggest rise in Holyrood’s budget apart from the extra funding supplied during the pandemic, it has been claimed.

It will be part of a delicate balancing act that will involve tax rises and curbs on spending alongside measures to stimulate economic growth.

A Labour spokesman said: “This Budget is about investment with Labour versus decline under the Conservatives. The Prime Minister opened the political Cabinet meeting by saying that “politics is about choices” and that the Budget tomorrow will show that “we are choosing to fix the NHS, rebuild Britain and protect the payslips of working people”, to deliver on our mandate for change.

“The Prime Minister highlighted the black hole in the public finances that the Conservatives covered up, which means that tough choices are necessary to stabilise the economy and rebuild our country. He added that the question for the Budget is not whether we must act, it is how we act and what choices we make in the national interest.”

The Chancellor used the meeting to update the Cabinet on the Budget.

“The Chancellor said that the inheritance the Tories left meant there would have to be difficult decisions on spending, welfare and tax,” said the spokesman.

“She said the Labour Party promised there would be no return to austerity and the Budget … would deliver on that promise. She said the choices the Government is taking will restore economic stability.”

Last night, First Minister John Swinney called on the Chancellor to “immediately and significantly” enhance Scotland’s resource and capital funding. He said she should announce plans that would provide new opportunities such as the carbon capture project for Scotland.

Addressing business leaders at a reception hosted by the Scottish Chambers of Commerce at Edinburgh Castle, he said: “My Government is committed to growing the economy to generate the wealth to invest in our public services and eradicate child poverty.

“We want to use that investment to create a partnership between government and business that will make the most of Scotland’s many economic opportunities.

“It takes political willpower to adapt and evolve our economies and grow thriving societies in all four nations – something the Chancellor can signal by including steps to advance the Acorn carbon capture and storage project in the UK Budget, which would provide new opportunities for workers in the oil and gas sector in Grangemouth and in other parts of Scotland.”