THE Scottish Trades Union Congress (STUC) is to lobby Holyrood on Thursday when the Scottish Government is due to publish its annual Budget.

The focus of the rally is on public services, particularly local councils which fear the biggest cuts are due to the Westminster government’s austerity policies reducing the Scottish Government’s budget.

Leading public service union Unison says the rally “will demonstrate the strength of anger across the public sector and highlight the impact of year-on-year cuts across services.”

Further evidence of the pressure on Finance Minister Derek Mackay and his Cabinet colleagues came with the publication yesterday of the latest Economic Commentary by the Fraser of Allander Institute (FAI).

An independent think-tank based at the University of Strathclyde said that whilst the outlook is set to improve next year, Brexit uncertainty and ongoing weak demand in the Scottish economy will act to dampen growth.

Scotland’s economy grew by just 0.5 per cent over the past year, one-third the rate in the UK as a whole. FAI analysts’ point out that whilst employment has held up well in Scotland, this has been at the cost of falling productivity, which has now declined for seven consecutive quarters.

Graeme Roy, Director of the FAI, said: “With the Scottish Budget now much more dependent upon the tax revenues generated in Scotland, boosting Scotland’s fragile economy will be crucial in helping to alleviate budget constraints over the long-term.

“The Scottish Government undoubtedly faces delivering a tight Budget settlement on Thursday.

“The Scottish Government’s resource block grant is on track to decrease by over £200m in real terms next year. On top of this, it is likely that the Scottish Fiscal Commission will revise down their estimates of the outlook for devolved taxes.

“With major manifesto commitments to pay for in health, education, childcare and policing – not to mention a more generous pay settlement for public sector workers than those in England – ‘non-protected’ areas will be in line for an extremely tough settlement.”

David Eiser, head of fiscal analysis at the FAI, said: “The Government has been open about its aspirations to raise revenues through increasing income tax. However, it is likely to be cautious given the largely unknown impact this could have on business sentiment and behaviour.

“At the same time, even one of its ‘bolder’ options on income tax – eg one that adds a penny to all tax rates and either protects or reduces the tax burden on lower earners – is likely to only be just enough to offset the cut to the Westminster block grant next year.

“Despite the recognition from across the political spectrum of the need for a long-term approach to managing public service delivery, budget planning remains remarkably short-sighted.

“This means there is a lack of awareness both of recent trends in the distribution of government spending, and how best to address the long-term challenges that our public services face.”

Overall, the FAI have revised down its forecasts for growth to 1.2 per cent for 2018 and 1.4 per cent in both 2019 and 2020.