PUBLIC services are facing eye-watering cuts of around £2bn over the next two years as a result of reduced Westminster grants and the SNP’s own spending priorities, it has emerged.

The Institute for Public Policy Research (IPPR) predicted a “really difficult” Budget on Thursday, when Finance Secretary Derek Mackay sets out his draft figures for 2018/19.

The IPPR said that, on its analysis, the Finance Secretary would have £700m less available for day-to-day revenue spending by 2019/20 than he has today.

However, because the SNP has promised to raise NHS funding and inflation-proof police spending, that could translate into cuts of up to £1.3bn a year in other “non-protected” areas, principally councils but also further and higher education, the environment, and transport.

That would amount to a 10.4 per cent cut to those other portfolios over just two years.

Fully offsetting such cuts would require a 4p rise in the basic rate of income tax, the think-tank said, something almost any government would regard as political suicide.

Mr Mackay is widely expected to increase the Scottish rate of income tax for the better off next year, possibly by creating extra bands, but this would only raise around £300m.

IPPR director Russell Gunson said such rises would only partially cancel out cuts already coming down the line because of Westminster cutting Holyrood's revenue budget.

He said: “Scotland is facing a really difficult budget this week, with further cuts to the Scotland block grant.

“The Scottish Government has started a debate on tax, and is clearly considering increasing income tax. However, tax rises alone are unlikely to end the cuts we face for long.

“Any increase in tax may only buy us a year or two of protection from cuts on this scale.

“Either we will need to see further tax rises over the coming years or find ways to deliver a significantly stronger Scotland economy, and increased tax receipts."

The IPPR findings bear out a separate analysis by the Fraser of Allander Institute, which said the outlook for non-protected areas was “stark”.

The Scottish Tories will today use a Holyrood debate to smoke out whether the SNP intend to stick to their 2016 manifesto pledge to freeze the 20p basic rate of income tax until 2021.

They will ask SNP MSPs to back a motion which includes the pledge verbatim.

Tory finance spokesman Murdo Fraser said most people opposed tax rises.

He said: "There is now a serious consensus within Scotland's business community that the SNP should not increase income tax.

“Indeed, the latest analysis suggests that these potential tax rises will not raise the required amount of money for public services, only punish taxpayers. The SNP must stick to their manifesto and not raise punishing and counter-productive taxes.”

The Scottish Chambers of Commerce last night urged Mr Mackay to match recent changes to the business rates regime south of the border, by capping any rises at the lower CPI measure of inflation, not RPI.

It also repeated its call not to raise income tax for “medium and high earners”, and asked the government to rethink its land and building transaction tax rates.

A Scottish Government spokesperson said: “The UK Government is cutting our discretionary block grant by £2.6bn in real terms over the 10 years to 2019/20.

“The serious economic threat posed by Brexit, coupled with continuing UK Government austerity following the UK Government’s budget last month, means we are seeing increasing pressure on our public services.

“Following a careful and considered conversation around income tax, we will publish a balanced package of tax and spending proposals as part of the draft budget.”