NICOLA Sturgeon has warned that next year’s “tough” budget will divide the country.

However the First Minister told the National Economic Forum in Edinburgh she hoped people would also appreciate its focus on growth and the economy.

Finance Secretary Derek Mackay will announce his draft budget for 2018/19 at Holyrood tomorrow, when he is expected to announce hikes in income tax for the better off.

Business leaders have warned the First Minister not to widen the “tax gap” between Scotland and the rest of the UK by pushing up rates using new powers over taxation.

However Ms Sturgeon has signalled her desire for a more “progressive” tax regime, with the better off paying more in order to help fund public services.

The First Minister’s own chief economist warned on Tuesday that hiking the very top rate of tax from 45p to 50p for those on £150,000 salaries could cost the country money.

While a 50p rate could in theory raise £145m a year, the ability of the mobile rich to move elsewhere to avoid the levy could ultimately reduce revenues by £24m, he said.

Westminster cuts mean Scotland is already facing a real-terms revenue cut of £200m.

Addressing an audience of leaders from business, unions, government and the third sector, Ms Sturgeon said the budget would not be universally well-received.

She said: “I don't expect that anyone in this room or indeed anybody across the country will agree with every single proposal that is unveiled in the budget tomorrow.

“But I hope when [you] see the detail of the budget, you will agree that it does seek to strike the right balance - that it is aimed at making Scotland an even better place in which to live study work and invest."

She added later: “I said earlier that nobody will agree with everything in the budget - that's not how budgets, particularly tough budgets work.

“But I do hope you will be able to see that the interests of businesses and the interests of growing the economy have been absolutely central at every stage in our thinking."