A leading economist has urged policymakers to have an honest discussion about tax and spending as Scotland's already fragile economy faces additional challenges from Brexit.

Professor Graeme Roy, director of the Fraser of Allander Institute, said the Chancellor's plan to manage the fallout of Brexit could have "bleak" consequences for Scotland, which is already struggling with the downturn in the North Sea and stagnating employment.

He told Holyrood's Finance Committee there are few avenues for cuts - with local government the largest unprotected area - but warned tax rises could also have consequences for productivity and economic growth.

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Prof Roy said: "The bleakest outlook for the Scottish budget would be if the Chancellor believes that he is going to miss his fiscal targets, or at least has the intention to get the deficit down over the next few years, he may decide to take further money out of departmental spending in the short term.

"So, we have a scenario there where we assume that if he wants to take an extra £9 billion out over the next four years, what would that look like for the Scottish budget?

"That would mean that next year there would be an additional £200 million reduction in Scotland's budget, on top of the £100 million that we have already next year."

He said this cut is "significant and it would be quite a challenge to take out" and "tough choices will have to be made around prioritising of expenditure".

He said: "The new tax powers the Scottish Government has, it may choose to utilise these to try and make up some of the difference or they may choose to prioritise spending in other areas, but it would be a challenging situation."

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He added: "Health, childcare and police are really quite big commitments. Essentially, what we do in the report is look at what's left.

"By far the largest unprotected area is the local government settlement at around £6.8 billion."

He continued: "The Scottish economy has been fragile over the last 18 months. We're growing at around 0.6% over the last year when the UK has been growing at close to 2%.

"That has largely been driven by what is happening in the North Sea.

"Over the medium term, do we see a dramatic change in that given the North Sea is adjusting to its new normal? That is quite a challenging situation to have.

"If you look at the Labour market as well, there was a sharp fall in unemployment over the last quarter, but if you look over the last year employment has essentially been flat in Scotland but growing in the rest of the UK.

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"So, taking that all together, we would say that when you add in Brexit, which is a challenge for the UK as a whole, Scotland has that additional element of what's been happening over the last year."

Labour has proposed a penny on income tax to invest in public services but Mr Roy warned that this may have adverse consequences.

"You can add a penny onto income tax and raise £400 million as a simple illustration, but that has consequences for economic activity, potentially, and for how services are delivered," he said.

"The parliament now has the power to do this but whether it is the best use of these powers is really a political question and choice to be made."

He added: "Our key conclusion, our key recommendation, is if you start from a position of a relatively fragile Scottish economy, a tight fiscal settlement and increasing demand for public services, what is the solution to that?

"The solution has to be an open and honest discussion about outcomes, about opportunity, costs of policy decisions, and also the balance of tax and spend that you want to have in the country, and be quite up front and frank about that."