Opening his speech, Mr Swinney said there is a “compelling case” for Chancellor Alistair Darling to continue allowing future spending to be brought forward.

Mr Swinney said that without access to the funds, jobs and economic stability would be at risk.

“Without further acceleration of capital expenditure, we will see steep falls in the resources available for housing, transport and other infrastructure activity that are essential to safeguard jobs and recovery,” he said.

The Scottish budget had been cut by £500m because of Westminster-imposed reductions of £392 million and a further reduction of £129 million because of lower spending for the Department of Health in England, Mr Swinney told his Holyrood colleagues.

“We will meet this challenge while continuing to work with our partners to achieve our priorities,” he said.

The Scottish Government’s published document outlined plans for a £253m cut in housing and regeneration, with reductions of £2.7m in schools funding and £76m in enterprise.

There will also be an overall £14m reduction in Scottish Government administration costs.

Spending in higher education will rise by £22m, while police funding will see a £6m increase.

Health spending will rise by £263m, with a £129m reduction linked to the Department of Health in England not passed on to the Scottish health budget.

Instead, unspent Scottish Government money held by the Treasury will be used in full.

“This will enable us to ensure that the health budget bears no part of the £129m reduction,” he said.

And while the £400m Glasgow airport rail link will be scrapped, other measures to improve public transport in Glasgow, such as connections to the New Southern General Hospital, and for the 2014 Commonwealth Games, will be budgeted for.

Earlier, Labour accused Alex Salmond of “dodgy accounting” and said any cuts would be of his own making.

The accusation came during First Minister’s Questions when Labour leader Iain Gray challenged Mr Salmond to save money by dumping two major policies.

Both the Scottish Futures Trust and the “national conversation” on an independence referendum are not working, Mr Gray said.

Mr Salmond rejected the charges, and said: “We put the National Health Service and the school-building programme before Trident missiles and weapons of mass destruction, whether they are supported by Iain Gray or not.”

The clashes took place hours before Finance Secretary John Swinney announced details of next year’s Scottish Government Budget.

Mr Gray said the Budget will rise by £600 million.

The First Minister “chose, for good reasons, to spend some of it this year”, Mr Gray said.

“We all know he is now trying to claim that’s a cut.

“If it is a cut, it’s one he made in his own Budget.

“Isn’t it time he took some responsibility for his own decisions and dropped the dodgy accounting for his own purposes?”

Mr Salmond replied: “If the acceleration of capital investment is dodgy accounting, that dodgy accounting emanated from the Treasury at Westminster - who gave permission to do it.

“Today is the day for a reality check for Iain Gray.

“As indicated by the Finance Secretary, for the first time since devolution the real Budget for this Scottish Parliament and Scottish Government will decline in real terms next year.

“And sooner rather than later, Iain Gray is going to have to face up to the fact, and work out the Westminster Treasury’s responsibility for that fact.”

Mr Gray replied: “He can spin the numbers any way he wants but the people of Scotland know he raided next year’s budget, and now he is blaming someone else.”

Mr Salmond told MSPs that Andy Kerr, shadow finance secretary, “looked ridiculous” after the Westminster Treasury did not inform the senior Scottish Labour figure about the planned 9% cuts over the next five years,

But Mr Gray pointed to the Prime Minister’s comments that programmes that were not working will have to be cut.

“Everything has to be looked at,” he said.

“What about the Scottish Futures Trust? Twenty-three million pounds, two and a half years on, and it hasn’t built a single school or hospital.

“Today its chief executive tells us it will be a few years before it’s properly up and running.

“That’s about as not-working as you can get”, said Mr Gray, who challenged Mr Salmond to cut the trust in order “to protect frontline services”.

Mr Salmond said Mr Gray had admitted the Trident programme and weapons of mass destruction should be cut.

“People in Scotland would favour an institution which is going to build - in a cost-effective manner - schools across this country before they will favour weapons of mass destruction from the Labour party,” he said.

But Mr Gray told MSPs: “There’s always somebody else to blame, it’s always somebody else’s responsibility, it’s always someone else’s programme that needs to be cut.”

He questioned whether Mr Salmond’s real priority was public services or “his own pet projects”.

He went on: “Is it running Scotland or it is running a campaign for separation, the national conversation?”

“It isn’t working. Support for independence is plummeting - let’s cut that conversation now.

“I would rather have one more teacher, one more nurse and one more apprentice than one more minute of this national conversation.

“Teachers, nurses and apprentices - these are our priorities, these are Scotland’s priorities. What about the First Minister?”

Mr Salmond said more than 2,000 extra staff are now working at the frontline of the health service.

And he said that while Mr Gray had claimed yesterday that there were fewer social workers, this reduction came from Labour-controlled Glasgow council “privatising” its home helps.

The First Minister continued: “Yes, politics is the language of priorities.

“We don’t believe that accelerating capital investment is raiding a budget - we believe it’s 5,000 jobs in Scotland.

“As yes, we put the National Health Service and the school-building programme before Trident missiles and weapons of mass destruction, whether they are supported by Iain Gray or not.”

Grahame Smith, General Secretary of the Scottish Trades Union Congress (STUC), said in response to the budget: “This was never going to be an easy process for the Scottish Government with the budget reducing from that forecast in the last comprehensive spending review. However, the STUC believes that a number of very poor choices have been made in the draft Budget.

“There will be serious consequences for the Scottish economy and jobs resulting from the cancellation of the Glasgow Airport Rail link and the cuts in the affordable housing budget.

“The superficially popular Council Tax freeze combined with significant pro-rata efficiency savings, will severely impact on Local Authority frontline services; hitting the most vulnerable in society hardest.

“The STUC will work over the coming weeks with the Scottish Government and Parliament to make a case for a budget which invests in Scotland’s people, jobs and communities”.