The Scottish Government is "facing a challenge in balancing its budget" due in part to its own choices, the Scottish Fiscal Commission (SFC) has said.

In a scathing assessment, the watchdog said that while UK Government policies "contribute to the pressures on the Scottish budget, much of the pressure comes from the Scottish Government’s own decisions."

They pointed to higher-than-expected pay deals, social security reform and the SNP's surprise council tax freeze.

The Commission warned that "difficult decisions" would be needed to balance the budget and "ensure decisions now are sustainable in the future."

The report comes after a senior official in the Scottish Government suggested ministers could look at scrapping free prescriptions, university tuition, bus travel and school meals.

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The Commission’s Chair, Professor Graeme Roy, said:  “The past choices of the Scottish Government narrow its room for manoeuvre now and in the future.

"Previous pay settlements, the approach to social security payments, and the Council Tax freeze have all added to the in-year pressures that must be accommodated as it continues to negotiate pay with the public sector unions.

“With pay making up more than half of the Scottish Government’s day-to-day budget, we need more transparency and planning around pay awards at Budget time to avoid disruptive spending controls being introduced part way through the year. 

The Commission also highlighted “significant uncertainty” about UK government funding for Holyrood.

Earlier in the day, Prime Minister Sir Keir Starmer warned that October's UK Budget will be "painful,"

He said he had no other choice and those with the broadest shoulders "should bear the heavier burden".

Ms Robison is due to make a statement to MSPs when Holyrood returns from recess next week.

Responding to the report, Ms Robison said: "The First minister and I have both made clear that, following the UK Chancellor's July statement, the Scottish government continues to face the most challenging financial situation since devolution.

"I will be providing an update to parliament on the urgent action being taken to address these profound financial pressures."

Ahead of the announcement next week, some spending decisions have already been announced – including the return of peak rail fares and scrapping free bus travel.

In a briefing to almost 500 staff members, Caroline Lamb, the director-general for health and social care in the Scottish Government, said her department alone had a £1.1 billion spending “gap”.

According to the Times, she said that £750m needed to be found this year before the “quite dramatic” addition of £357m because of above-inflation public sector pay deals.

“We’ve managed to almost limp over the line over the last year or two but we’ve now got to the point where it’s actually a bit of a tipping point,” Ms Lamb told the civil servants.

“I think that reflects the reason why Ms Robison wrote to all cabinet secretaries setting out those financial controls and the measures that we need to take now to ensure that we can achieve balance by the end of this year.”

During a question and answer session, Ms Lamb said: “What we need to do in terms of what we’ve talked about and the financial recovery plan is to wrap all that up so that we are really clear about what we need to do and that will be a balance of things around service change that will enable us to deliver services differently.

“It will be potentially looking at income generation and some of the universal benefits across Scotland and other measures as well.”