The SNP has said millions of Scots "will be hit in the pocket" as the Chancellor unveiled more than £40billion of tax hikes.

Stephen Flynn, the party's leader at Westminster, said Rachel Reeves' plans fail to deliver "the transformative change people in Scotland were promised" at the general election and that people north of the border were "still paying the price for Brexit and Westminster austerity".

The Office for Budget Responsibility (OBR) predicted the economy would grow by 1.1% this year and 2% in 2025. But from 2026, growth is predicted to weaker than previously forecast, slowing to 1.5% by 2028.

The OBR said the policies in the budget would "temporarily boost" the economy in the short term, but leave the size of the economy "largely unchanged in five years".

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Ms Reeves announced £40 billion a year in extra taxes as she increased government borrowing and spending to “rebuild Britain”.

The Chancellor’s plans will see the tax burden reach an historic high, while borrowing increases by an average £32.3 billion a year as spending increases by around £70 billion annually over the next five years.

Ms Reeves said the measures were necessary to address a “black hole” in the public finances left by the Tories while pumping billions into schools and hospitals.

She confirmed plans to hike employers’ national insurance contributions and increase capital gains tax, while also making changes to inheritance tax and stamp duty.

Employers will pay an additional 1.2 percentage points in national insurance from April 2025, taking the total rate to 15%. The secondary threshold – the level at which employers start paying National Insurance on each employee’s salary – is being slashed from £9,100 per year to £5,000.

Chancellor Rachel Reeves as she left Number 11 Downing Street today ahead of delivering her budget (Image: Jordan Pettitt) These changes are expected to raise £25bn per year by the end of the forecast period, but experts have warned that employees will likely bear the brunt of this.

Robert Holland, head of employment, at property firm Aberdein Considine, explained: “On the face of it, the budget delivered this afternoon seems geared towards the workers rather than employers.

"Small to medium enterprises in particular will feel the impact most acutely, with employer national insurance contributions set to rise to 15%, and the national insurance threshold being lowered to £5,000.

“As a result, many employers will seek to recoup this loss, which could result in pay freezes or even reductions for employees, with salary sacrifice schemes likely to come under scrutiny. So, ironically, the very workers the Labour Government was aiming to protect could end up shouldering much of the financial strain.”

Changing the way government debt is measured allowed Ms Reeves greater flexibility to borrow, resulting in what the OBR called “one of the largest fiscal loosenings of any fiscal event in recent decades”.

The tax burden will reach 38.3% of gross domestic product in 2027-28, the highest since 1948 as the UK recovered from the impact of the Second World War.

In the first budget ever delivered by a female Chancellor, and the first Labour financial statement since 2010, Ms Reeves said: “This is a moment of fundamental choice for Britain.

“I have made my choices. The responsible choices. To restore stability to our country. To protect working people."

But Mr Flynn pointed to Brexit and austerity policies pursued at Westminster as he noted the slow growth forecast given by the OBR.

He welcomed the Chancellor's decision to invest more in the NHS and public services but criticised her decision not to lift the two child cap and to push ahead with the scrapping of the annual winter fuel payment for most pensioners.

The MP for Aberdeen South also hit out at the rise to employers national insurance contributions.

"It's clear the SNP is winning the argument on the need for more investment in our NHS and public services. I welcome those areas where the Chancellor has listened, including the decision to change the Labour government's conservative fiscal rules to allow for more investment," he said.

"However, while additional funding for public services is welcome, the Labour government's budget also imposes more than £40billion of cuts and tax hikes that will hit millions of Scots in the pocket - and it fails to deliver the transformative change people in Scotland were promised."

He added: "The Chancellor's decision to cut the winter fuel payment will leave around 900,000 Scottish pensioners up to £600 worse off this winter. 

"The decision to keep the two child benefit cap and bedroom tax will push thousands of Scottish children into poverty. And the decision to raise national insurance will hit low and middle income workers, and small businesses, the hardest.

"And it is damning that, despite the Chancellor's warm words, the OBR have significantly downgraded their economic growth forecasts following the budget, while the IFS [Institute for Fiscal Studies] has warned the vast majority of the National Insurance tax hike will hit working people through lower pay.

"After 14 years of the Tories, this UK budget should have been the chance to completely turn the page but people in Scotland are still paying the price for Brexit and Westminster cuts, which are wiping billions of pounds from public finances and household incomes."

After the Chancellor's speech Conservative leader Rishi Sunak accused Labour of “not being straight with the British people” in its election campaigning.

He said: “The Chancellor repeatedly promised that her plans were fully funded. Only a few weeks ago the Prime Minister said the budget would balance the books, but this budget does no such thing and reveals they have not been straight with the British people.

“Today the Chancellor has launched an enormous borrowing spree, saddling our children and grandchildren with billions upon billions of pounds more debt, pushing up interest rates, leaving our economy more exposed to future shocks and leading the OBR today to now forecast higher inflation in every year of the forecast.

“Her decision to let borrowing rip make a total nonsense of her claims on the state of the public finances, because if they were truly in such a dire strait, as she has said, what we should have seen today was a significant reduction in borrowing to repair them, not the splurge that she has just unleashed.”

Scottish Labour leader Anas Sarwar insisted the budget was "transformative."

"This budget delivers on the promises made in the election, ends the era of austerity, provides vital new investment for our public services and prioritises economic growth.

“When Scotland voted for a Labour government they voted for change and an end to austerity - today’s budget has delivered both.

“This transformative Labour Budget is good for workers, good for public services and good for Scotland.

“After 14 years of austerity, we now have a UK Labour Government that is delivering £1.5bn additional funding for Scotland this year and another £3.4bn next year.

“This money must be used to support Scotland’s NHS and vital public services.

“Decisions taken today by this Labour Government mean that the Scottish Government is receiving more per person in Scotland than in the rest of the UK."

He added: “Now more than ever Scots need a government at Holyrood too that is prepared to spend money wisely and look after taxpayers.

"Today we turn the page on 14 years of Tory failure - at the 2026 election we have the chance to turn the page on 17 years of SNP failure as well.”

Acting Alba Party leader Kenny MacAskill attacked the Labour budget attacking an increase to the windfall tax on the profits of oil and gas giants to 38%, extending it to March 2030 and also crticised the government for not committing funding to a new carbon capture plant off the north east of Scotland.

He also hit out at the Chancellor's failure to step in and stop the closure of the Grangemouth oil refinery next Spring and reverse the axing of the annual winter fuel payment for most pensioners.

“Today’s UK budget is a continuity budget that proves that regardless of whether we have a UK Tory Government or a UK Labour Government, Scotland will always lose," said Mr MacAskill.

“To gain pass marks the new UK Labour Government had three key tests to meet in Scotland: it had to reverse its plan to cut the universal winter fuel payment; it had to save Grangemouth; and it had to fund a plan to save North Sea Oil and Gas jobs - on all three counts Labour has failed Scotland.

"Close to a million Scottish pensioners are to be kept in the cold this winter, the UK Government has chosen to stand by and allow Scotland’s key industrial asset to close, and Labour have betrayed the North East of Scotland. 

"Nothing for Scotland’s pensioners, nothing for Grangemouth and nothing for carbon capture and the North Sea. It is now vital that the Scottish Government steps up to the plate and uses any additional funding consequentials it receives to fully mitigate the cut to the winter fuel payment."

John Dickie, Director of the Child Poverty Action Group (CPAG) in Scotland, said the budget was not taking bold action on addressing child poverty.  

"She missed a golden chance to scrap the two-child limit, a policy that will pull 16,000 extra children into poverty by the time the government’s child poverty taskforce reports in spring," he added.