SCOTLAND’S budget from Westminster faces a £3.3 billion contraction from its level six years ago, with the financial position likely to worsen further after the UK leaves the European Union, a senior economist has told MSPs.

Professor Anton Muscatelli made the prediction in a report to Holyrood’s finance committee, which is taking evidence ahead of the Chancellor’s Autumn Statement next week.

The Glasgow University academic’s projection was based on Philip Hammond continuing on the austerity course set by his predecessor George Osborne, which aimed to move the public finances to a surplus by 2019-20.

Muscatelli told MSPs: “If the new UK Government’s plans confirm this trend in revenue spending, the Scottish Government will see its discretionary budget cut by approximately £1bn in real terms between 2015-16 and 2019-20.

“This is on top of the reductions in public spending observed since 2010. In total it will mean that by 2019-20 the Scottish Government’s discretionary budget will be 10.6 per cent (£3.3bn) smaller in real terms than it was in 2010-11.”

The economist said the deterioration in UK public finances forecast by the Institute for Fiscal Studies, which last week predicted a £25bn black hole in the UK’s finances by 2019, was based on projected slower economic growth between 2017-20, but that the economy could deteriorate further after the UK left the EU.

“It is important to stress that the apparent deterioration in the prospect of the UK public finances set out above is just based on projected slower economic growth between 2017-20,” he said.

“As I have emphasised on numerous occasions since the referendum, I believe that the real impact from Brexit will occur after 2019, if that is the date when Brexit actually happens, as that is when the dislocation effects on trade will begin to unfold.”

Muscatelli’s comments are the second dire warning from economists given this week to members of Holyrood’s finance committee.

IPPR Scotland also presented evidence to the same session saying additional spending cuts of up to £1.3 billion a year were likely when the Chancellor delivers his Autumn Statement.

The think tank predicted Scotland’s budget would be cut by between £330 million and £1.34bn per year by 2019/20 thanks to lower economic growth and tax receipts in the wake of the EU vote.

It said that when £2bn of cuts that were planned before the Brexit vote are taken into account, Scotland’s budget faces being cut by a total of between £2.33bn and £3.34bn by 2019/20 compared to 2015/16.

Yesterday the SNP picked up on the IPPR assessment and warned Hammond against “doubling-down” on austerity in his statement.

“This is the latest sign that the impact of Brexit is being felt even before Article 50 is triggered – which is why the total lack of clarity from the UK Government is a complete dereliction of responsibility,” said the SNP MSP Joan McAlpine.

“The Tory Brexiteers have blown a hole in their own budget, with the IFS warning that slower growth and higher inflation will cost the UK Government £25bn by the end of this parliament.

“But the Chancellor has a choice over how he responds – and it would be a huge mistake to double-down on failing austerity ... these latest warnings should be a reality check for the Tories – it’s time to ditch plans for a hard Brexit and protect our membership of the single market.”

IPPR Scotland director Russell Gunson said: “There is no doubt that Brexit will have a significant impact on Scotland – both in terms of our economy and the subsequent impact on public services.

“Scotland, like the UK, is facing a ‘growth shock’ pretty much in line with expectations prior to June’s EU referendum vote, which will likely leave a black hole in the UK’s finances.

“In his Autumn Statement next week, the UK Chancellor must spell out exactly what the impact of his policies on Scotland’s budget will be, in what were already hugely challenging circumstances.

“Any further cuts to day-to-day spending in the rest of the UK could mean cuts for Scotland’s budgets too, on top of very significant cuts already planned over the coming years.”

The forecasts emerged as a separate study warned economic growth in Scotland is expected to fall by half in the next year as the country’s negative jobs growth continues.

PwC analysis said economic growth in Scotland is forecast to fall from 1.8 per cent in 2016 to 0.9 per cent in 2017.

The drop is a lower rate than the UK as a whole, which is forecast to fall from 2.1 per cent to 1.2 per cent, but both Scotland and the UK are expected to avoid recession.

The UK-wide slowdown is blamed in particular on “the drag on investment from increased political and economic uncertainty following the Brexit vote”.

Scotland is the only region of the UK that continues to have negative employment growth, although it is forecast to go from -0.4 per cent in 2016 to -0.2 per cent in 2017.

PwC government and public-sector partner Paul Brewer said official job figures for June to August showed the economic inactivity rate for working-age adults fell UK-wide compared to the previous year.

He said: “For Scotland, the trend has moved in the other direction, with the inactivity rate for 16 to 64-year-olds rising from 21.3 per cent in June-Aug 2015 to 22.3 per cent in June-Aug 2016.

“When you break down the

Scottish figures, you see that the inactivity rate for men has only increased very slightly over this period from 17.9 per cent to 18 per cent but the female rate has risen much more markedly from 24.5 per cent to 26.5 per cent.”

PwC chief economist John Hawksworth said: “We expect Brexit to exert a long, slow drag on growth, rather than giving the economy a short, sharp shock.”