SNP ministers are facing a "black hole" of almost £5bn in their spending plans after presiding over a huge rise in Scotland's welfare bill and a surge in the size of the state.
The Scottish Fiscal Commission (SFC), which provides the SNP Government's official budget forecasts, warned that spending was on course to exceed funding by £4.7bn by the end of the decade.
Its latest fiscal update found spending on social security had increased by 55 per cent above inflation since 2020-21, partly thanks to the SNP's more generous benefits.
The devolved Civil Service has grown by almost 60 per cent since 2018-19, it said, while all public sector pay deals so far agreed for this year and next have exceeded the Scottish Government's wage policy.
The report also said that the SNP's higher income taxes were raising £1.1bn a year less than they would if Scotland's tax base had kept pace with the rest of the UK's.
Only about £600m net will be generated in the current financial year from the SNP's income tax hikes for middle and higher earners, the SFC's forecasts found.
However, nearly £1.7bn would have been raised if factors such as earnings and employment growth in Scotland had increased at the same rate as south of the border.
Prof Graeme Roy, the SFC's chairman, said the update demonstrated that whichever party wins next May's Holyrood election, they are "going to face some really difficult choices about balancing the books".
He said they would inherit a situation where funding was "lagging behind" the SNP's existing spending commitments and argued they should examine what could be done to widen Scotland's tax base.
Although SNP ministers have unveiled plans to cut public sector staffing levels by 0.5 per cent a year until 2030, the equivalent of about 11,600 jobs, he said that would not be enough to close the black hole.
The Scottish Tories said the report was a "damning confirmation that the SNP Government is living beyond its means" and called for deeper cuts to the public sector.
Craig Hoy, their shadow finance secretary, said: "Nicola Sturgeon, Humza Yousaf and now John Swinney have presided over a huge rise in welfare spending and an enormous surge in the number of civil servants, especially those on the highest salaries.
"They've hammered working Scots again and again with tax rises to pay for their financial recklessness, but despite this, they have now run out of road. They now claim they'll rein in costs, but it's clear they have no idea how to do so."
The SFC update found that the Scottish Government's spending is on course to exceed its funding by just over £2bn in the 2026-27 financial year.
The gap is forecast to widen to nearly £3.4bn the following year, £4.3bn in 2028-29 and more than £4.7bn in 2029-30.
This includes a £2.6bn black hole in day-to-day spending and a £2.1bn shortfall in capital spending on new public roads and buildings plans.
Benefits spending has seen the highest increase of any major policy area since 2020-21, when responsibility for some social security payments were devolved to Holyrood.
The Scottish Government's public sector pay policy limited wage rises to 9 per cent over the three years to 2027-28, but the update said this was on course to be exceeded unless workers accepted a 1 per cent rise for the final year.
About 1.5 million Scots earning more than £30,318 pay more income tax from the new tax year than if they lived elsewhere in the UK.
There are six tax bands in Scotland, double the total south of the border, and the top band is 3p higher. Someone earning £50,000 pays £1,527 more tax in Scotland than England in 2025-26, with the gap rising to £2,081 for those on £75,000.
However, the SFC said the hikes generated less revenue than they would do if implemented south of the border thanks to a "tax base performance gap".
Among the factors that created the £1.1bn gap were "slower aggregate earnings and employment growth in Scotland compared with the rest of the UK" and "behavioural responses from taxpayers to policy changes".
Experts have previously warned that the higher tax rates could lead to people working shorter hours or not applying for promotions.
Prof Roy said: "The Scottish Spending Review in December will determine the trajectory of public spending over the next Parliamentary term, and it must provide a meaningful basis for informed debate on the public finances during and after the election.
"Closing the fiscal gap will require all parties in this Parliament and the next to work together to address the fiscal challenges, and any debate around new spending plans, changes to social security policy or tax changes needs to consider the broader public finances."
Shona Robison, the SNP Finance Secretary, blamed the UK Government and high inflation for the financial black hole.
She said: "The financial strategy and delivery plan I published in June means funding can be targeted at front-line services such as the NHS, action to eradicate child poverty and other priorities whilst setting out a comprehensive approach to ensure our finances remain sustainable.
"We are also taking forward a public service reform strategy to deliver services that are preventative, better joined up and more efficient. I plan to set out our multi-year Spending Review in December."
The Scottish Government was approached for comment.