Mr Mackay says in the coming financial year the government will invest not £2m – but £3m in a package of targeted fare reductions, to ease costs for passengers and thank them for their patience.

He says the minister for transport will set out more detail tomorrow.

Mr Mackay says he will launch the £500m Scottish Growth Scheme in 2017, offering financial support for business investment.

Mr Mackay says: "The Small Business Bonus extended, and the Large Business Supplement focused only on the very biggest businesses. 

"That is a good deal for Scottish business and a great deal for Scottish jobs."

Mr Mackay sets out measures that confirm a highly competitive business rates regime for Scotland in 2017-18. He will....

• reduce the business rates poundage by 3.7% to 46.6p
• expand the Small Business Bonus Scheme by raising the eligibility threshold for 100% relief to a rateable value of £15,000 - lifting 100,000 properties out of rates altogether
• restrict the supplement to the very largest businesses by increasing the threshold to £51,000, reducing the tax burden on 8,000 businesses.
• and match the Chancellor’s recently announced rates reliefs for rural areas.

Scotland's Finance Secretary says the basic rate of income tax will be frozen.

He adds that the higher rate will be set at £43,430 and he will not pass on the tax cut announced by the UK government.

Mr Mackay says: "This government is committed to a principles-based approach to taxation, particularly that tax should be proportionate to the ability to pay."

The minister says the government will introduce a Bill to devolve Air Passenger Duty to Scotland, to be known as Air Departure Tax.

Mr Mackay says due to Brexit and austerity, the economic forecasts he is publishing today, which underpin the tax projections, assume Scottish GDP will grow by around...

• 1% in 2016-17
• and by 1.3% in 2017-18.

Mr Mackay says this is the first budget in which the Scottish government will make use of powers devolved through the Scotland Act 2016, including income tax. 

The finance secretary says: "An historic budget, delivered in challenging economic and political circumstances."

Finance Secretary Derek Mackay says: "It is a great privilege to set out to Parliament my first Draft Budget."

Labour MSP Daniel Johnson raises a point of order about the attainment gap, saying the first minister said it had narrowed, when in fact it has increased.

Presiding Officer Ken Macintosh says it is not a point of order.

Image source, bbc

Finance Secretary Derek Mackay will now deliver a statement on his draft budget for 2017-18.

Some public services in Scotland could be facing budget cuts of almost a fifth over the next four years, according to a study by economic forecasters.

The Fraser of Allander Institute said its "worst case scenario" was a £1.6bn cut - 6% - to the Scottish government's overall budget by 2020/21.

Image source, PA

Even under more optimistic scenarios, the Scottish budget is still projected to fall in real terms.

The institute also predicted the grant given to councils could be cut by £1bn.

And it warned that cuts to local services were likely to become increasingly apparent in the years ahead unless there was "radical reform".

• Read the report, external