Extra money will be spent on construction and getting people back into work as part of a Scottish budget focused on the economy, the Finance Secretary has said.
John Swinney identified £40 million for "affordable housing", a new energy skills academy and an employer recruitment scheme designed to help create up to 10,000 jobs for young people. The public sector pay freeze will be thawed with a 1% increase for most employees.
Opposition parties and some business groups said the 2013-14 budget is a missed opportunity that fails to address conditions that pushed Scotland back into a recession.
It also signals an end to a freeze on bills with water rates starting to rise at the rate of inflation.
Unveiling his "toughest budget yet", Mr Swinney said: "Today I am announcing a Scottish budget for jobs and growth. In difficult economic times, this Government is doing everything within its limited power to stimulate Scotland's economy, to invest in our young people, protect households and support frontline services."
The construction industry is to get a "stimulus package" worth £40 million this autumn and in the next financial year. The sector has been hit harder than others during the economic downturn and has been blamed in part for pulling Scotland back into a recession. The Government will increase the number of schools being built from 55 to 67, and do it "sooner", with the help of £80 million, Mr Swinney said.
On public sector pay, the 1% cap will be prioritised for those on lower wages and will not apply to people on the highest salaries from £80,000. But the measure was dismissed by Lynn Henderson, of the Public and Commercial Services union, which represents 30,000 civil and public servants in Scotland, who said: "The 1% cap on pay increases announced by Mr Swinney is the same 1% cap announced by George Osborne with a tartan cover over it. This is woefully inadequate to redress the lost income and hardship our members have suffered after two years of a 0% pay freeze."
About £17 million more will be spent on college education, following high-profile complaints about cuts last year. Mr Swinney hopes a government commitment of £15 million will be matched by European cash and employer contributions. The aim is to encourage jobs in small and medium-sized enterprises for people aged between 18 and 24 who have been out of work for between three and nine months. The Finance Secretary also announced an extra £30 million for an energy efficiency scheme.
Funding will continue for the Government's "key commitments" such as the council tax freeze, free prescriptions, free university education for Scotland-based students and keeping an 1,000 extra police officers.
Conservative finance spokesman Gavin Brown said that investment in housing and colleges is being outstripped by previous cuts from the SNP at Holyrood. Housing lost £100 million and gets £40 million back while about £50 million was taken from colleges which get £17 million back, he said. Labour finance spokesman Ken Macintosh said Mr Swinney has previously claimed to set a budget for growth. "One year on, unemployment in Scotland is higher than the UK average and our country has sunk back into recession for the second time under his stewardship," he said.