Labour's Neil Findlay issues half-hearted retraction after calling Sturgeon a "liar" over tax

MSPs backed John Swinney's proposals to keep the tax at the same level as the rest of the UK, despite Labour and Liberal Democrat calls to raise it by 1p to raise enough cash - around £500m - to offset cuts to public spending.

The SNP refused to back the raise, with the First Minister saying it would "shift the burden of Tory austerity on to the shoulders of the low paid" and branding a lack of detail over Labour's plan "embarrassing". Labour hit back by pointing out that the better off would pay far more than the poorest and to a string of experts who have said the policy is progressive.

Mr Findlay, who called the First Minister a liar during her fraught exchange with Kezia Dugdale over the issue, suggested that he had previously been unaware the term was unparliamentary before agreeing to withdraw it.

He added: "At the same question time session the First Minister described Labour's support for a modest tax increase on those earning over £20,000 to end the Government's austerity as 'dishonest' and went on to accuse Labour of 'perpetuating a con trick'. 

"I therefore withdraw the term attributed to me that the parliament finds unparliamentary. I would instead substitute it with the term used by the First Minister today."

The Presiding Officer, apparently unimpressed, told Mr Findlay he had known the word liar was unparliamentary and would consider the matter further following what he had said.

It came after the dispute over whether to use tax powers dominated First Minister's Questions and the afternoon session at Holyrood as MSPs debated whether to increase the rate. Mr Findlay, in his contribution to the later proceedings, said "it made him want to weep" to see the impact of public spending cuts across Scotland and that it was "utterly immoral" for highly paid politicians to "mislead" the low paid by telling them they would be worse off under the tax rise plan. He added: "Not only will they be financially better off, but their families will be better off as a result of improved services."

The SNP, Tories, Greens and Independents backed finance secretary John Swinney's plan, with Labour and Liberal Democrat MSPs opposing it. Mr Swinney, repeating the First Minister's argument, accused Labour of targeting "low paid people busting a gut to make ends meet." Referring to other measures in his budget, he added: "We want to give the low paid a pay rise, they want to give them a tax rise."

Jackie Baillie, Labour's finance spokeswoman, said the SNP was rejecting an opportunity to end austerity and said councils were already considering slashing school budgets to meet savage cuts imposed by Mr Swinney. The party has claimed that those earning under £20,000 will be protected by a £100 annual rebate, with those on modest salaries paying only a few pounds a month more in tax. Willie Rennie, the Scottish Liberal Democrat Leader, said those earning £100,000 would pay 30 times more than someone on an average wage.

Gavin Brown, the Tory MSP, welcomed a new "taxpayers alliance" between his party and the SNP as he lavished praise on nationalists for their staunch opposition to tax rises. SNP backbenchers rejected a personal plea from Ms Dugdale to back the Labour policy, with Mr Swinney's proposal passing by 74 votes to 35.

Mr Brown said: "I don't think I've ever heard Nicola Sturgeon or John Swinney quite as passionate about any political issue as opposing this awful tax increase put forward by the Labour Party and the Liberal Democrats.

"We now have some kind of new taxpayers' alliance with the Conservative Party on this side of the chamber, and the fiscal conservative party. That has to good news for a progressive, competitive and outward looking Scotland. We will take great pleasure in voting alongside the Government."