Cameron tells Sturgeon the time has come to "move towards" UK position during new powers talks

However in his response, the Prime Minister said he was disappointed by the impasse in the talks, that have gone on for months, and that the UK Government, having "moved substantially" towards the SNP Government's position, it now "needed to be prepared to move towards us".

Whitehall sources have claimed that the Treasury has “bent over backwards” to get a compromise deal.

The nub of the impasse has boiled down to what each side believes is meant by “no detriment” as outlined in the Smith Commission report, which underpins the Scotland Bill containing the proposed new tax and welfare powers.

It said there should be no detriment at the point of further devolution and after the transfer of extra powers so there is fairness to both Scottish and UK taxpayers.

One key element is that of population. The UK’s is predicted to grow twice as fast as Scotland’s in the next few years, meaning its revenue will increase proportionately greater. Whitehall insists this growth should benefit the UK but Holyrood argues this would place Scotland in a detrimental position and so would breach the Smith Commission principle.

In his reply to Ms Sturgeon, Mr Cameron emphasised his commitment to “securing an agreement between our governments" but warned that Holyrood would need to be ready to compromise.

"We have consistently listened to your concerns, put a number of alternatives on the table and moved substantially towards you; you will need also to be prepared to move towards us,” he wrote.

"In the interest of reaching an agreement, we tabled a significant new proposal that would see the Scottish government retain all growth in Scottish taxes plus a share of the growth in corresponding taxes from the rest of the UK," the PM explained.

He stressed the UK Government would “not accept any proposals that would diverge systematically from the taxpayer fairness element of the Smith Agreement principle of 'no detriment'”.

He added: "It would be very difficult for me to explain to taxpayers in the rest of the UK that Scotland will stop paying income tax into the central pot yet somehow still receive a share of it."

A spokesman for John Swinney, the Deputy First Minister who is leading for the SNP administration in the tax powers talks, described the PM’s letter as "deeply disappointing", saying it "completely fails to engage with the central point" of the FM's letter.

"We will put a further proposal to the UK government this week that will meet in full the principles of the Smith Commission and which no government seeking to secure a deal based on the principles of Smith could reject,” he declared.

The spokesman added: "If the UK government is not able to reach an agreement which respects that core principle of no detriment, it would be crystal clear that they have no intention of honouring the Vow or the Smith Commission. We sincerely hope that's not the case."

Earlier today, Mr Cameron the SNP government to abandon its grievance agenda, do a deal on new tax powers and adopt a governing agenda, so Scottish voters “can see what you’re made of”.

But the Nationalist leadership asked where was the “missing £3 billion,” the amount it claims the Treasury wants to deprive Scotland of over the next 10 years in a new financial settlement.

Labour urged the PM to “pull his finger out” and get round the table with Ms Sturgeon to hammer out a deal on the so-called fiscal framework, the mechanism to implement the proposed new tax and welfare powers for the Scottish Parliament.

During Prime Minister’s Questions, Mr Cameron was challenged on the framework by Angus Robertson, the SNP leader at Westminster, who said: “The Prime Minister made a Vow and his party signed an agreement that there would be ‘no detriment’ to Scotland with new devolution arrangements, yet the UK Treasury is proposing plans that may be detrimental towards Scotland to the tune of £3bn.

“The Prime Minister needs to tell the Treasury that time is running out on delivering a fair fiscal framework and they must agree a deal that is fair to the people of Scotland and fair to people in the rest of the UK.”

But the Conservative leader stressed that the UK Government accepted the principles of no detriment set out by the Smith Commission, whose recommendations form the basis of the new Scotland Bill.

He explained it was quite right that there should be no financial detriment to Scotland when the transfer of the new powers was made but he insisted there should also be no detriment to taxpayers in the rest of the UK.

The Herald revealed that Mr Cameron spoke to Ms Sturgeon on Monday in talks, the PM described as “good conversations”, and that he was committed to conducting the intergovernmental negotiations in a “fair and reasonable way”.

But he told Mr Robertson: “Let me remind the right honourable gentleman, if we had had full fiscal devolution with oil revenues having collapsed by 94 per cent, he and his party would be just weeks away from a financial calamity for Scotland.”

The SNP leader warned that “time is running out” on getting a deal on the framework and the Treasury had to agree a deal that was fair to Scotland and the rest of the UK.

The PM told MPs everything that had been committed to by the UK Government would be delivered and, in a direct message to Ms Sturgeon and John Swinney, said: “I would say to the Scottish First Minister and the Scottish Finance Minister, they have to recognise there must be fairness across the rest of the UK too.”

He then said: “No one is keener on agreement than me. I want the SNP here and in Holyrood to have to start making decisions. Which taxes are you going to raise? What are you going to do with benefits?

“I want to get rid of, frankly, this grievance agenda and let you get on with the governing agenda and then we can see what you’re made of.”

Later, faced with calls for Mr Cameron to get personally involved, a senior aide did not rule out the possibility, saying only: “Well, let’s just see how it goes…If there is more he can do to help, I’m sure he is willing to do that. He is hopeful progress can be made and we can get a deal on this.”

Asked about Nationalist concerns that the SNP Government said it needed up to £600m to establish a new welfare system for Scotland but had been offered just £12.5m, the aide said he was not going to get into detail. “Clearly, there’s still a gap between the two sides but we’re hopeful we can get an agreement on this.”

During Scottish Questions Labour’s Ian Murray bemoaned the length of time the talks were taking, telling MPs Andy Murray's daughter could be winning Wimbledon before Scotland's new funding settlement was agreed.

The shadow Scottish secretary pressed the Government over the details of what framework mechanism should be used.

But David Mundell said he had previously made clear that detailed negotiations would not be held in the Commons and welcomed indications from Ms Sturgeon that the SNP administration was to bring forward a revised proposal.

“We're in touching distance of striking a deal and I remain optimistic we'll do so," declared the Scottish Secretary.

Mr Murray, noting how the two governments had been providing a running commentary despite pledges not to do so, told Mr Mundell: "The Prime Minister has spent recent months shuttling around Europe trying to strike a deal on EU reform. Isn't it time he got involved and showed the same enthusiasm for striking a fair deal for Scotland on our union as he has on the European Union?"

The Secretary of State insisted the PM was committed to securing a deal and had had a “productive discussion” with the FM and they were now exchanging letters.

"But both of them are quite clear that they want to get a deal and I'm confident that with the position set out in the letter from the First Minister that the Scottish Government is actively engaging in that negotiation process, as are we, that we will be able to get that deal," he said.

Earlier, the SNP's Pete Wishart warned that those involved in the talks had to be "very careful" about the language used as they were at a crucial stage.

He took Mr Mundell to task, telling him: "You were using language like 'ludicrous' and 'chancing his arm' when it comes to one party in this negotiation; it's profoundly unhelpful.

"If you and the Scotland Office have got nothing to offer these negotiations, will you vow to stay right out of it and leave those to work to get a solution in place to try and get these negotiations fixed?"

But Mr Mundell responding by saying it was “a little odd” to take a lecture from the Perth MP on moderate language.

"But I don't think anybody can doubt my commitment to ensuring that we have a negotiated fiscal framework,” he declared.

"I'm delighted that the First Minister in her letter to the Prime Minister set out her strong commitment to achieve that agreement; that's the Prime Minister's position. As I said at the weekend both sides have done the dance, let's do the deal," added the Scottish Secretary.