TREASURY Chief Greg Hands has dug his heels in on the tax powers talks, rejecting a suggested compromise from MPs and sticking to the UK Government’s offer, which it says would benefit Scotland by £4.5 billion but which the SNP Government insists would cost it £3bn.

Earlier this week, the Commons Scottish Affairs Committee endorsed the option preferred by Deputy First Minister John Swinney - so-called per capita indexed deduction – as the basis for the fiscal framework, the mechanism by which Holyrood’s new tax powers will be introduced.

But the committee suggested an “additional adjustment” ie a cap could be introduced to ensure fairness and that Scotland’s per capita funding did “not increase beyond a certain point relative to the rest of the UK”.

However, in his response to the committee’s report, Mr Hands rejected this suggestion, saying it would run “counter to the aim of devolving tax powers”.

The Chief Secretary has backed a tweaked version of his preferred option – so-called levels funding – which he believes is fair to Scottish and UK taxpayers and abides by the ‘no detriment’ principle.

Under this option, in future years Scottish taxpayers would benefit from changes to devolved taxes and UK taxpayers would benefit from changes to their equivalent taxes. This, argued Mr Hands, would produce a “fair and symmetric” system, which, he suggested Nicola Sturgeon said she too wanted.

But the First Minister has claimed the Treasury has been embarked on a campaign of misinformation and that it appeared intent on embedding a systemic cut on Scotland’s finances, which was unacceptable.

Meantime, Mr Swinney made a "further offer", which he said addressed the UK Government's concerns over fairness to taxpayers across the rest of the UK and meant they would “not lose a single penny under these plans”. The details of the offer have not been made public.