Alex Salmond says he will quit and seek fresh Holyrood elections if he does not win today's knife-edge vote on the SNP government's Budget.

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Alex Salmond says he will quit and seek fresh Holyrood elections if he does not win today's knife-edge vote on the SNP government's Budget.

The First Minister challenged his opponents not to vote down the spending plans, knowing that Labour, in particular, is poorly positioned to fight a campaign and could be punished at the polls for being seen to force an election.

A source close to Mr Salmond said last night that if MSPs cannot agree the plans, it should be for the people to decide on them. He signalled that an election campaign would feature the SNP's populist call for a council tax freeze while warning that Budget defeat would deprive them of £144m from April.

"There are serious implications if Parliament were not to support the Budget," he said. "We're at the heart of minority government here. Opposition parties have decisions to make - very major decisions with very major consequences and that's true for every group in the parliament.

"If parliament doesn't want the Budget, it would be appropriate for the issues to be taken to the people."

Unlike Westminster, the head of government cannot simply call for a dissolution. Mr Salmond would have to get a two-thirds majority for dissolving the parliament, or there would be a dissolution if his opponents failed to form an administration within 28 days. He also has the alternative, if the Budget is defeated, of bringing back an amended spending plan as an emergency measure.

Last night one senior Labour MP branded the First Minister's ultimatum as "grandstanding", claiming his threat to quit was only made in the full knowledge that sufficient support for the Budget plans had already been gained from Opposition groups.

Tom Harris, Glasgow South MP, told The Herald: "This is cynical grandstanding by Alex Salmond. He's already done a deal with the Tories, it is all just an empty threat."

However, the SNP government claimed discussions on the support of Conservatives, Greens and independent MSP Margo MacDonald were "ongoing". But the SNP, with 47 votes, is confident that it can count on their support to reach the minimum 65 votes it needs for a majority.

Part of the deal-making process was an exchange of letters yesterday in which the SNP's junior justice minister, Fergus Ewing, spelled out to Tory justice spokesman Bill Aitken how he intends to meet the Conservative demands on drugs policy.

Conservatives have also used their 16-MSP leverage for more spending to recruit 500 more police by 2011, and await an announcement today from Finance Secretary John Swinney, which is expected to meet the third demand of accelerating the introduction of a small businesses' rates relief scheme.

The two Green MSPs are also holding out for a further concession this afternoon. They have told Mr Swinney they want an increase in the £57m bus subsidy budget, which current SNP plans would cut in cash terms.

Mr Swinney was last night keeping his final concessions to a three-hour debate this afternoon. Tories and Greens say they are leaving it until they hear the wording of his speech to decide if they will back him, while Labour, which has opposed the Budget up to now, refused to comment on the election brinkmanship.

In London, Labour's Holyrood leader, Wendy Alexander, told the Scottish Trades Union Congress that the SNP Budget would fail vulnerable people.

But with the Electoral Commission expected to decide at its meeting today how to handle the results of an investigation into an illegal donation to her leadership campaign, her attempts to win support for party and policy reforms have been overshadowed by doubts on whether she can hang on to the leadership.