DEREK Mackay has been urged to use £350m in Budget spin-offs to reverse plans to make high earners in Scotland pay more income tax than those in England and Wales.

However the SNP Finance Secretary also faced calls from business leaders to invest the Barnett consequentials in infrastructure projects, house building, and supporting the economy.

Philip Hammond confirmed higher spending on social care and education south of the border would mean an extra £260m of revenue and £90m of capital funding for Holyrood by 2020-21.

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An extra £145m is due in April, £107m in 2018/19, £75m in 2019/20, and £23m in 2020/21.

The money is on top of £820m of Barnett consequentials over the current parliament which the Chancellor announced in his autumn statement arising from infrastructure projects.

He said: “Benefitting from £350m of extra investment, the Scottish government can take further steps to strengthen Scotland’s economy and make sure that Scottish people, of all background and no matter where they live, feel the benefits of economic growth.”

Scottish Secretary David Mundell said the extra £1bn announced for Holyrood over the past year would let MSPs “make the right decisions to grow Scotland’s economy”.

However the Tories at Holyrood had a very specific proposal for Mr Mackay - scrap the budget deal he struck last month with the Greens to keep the 40p income tax threshold at £43,000.

South of the border this rises to £45,000 in 2017/18, meaning Scots earning more than £45,000 will pay £400 income tax more than their southern counterparts.

A cross-border mismatch on national insurance also means Scots earning between £43,000 and £45,000 pay a marginal tax rate of 52p, against 42p in England.

Tory finance spokesman Murdo Fraser said: “The SNP’s double dose of local government cuts and income tax changes to penalise middle-earners is now utterly without justification.

“With even more spending power now at its disposal, a competent government could give taxpayers a break and find the cash to support social care and schools across Scotland.”

Tory leader Ruth Davidson added: “We simply do not need to send out the message that higher taxes are necessary in Scotland. I urge the SNP to think again.”

Mr Mackay said the extra £350m was dwarfed by £2.9bn of Westminster cuts over 10 years.

He accused Mr Hammond of failing to explain how he would steady the economy in light of Brexit and for failing to alleviate welfare cuts on the most vulnerable in society.

He said: “The Chancellor has confirmed a real terms cut to the Scottish budget of 9.2 per cent between 2010/11 and 2019/20. While I welcome the additional Barnett consequentials, no one should think that this budget provides an end to austerity from the UK Government – in fact there is still a further £3.5 billion of cuts to come.”

Scottish Labour leader Kezia Dugdale said the Budget would continue the squeeze on living standards, hurt struggling families, and maintain cuts to public services.

She said: “The Chancellor could have brought an end to seven years of damaging Tory austerity, but instead he doubled down by imposing cuts to public services and welfare. “Despite the £350m extra for the Scottish Government, the reality is that by the end of this decade up to £1bn will have been cut from Holyrood’s budget – cuts the SNP chooses to meekly pass on to families here in Scotland.”

Green MSP Patrick Harvie added: “The £350m coming to the Scottish Government is a drop in the ocean after years of cuts, but it’s vital that Scottish Ministers use this cash to invest in the kind of physical and social infrastructure we really need.

“We could go further than the Living Wage for social care staff to recognise their vital role; we could invest in energy efficient housing to cut fuel poverty; and we could create local energy companies to harness the benefits of renewables for the public."

Liz Cameron, chief executive of the Scottish Chambers of Commerce, said the £350m represented a “major opportunity” to help grow the Scottish economy, however although a critic of the SNP-Green income tax changes, she did not call for them to be reversed.

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She said: “This additional funding needs to be invested wisely. The Scottish Government could use some resources to support businesses in the social care sector [and] developing and upskilling existing employees, particularly those over 25, to help fill the major skills gaps.

“We must also develop the skills of our unemployed and underemployed and ensure these talents can make an effective contribution in areas such as digital, engineering, and others.”

STUC General Secretary Grahame Smith said the Barnett consequentials were “as but a drop in the ocean compared with the serial real terms cuts to the Scottish block grant”.

Scottish Retail Consortium director David Lonsdale said the £350m should go into “physical and digital infrastructure and ensuring Scotland is a competitive place to do business”.

Gail Hunter, director of the Royal Institution of Chartered Surveyors in Scotland, said the £350m should be used to “bring forward vital infrastructure projects and make inroads into its target of 50,000 affordable homes by the end of this parliament”.