Nicola Sturgeon defended the SNP's tax policy during a lively First Minister's Questions after it was revealed that middle earners in Scotland could face a higher tax rate. 

Derek Mackay said he would not raise the Scottish threshold to the English level in 2019/20, and Wednesday’s draft Budget was not the time to give tax breaks to higher earners.

Speaking at FMQs, Jackson Carlaw said the cost of the SNP relying on the Greens to pass their budget next week would be a "brand new tax on householders across Scotland".

READ MORE: SNP to consider further tax hikes for middle earners in Scotland 

He asked: "So will the First Minister make clear today, there will be no new tax on homes of hard-pressed ordinary Scots?"

He also criticised business rates in Scotland, saying they were "crippling" some businesses and the "crass indifference" of the First Minister was leading to closures.

He added: "The First Minister's budget is now going up. She has the money to spend. The fact is no further tax rises are necessary. The Scottish Government has the cash.

"Isn't the right choice this year to commit to no further increases on Scottish taxpayers?"

The First Minister said: "If we had followed Tory tax suggestions in this year's budget, we would have £550 million less to invest in public services.

"If we were to follow what [Jackson Carlaw] appears to be suggesting for next year, that would remove hundreds of millions of pounds more.

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"He hasn't said yet today where he thinks we should take that from.

"Is it the National Health Service? Is it frontline local government budgets? Is it the education budget? We don't know because the Tories refuse to tell us."

She added: "The Tories' tax policy and Tory spending policies are not credible, but then we're in a position where the Tories generally are no longer credible."

Ms Sturgeon said the Finance Secretary would set out a budget next week which would be fair for both taxpayers and businesses.