Humza Yousaf is expected to escape a rebellion over his first budget despite opposition among some SNP MSPs to the prospect that it may propose income tax increases for higher earners.

Reports at the end of last week suggested the First Minister could see his financial plans rejected by some in his party’s group at Holyrood.

However, sources have told the Herald on Sunday they believe a full-scale revolt is unlikely when the legislation comes before parliament, with the first parliamentary vote expected in February.

They maintain a rebellion over the budget would be high stakes for any SNP MSP.

READ MORE: SNP backbencher: Scrap council tax before income tax hike

Individually party MSPs who fail to back the government could be suspended from for a lengthy period while collectively they could risk collapsing their own government which could struggle to survive if its tax and spending proposals are not approved by parliament.

Some insiders believe the criticisms being raised by backbenchers about the possibility of hiking income tax on people earning over £75,000 are part of efforts to get the government to back down on its plans.

“To express concerns is one thing but to actually vote against the budget is another thing,” said one source.

“It would mean sanctions and discipline and most people are keen to avoid that. But if a budget falls the government basically falls with it.”

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It was put to the source that what was going on behind the scenes was intense lobbying of the government by some on the backbenches, they said: “I think that is what’s happening to some extent.” 

Another source echoed this viewpoint.

“Voting against the government on the budget is a big deal,” they said.

“I would be very very surprised if there is a co-ordinated rebellion on this. People are commenting on something they think is a bad idea. But I don’t think it is something they would resign over.”

READ MORE: High earners facing new tax hike in Holyrood's toughest budget

The budget is due to be unveiled by Deputy First Minister and finance secretary Shona Robison on Tuesday with mounting speculation the government will introduce a new band for people earning between £75,000 and £125,140 in a bid to plug a £1.5 billion shortfall in the government’s finances.

Some SNP MSPs last week voiced opposition to the planned introduction of a new tax band, which they believe will create a perception that the country is “not open for investment” and could deter business people and other higher earners - including much needed doctors - to move to Scotland.

In one of his first speeches as First Minister, Mr Yousaf backed targeting workers who earn more than £75,000.

Higher earners would be taxed 45 per cent on earnings up to £125,140, according to a proposal by the Scottish Trades Union Congress as a way to raise additional revenue, which the First Minister has expressed interest in.

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Research commissioned by the trade union group suggested this could raise £200 million a year with someone earning £100,000 in Scotland paying £3,600  year more income tax than in England.

However, analysis by the Fraser of Allander Institute (FAI), a University of Strathclyde research unit, found adding an additional income tax band for higher earners would be “nowhere near sufficient” to balance the books in the coming financial year.

It estimated the actual figure would be £41million once “behavioural responses”, such as people declining extra work to avoid paying it, were factored in.

Critics of the policy include Kate Forbes, the former finance secretary, Michelle Thomson, the Falkirk East MSP, and Fergus Ewing, the former rural affairs secretary.

A report in The Times last week said the Cabinet was split over the possibility of a new rate for high earners.

Sources told the Herald on Sunday the government may yet back down on the plan pointing to growing opposition among business leaders.

Sir Tom Hunter yesterday became the latest high-profile figure to criticise the proposals.

“Let’s grow the tax take not the tax rate,” he told The Times.

He praised Mr Yousaf’s approach to business leaders as compared with previous administrations, but said that warm words were not enough. He said: “Yes, this First Minister is listening to business more than the last first minister [Nicola Sturgeon] — he could not do any worse, frankly — but I always judge people on their actions, not their words.”

Mr Hunter also expressed concern about “waste” in public spending across the budget of almost £60 billion. He cited failures such as the collapse of the deposit return scheme, through which the state-backed Scottish National Investment Bank is expected to lose £9 million, and the bill of more than £300 million for two ferries built by the nationalised Ferguson shipyard.

It would take six SNP MSPs to rebel over the tax band for the budget to fail  even with the support of the Scottish Greens, who have entered into a coalition deal with the SNP. A key reason Ms Sturgeon brought the Greens into government was to ensure she had a Holyrood majority that would mean significant votes almost always passed.

Divergence between Holyrood and Westminster on income tax means anyone on about £28,000 already pays more in Scotland than if they lived south of the border. Someone in Scotland on a salary of £50,000 pays about £1,550 more in income tax.

Ms Forbes, who was finance secretary for three years, moved to the backbenches after she lost the party’s leadership contest to Mr Yousaf earlier this year.

She warned that many employers were already finding it difficult to attract workers and adding to the tax burden was unlikely to improve the job market.

“The issue is not just people choosing to move elsewhere, the issue is whether they choose to come in the first place,” she said. “Scotland is facing a massive demographic challenge. What an opportunity if Scotland could attract lots of people in that working-age bracket who would contribute and pay their taxes here.

“If we expanded the tax base like that, we could see public revenues significantly increase. But to do that you need to attract people in the first place. And that’s why you have to get income tax rates and bands just right.”

Ms Thomson echoed Ms Forbes’ complaint insisting the new tax band ran the risk of “introducing more complexity, at odds with the principles around tax that the Scottish Government set out, as well as creating the perception that Scotland is not open for investment”.

Mr Ewing said that workers may move to England to avoid paying thousands more to the government. “Newly qualified doctors, for example, at the start of their career, may simply choose to leave Scotland and earn much more in England to help look after their families,” he said.

Writing in the Record yesterday, senior SNP MSP Ivan McKee said the Scottish Government should focus on replacing council tax rather than increasing income tax.

Former business minister Mr McKee said it is time to scrap the “unfair” council tax in favour of a more progressive property charge.

Meanwhile, on Friday, the Fraser of Allander Institute's pre-budget report estimated that ministers face an £800 million gap on day-to-day resource spending for 2024/25 and about £700 million on capital investment plans.

Mairi Spowage, the FAI director, said significant spending cuts would likely be needed. “This large funding gap will mean difficult choices for the Scottish Government on what to prioritise,” she said.

“In a devolved context, this gap cannot be allowed to manifest in practice, so steps will need to be taken to address it.

“Of course, the Deputy First Minister may choose to use powers over income tax to raise more revenue to plug this gap but it is unlikely that this would be sufficient in isolation.”

The Scottish Government is having to fund public sector pay deals that cost more than previous estimates and greater social security spending, as well as flagship policies such as the council tax freeze and a pledge to allocate £100 million to tackle NHS waiting lists.

However, while some SNP MSPs and business leaders are opposed to the tax rises for higher earners, polls on previous rises suggest the move could be popular among the wider population.

A YouGov survey in 2018 found that 54% backed the Scottish Government proposals which included increases for higher earners, while 30% said they thought they would be "unfair".

A Scottish Government spokesman said: “The budget will be set out on Tuesday by the Deputy First Minister.

“She has been very clear Scotland is facing one of the most challenging budget settlements since devolution because of sustained high inflation and a UK government autumn statement that failed to deliver the investment needed in Scotland’s public services.

“We are proud that Scotland already has the most progressive income tax system in the UK, protecting those who earn less and asking those who earn more to contribute more. This in turn allows us to provide a more comprehensive set of services than in the rest of the UK.”