JOHN Swinney has been warned by his expert budget advisers not to ramp up taxes on the better-off despite real terms cuts to services looking “very likely”.

Instead, the group urged “caution in tax policy responses” in case hikes led to “tax-induced migration between Scotland and England, particularly of top-rate taxpayers”.

The experts also said it was “imperative” that the Scottish Government continued to focus on ways to improve productivity and growth to help the economy in the long-term. 

It followed an emergency review of Scottish Government spending in light of the UK Government’s disastrous mini-budget in September as well as double-digit inflation.

The Deputy First Minister created an expert panel of three economists - Professor Sir Anton Muscatelli, Professor Frances Ruane and Dr Mike Brewer - to consider the implications for Holyrood’s budget and Scottish tax and spending policy.

Mr Swinney today announced an extra £615million of cuts to the 2022/23 budget to help pay for inflation-driven public sector pay rises, on top of £560m announced in September.

He said he would leave any tax changes until next year's budget, after the UK Government’s autumn statement on November 17.

He said: “We now also, once again, face the prospect of tax changes from the UK Government. 

“It is only right then that we take appropriate time and care to consider any impacts on our Budget and devolved tax policies, so I will wait until after the UK Government’s next fiscal statement before deciding on the content of any tax discussion paper.”

In Scotland, earnings over £150,000 attract income tax of 46p in the pound, while in England and Wales it is 45p.

Middle earners are taxed at 41p above £43,662 in Scotland, and at 40p above the higher threshold of £50,270 south of the border.

Labour has repeatedly urged the Scottish Government to raise taxes on top earners more.

But the expert group warned against making major changes amid so much uncertainty.

“Not knowing the extent of any future changes in public expenditure at the UK level makes planning for public services and tax choices in Scotland near impossible,” it said.

The group said that with pressure on spending made worse by inflation the Government would need to consider how much it would offset cuts with higher taxes, which in turn affected Scotland’s “relative competitiveness”.

It went on: "The recent UK Government policy announcements have again underlined the risk of behavioural responses from different tax regimes across the UK. 

“The Scottish Government must consider, in any tax changes, whether it also creates risks of tax competition, and possible tax-induced migration between Scotland and England, particularly of top-rate taxpayers.

“Behavioural changes may take several years to realise their full effect on behaviour, if the tax change is marginal. The interconnectedness of UK and Scottish tax changes through the fiscal framework, the uncertainty relating to the UK position as well as the potential time lag on behavioural change, lead us to call for caution in tax policy responses.”

The experts also said ministers must provide “clear and consistent policy” to give certainty to households and businesses so they could make informed spending decisions.