John Swinney is preparing a revised devolution funding deal he thinks UK ministers will be unable to reject without slashing Scotland’s budget.
The Scottish Government has set a target of Friday to agree the fiscal framework, which will underpin the Scotland Bill currently going through the House of Commons, and the new proposals will be put on the table this week.
Treasury ministers offered a package on Monday night which they claim will leave Scotland better off than it is under the current monetary arrangement.
With talks on a knife edge, Greg Hands, the Chief Secretary to the Treasury, made his way to Edinburgh for a ninth negotiation session with Scotland’s Deputy First Minister.
The start of the proceedings was delayed as Storm Imogen battered the south of England and hindered the UK minister’s travel plans.
Disputes have arisen about the funding formula which will underpin the shifting of new powers over tax and welfare and the meaning of “no detriment” in the cross-party Smith Commission agreement,
Treasury sources argued neither Scotland nor the UK should be forever protected from the consequence of any bad decisions they make, adding their latest offer deliver more funding for the Scottish Government than the current Barnett formula.
Mr Hands said: “I think we need to get a deal that is fair to tax payers in Scotland and fair to tax payers across the UK.
“That is one of the key considerations of the Smith agreement – tax payer fairness – and we need to make sure we can get a deal that both governments can sell to their parliaments as well.”
A UK Government spokesman added they were at the “business end of negotiations”.
And sources at the top of the Scottish Government told The Courier Holyrood ministers were now poised to return to the table with a fresh counter proposal.
The economist Profesor Anton Muscatelli has claimed the block grant could be cut by up to £7 billion if certain calculations are used.
SNP strategists think they now have a version of their preferred system which satisfies all the criteria put forward by the Treasury and cannot be rejected without giving Holyrood’s budget a “year on year hammering”.
Mr Swinney said: “The Scottish Government will put forward new proposals in light of today’s discussion which will be rooted in the Smith Commission and ensure that neither Scotland, nor the UK, will be better or worse off as a consequence of the devolution of new powers.
“I am determined to get an agreement but only one that is fair to Scotland.”
Scottish ministers’ appetite for an agreement to be concluded quickly centres around the ability of Holyrood to scrutinise it before parliament dissolves next month for May’s election.