DEREK Mackay has rejected Tory pleas to cut taxes for high earners.

In his third budget as finance secretary, Mackay announced that he would freeze the higher rate tax threshold and increase the basic and intermediate rate thresholds by inflation.

This, he said, would mean the bottom 56% of taxpayers in Scotland – all those earning under £26,999 – would pay less income tax in Scotland than those on the same wage living in the rest of the UK.

The finance secretary said keeping the 41p, higher rate threshold starting at £43,430 would bring in an extra £68m for the Scottish Government’s coffers.

But with Chancellor Philip Hammond's decision to increase the higher rate to £50,000 in his October budget, the change means Scots on £50,000 will pay around £1500 more in income tax than their counterparts in the rest of the UK.

The Tories said these were middle class tax hikes the SNP didn’t need to impose.

The SNP minister told MSPs that his spending plans were being delivered in the context of continuing austerity and "a UK Government careering towards Brexit at any cost”.

He warned Holyrood that if the UK crashed out of Europe without managing to secure a deal, he would need to revisit some of his spending priorities.

Key announcements included a £500m investment in expanding early learning and childcare, and more than £180m to raise attainments in schools, most of which, around £120m, would go to headteachers as part of the SNP government pupil equity fund.

He promised to increase the resource budget for the health portfolio by almost £730m, an increase of around £500m in real terms.

There was also a commitment to increase direct investment in mental health services by £27m taking overall mental health funding to £1.1bn in the next financial year.

There was also a 3% pay uplift for public sector workers earning up to £36,500. While for business there was the introduction of a below-inflation cap of 2.1% on business rate increases.

Mackay also announced extra revenue and capital funding for local government and £5bn of infrastructure investment over the coming year, including £1.7bn for transport.

He revealed new growth forecasts from the Scottish Fiscal Commission, saying the independent body had revised up previous predictions.

"The commission has revised up its forecasts of GDP growth in every year,” he told MSPs.

"They now forecast GDP in Scotland to grow 1.4% in 2018 which is faster that the growth in the UK as a whole.

"They then expect the Scottish economy to grow 1.2% in 2019, 1% in 2020 and 2021, 1.1% in 2022, 1.2% in 2023.

"However the commission highlights that Brexit is a key factor that is expected to lead to slower growth and productivity, population and trade in future years."

There was a clash over the money coming to Holyrood from Whitehall with the SNP MSP saying the Treasury had cut Scotland’s block grant, despite Philip Hammond’s recent Budget spending splurge, which resulted in new consequentials coming to Scotland under the Barnett Formula.

“The facts are these," Mackay said, "Scotland’s resource block grant will be almost £2bn lower in real terms in 2019/20 than it was 2010/11, a fall of 7%."

He added: “If this year’s Budget consequentials for investment in the NHS are excluded, which is reasonable given our commitments to pass all of these consequentials on to health, our 2019/20 resource block grant is £340m less than it was in 2018/19.”

Tory Murdo Fraser said: “It's a source of regret for us all that today’s big statement has been overshadowed by events at Westminster, I refer of course to the £950m increase in the Scottish block grant, announced by the Chancellor in his budget in October. An increase which, according to Spice, means the Finance Secretary’s total budget has not been cut by the Conservatives, but is up in real terms, nearly £1bn since 2010."

Labour’s James Kelly, told Mackay it was a “woeful SNP budget that will let the people of Scotland down”.

“Scotland has been let down by Nicola Sturgeon’s timid government and Derek Mackay’s timid budget, Scotland needs a radical budget that supports public services,” he said.

As the SNP has no majority, Mackay now needs to win over the MSPs of one of the other Holyrood parties to get the budget passed.