Scotland's Finance Secretary says she may have to “potentially review” her tax plans amid reports the Chancellor will increase income tax in this month's Budget.
Shona Robinson said the Scottish Government had a “very limited” set of levers to respond if Rachel Reeves makes the tax decision on November 26.
The Allander Institute's Fraser has estimated that a 2p rise in income tax in the UK budget could cut Scotland's funding by £1bn due to the way the tax framework operates.
Robison has requested an urgent meeting with the Chancellor, saying Reeves should ditch his tax rules and instead make investments “to grow the economy and support people with the cost of living”.
Speaking to BBC Scotland's Sunday programme, Ms Robison said the tax framework does not take into account changes to national insurance (another tax the Chancellor is reportedly considering changing).
The tax framework governs public money coming to the Scottish Government, but Robison said the system was now in “uncharted territory” as it did not provide for simultaneous changes to both income tax and national insurance.
Ms Robinson was asked if she would increase income tax rates in Scotland in response to any income tax rise in the Chancellor's Budget.
She said: “I'm not going to lay out here today what our income tax plans are when we don't know what we're going to face on the 26th…
“If we end up in this scenario, then the levers we have will be very limited.
“Unless we are given flexibility through the fiscal framework, which would be my first request, we need to have that flexibility.
“As we do not want to increase taxes, we had already established in the fiscal strategy that we want to see that stability until the end of Parliament.
“But in the event of unforeseen exceptional circumstances, we would clearly have to review that.”
Under the devolution deal, the Scottish Government has powers to adjust income tax rates north of the border.
An HM Treasury spokesperson previously said: “Our record funding deal for Scotland will mean more than 20% more funding per head than the rest of the UK.
“We have also confirmed £8.3bn in funding for GB Energy-Nuclear and GB Energy in Aberdeen, up to £750m for a new supercomputer at the University of Edinburgh, and we are investing £452m over four years for city and growth deals across Scotland.
“All this investment is possible because our fiscal rules are not negotiable, they are the basis of the stability that supports growth.”
