However, the Scottish Labour leader said he did not think the SNP should use the single largest revenue raising power available to them – raising income tax – to provide more cash to help tackle the problem.
It comes as Mr Sarwar is set to today announce Labour proposals for “emergency legislation” in Scotland to tackle the cost-of-living crisis.
Speaking to The Scotsman at a visit to the Fife Renewable Innovation Centre, the Glasgow MSP defended the decision of his party’s council leaders to reject a 5 per cent pay offer to council workers tabled by the SNP.
Trade unions on Monday rejected the “paltry” 3.5 per cent pay offer from Cosla and proposed by Labour, accusing politicians of the “pathetic spectacle” of both the council representative body and the Scottish Government “politicking”.
Edinburgh will be the first city affected by strike action when waste workers begin their strike tomorrow. The action is planned to last until August 30.
Other waste and recycling workers across Scotland will walk out between August 26 and 29 as well as between September 7 and 10.
Explaining the decision of Labour council leaders to reject a 5 per cent pay lift for council workers, Mr Sarwar said it was so trade unions could be consulted to find an agreeable pay settlement.
“The challenge you have is at the moment you see council budgets being slashed by the Government,” he said.
"The Government have committed to put £140 million more to local authorities, having already cut hundreds of millions out of their budget to say this can help with a pay settlement.
"But to be honest, £140m won’t cut it if we are going to give a fair pay settlement.
"The more credible thing would be for council leaders, regardless of their political affiliation, demanding of the Scottish Government even greater financial support so we can give a pay rise that council workers deserve.”
Mr Sarwar ruled out any support for prospective tax rises, which could help pay for increased cost-of-living help or future council funding. But he called for increased funding for councils from the Government rather than further demands to cut services.
A penny increase across all income tax bands in Scotland would raise more than £460m, enough for a 5 per cent uplift in council pay for the 2023/24 financial year.
However, such a plan was rejected by Mr Sarwar.
"I don’t think an income tax rise right now and at a time when household budgets are squeezed [is the right move],” he said. “I think we should be looking at the money we have available to us.
"I think the politicking and political games is coming from others.
When pressed on the fact income tax is the main revenue generating tax available to the Scottish Government, Mr Sarwar said that was why Labour was calling for emergency legislation such as a freeze on energy bills and for a “proper” windfall tax that would tighten the rules around reinvestment of profits.
He said: “My request to the Scottish Government would be is that you have more credibility in demanding more from the UK Government if you’re doing everything you can as a Scottish Government.”
Pressed on the claim from the Scottish Government there was no more money available for opposition spending demands, Mr Sarwar said it was time for a full budget review and a serious approach to financial waste.
He said it would be possible to bring down bills through measures such as a rent freeze or through using public ownership of the railway to bring down commuting cost.
More details of Labour’s plans will be announced at a press event today.
The MSP also accused the Scottish Government of “hiding money” through “creative accounting”, which could be found when it is politically convenient.
Mr Sarwar said: “I know they are going to say that, but I think history is the best judge of this where the Scottish Government always managed to magic up the money when it suits them and it is politically convenient for them, but then often accuse opposition parties of saying you haven’t come up with proposals of where this money comes from.
"We know that this is a Government that’s got a record of playing fast and loose with the public finances, of finding ways to do creative accounting to hide money so they’re then able to offer money in other parts.
"Let’s have a genuine budget review, let’s find where the waste is coming from in this Government. Let’s find that missing cash that finance secretaries now repeatedly have had to do dirty deals with the Greens.
"Let’s instead have transparency about where that money exists and let’s use it right now to support people through the cost-of-living crisis.”
A Scottish Government spokesperson said: “The Scottish Government have already taken a range of actions unmatched anywhere else in the UK to help households cope with financial pressures, but most of the key policy levers needed to address the crisis still lie with the UK Government.
“The Scottish Government has allocated almost £3 billion in this financial year that will help households face the increased cost of living, including the provision of services and financial support not available elsewhere in the UK. Every single penny that the Scottish Government has been allocated for cost-of-living measures will go on cost-of-living measures.
“The Scottish Government will continue to press the UK Government to use all the levers at its disposal to tackle this emergency on the scale required. These include access to borrowing, providing benefits and support to households, VAT on fuel, taxation of windfall profits and regulation of the energy market.”