But the SNP government was accused of imposing “austerity on stilts” on Scotland as part of the 2016-17 budget agreed by MSPs last night, which will see about £350 million of cuts to councils and an estimated 15,000 jobs losses.
The 1p tax rise proposed by Labour was backed by the Liberal Democrats but MSPs voted 81-43 against the controversial measure yesterday.
Unions and council chiefs staged a demonstration outside Holyrood over the scale of the reductions to local spending in the budget, which will also see the council tax freeze maintained.
Mr Swinney insisted Labour’s proposed tax hike aimed at tackling the impact of the cuts would hit the “lowest paid people in society” as the SNP joined the Conservatives in voting down the plan.
The finance secretary said: “I want to say to the teachers and the public service workers the length and breadth of this country who have had to endure pay constraints because of the austerity programme of the United Kingdom government that I value the sacrifice they have made.
“The last thing I am going to do is put up their taxes.”
Mr Swinney told MSPs the SNP is determined to protect workers’ incomes and not “punish them” with a tax rise.
He said the lowest paid workers would be hit by the 1p tax rise using the new Scottish Rate of Income Tax (SRIT), which comes into effect in April. But Labour has said that workers earning less than £20,000 would receive a £100 rebate.
Mr Swinney warned that unless local authorities agree to the deal on the table – which includes the council tax freeze, maintaining teacher numbers in line with school rolls and merging health and social care – they will lose out on their share of £408 million of funding. Councils have until Tuesday to sign up to the deal.
Jackie Baillie, Labour’s spokeswoman for public services and wealth creation, said the Mr Swinney had chosen to pass on UK government austerity rather than break from it in an “austerity budget”.
She said: “Make no mistake, the big losers in John Swinney’s budget are local communities, local schools and the local public services that people value.
“The budget cut to local government is hundreds of millions of pounds. That is austerity on stilts and it is John Swinney’s choice to do that.”
Lib Dem leader Willie Rennie added: “The people of Scotland will know that his refusal to act means that every single cut to public services in Scotland is a John Swinney cut.”
Prime Minister David Cameron waded into the row, claiming Labour’s “great plan” is higher taxes for Scots to fund more welfare.
As he clashed at Prime Minister’s Questions with Labour leader Jeremy Corbyn over NHS services south of the Border, Mr Cameron said: “What Labour’s great plan is now emerging. It wants to cut the NHS in Wales and put up income tax on hardworking people in Scotland.
“That is right. What are Labour going to do to radiographers in Scotland? Put up their taxes. What are they going to do nurses in Scotland? Put up their taxes. What are they going to do to dentists in Scotland? Put up their taxes.
“We now know Labour’s plan: higher taxes for more welfare. They have learned nothing in the last decade.”