NICOLA STURGEON threatened yesterday to reject further powers being devolved to Scotland if they don’t come with a “fair” funding deal.

The First Minister (below) warned that the British Treasury could attempt to “penalise” the nation by cutting its budget under plans to devolve powers over tax and welfare to the Scottish government.

The Scotland Bill going through Westminster, drawn up in the wake of last year’s independence referendum, proposes giving Holyrood the power to set thresholds and income tax rates as well as retaining the cash raised.

But, as a result, the annual block grant that the Scottish government receives from Westminster will be reduced.

Ms Sturgeon feared this could see an attempt by Westminster to cut the grant by a greater amount than Scottish ministers could hope to raise.

Talks between the two governments over the funding arrangements are currently under way, the SNP leader said as she outlined her plans for the coming year.

She added that she hoped the Scottish Parliament would be able to give its consent to the legislation by next March, but insisted: “Let me make clear that we will only recommend consent if the accompanying fiscal framework is also fair to Scotland.

“As we get responsibility over tax, then our block grant is reduced by a commensurate amount. But the devil is in the detail of that discussion.

“What I’m saying is if the Treasury — and the Treasury is wont to try to do this sometimes — tries to penalise us by taking away more in our block grant than is reasonable to expect us to raise through the taxes we’re getting, then that would be unfair.”