HERE is what we know about the Scotland Bill and the fiscal framework that will support it. Under the legislation, which was backed by Westminster last year, Holyrood will be handed extensive tax and welfare powers. Specifically, the Scottish Government will be able to set and retain income tax and other levies worth around £15billion and keep half of the VAT that is paid in Scotland.

Now here is what we do not know. When the new powers do transfer from Westminster, its annual block grant from Holyrood will have to be reduced accordingly – everyone is agreed on that. But how? There are a number of competing formulas that could be used, but, writing in The Herald, Anton Muscatelli, the economist and principal of the University of Glasgow, points to what he sees as the considerable risks posed to Scotland’s budget if the wrong method is chosen.

In exploring the options, Profesor Muscatelli has shown just how much Scotland would lose out if the “per capita indexation” mechanism favoured by the finance secretary John Swinney was rejected. The idea of per capita indexation is that it would protect the Scottish Budget in the likely event its population grows less quickly than England’s. Under other mechanisms put forward, Scotland would be £3.5billion - or even £7billion - worse off after a decade, with the losses only increasing in future years.

Profesor Muscatelli and other economists also agree with Mr Swinney that per capita indexation meets a key requirement of the Smith Commission (which formed the basis of the Scotland Bill) that devolution should come with “no detriment” - in other words, Scotland should be no worse off as a result of devolution. Importantly, he also insists it can be tweaked to ensure it meets another principle – that the new arrangements are fair to taxpayers in all parts of the UK. It is to be hoped the Treasury agrees.

In the face of these important principles, Mr Swinney is right to dig his heels in and demand the best deal possible because, important as the new powers are, it would be wrong to accept them at any price. However, it is just as important that a sustainable deal is found and for that to be the case, it will have to be fair to both sides.

The suspicion persists of course that Mr Swinney would be happy to kick any deal into the long grass for the simple reason that if the bill is not approved before the Scottish election, the SNP could avoid hard questions about how it would use the new powers. The Conservatives like the idea of fighting the election on reducing tax for the “squeezed middle”; Labour would like to talk about increasing tax for pay for public services. But the SNP might prefer instead that the election is dominated not by the future of Scotland’s schools and hospitals and how to pay for them, but by a row with the Treasury and yet another constitutional wrangle over devolution.

Mr Swinney’s insistence on an early deadline of February 12 and the First Minister Nicola Sturgeon’s increasingly combative rhetoric on the fiscal framework have done nothing to dispel these suspicions, but would they really be happier not to reach a deal than to reach one - at least for now? The hope is that the Scottish Government will put the interests of a good devolution settlement above shorter term tactical considerations. Both sides have a duty to keep talking and to explore every avenue in their search for a mutually acceptable deal.