The lack of comprehensive financial powers for the Scottish parliament is a "fatal flaw" in the devolution settlement, John Swinney has said.

The SNP leader claimed that the parliament lacks the flexibility to respond effectively to changes in the global marketplace.

Pointing to higher education as one example, he said that while top-up fees would raise extra money for English universities, their Scottish counterparts would lag behind.

Swinney said that most members of the Holyrood parliament would reject top-up fees while wishing to protect the competitive edge of Scots universities.

"But that majority on policy and intent count for nothing if this parliament lacks the financial muscle to put that policy and that intent into practice," he said.

"When decisions are taken in Westminster - or Brussels or Washington - that impact on Scotland, we must have the means to respond.

"We cannot say leave it for someone else to sort it out."

In a debate in the Scottish parliament, Swinney said that the devolved executive "has little or no power" to expand its tax base by growing the economy.

"To do that we need full economic powers," he told MSPs.

"Powers such as the ability to vary business taxes and incentives, such as corporation tax and research and development credits."

The SNP chief said that cuts to other business taxes would "counter the huge gravitational pull of London which sucks in Scottish jobs and investment".

"We want control over business taxation to give our wealth creators a competitive edge," he said.

"We want control over personal taxation to restore fairness and the progressive principle to the tax system."

Swinney pointed to the example of other smaller countries such as Norway, Ireland and Switzerland as examples of what could be achieved.

"Despite the appalling publicity which has sometimes engulfed this parliament since 1999 the people still want this parliament to have more influence over their lives than Westminster," he said.

"But they know that today that is not the case.

"Let's display the self-confidence in ourselves that we all say we want to instil in the people and take on the powers to meet the people's ambitions."