Kate Forbes has rejected Humza Yousaf's “insulting” offer of a demotion to serve in his Cabinet.
Insiders said the new First Minister had offered his leadership rival - whom he narrowly beat in the race to succeed Nicola Sturgeon - the role of Rural Affairs Secretary.
But the Telegraph says Ms Forbes viewed this as too much of a downgrade from her previous role as Finance Secretary - and is expected to return to Holyrood’s backbenches.
Her rejection leaves his efforts to heal the deep split in the party following the acrimonious leadership contest in disarray, with her allies angry and disillusioned by his offer.
Alex Neil, a former SNP cabinet minister who backed Ms Forbes, suggested that Mr Yousaf had sought to humiliate his former rival by offering her a lesser post. He tweeted: “An insult and not a real effort to unite. A poor start.”
Other close allies accused Mr Yousaf of trying to “trap” Ms Forbes in the rural affairs brief, as she would be forced to defend a series of green policies that she savagely attacked during the leadership campaign.
Meanwhile, Mr Yousaf said the minister who was in charge of Ms Sturgeon’s highly-divisive self-ID gender reforms would be his Deputy First Minister. He said Shona Robison, one of Ms Sturgeon’s closest allies, would fill the key post.
Deposit Return Scheme
The chief executive of Britain's biggest supermarket chain has criticised Scotland’s controversial bottle-recycling scheme, warning it risks setting back broader UK efforts to go green.
Ken Murphy, chief executive of Tesco, said the proposed system was not fit for purpose – and it risks driving up prices and undermining consumer confidence.
The Scottish scheme, scheduled to launch in August, is meant to encourage recycling by forcing buyers to pay an extra 20p deposit on single-use drinks containers, which would then be refunded when returned.
Wales, England and Northern Ireland are working on a separate joint system to encourage people to recycle more.
Mr Murphy said Scotland's race to be first meant that "the blueprint is incomplete", with confusion over how containers will be collected and what price retailers should be displaying.
Drinks manufacturers themselves would have to add that initial 20p onto every product before they are sold.
UK-wide scheme
The Tesco chief said: "It's a scheme that needs more time to get it right and when it is launched it should be a UK-wide scheme, rather than one for each of the devolved nations to implement separately.
"The UK is a single market for soft drinks. And so the scale of a UK-wide scheme seems the more logical approach."
The Telegraph says Scottish hospitality chiefs have called for the system to be scrapped as "the complexity and devastating impact of it becomes glaringly evident".
The Secretary of State for Scotland Alister Jack has said the plan will be inflationary as it will force up the price of drinks at the till.
And business leaders continue to warn that the price differential will put Scottish firms at a competitive disadvantage.