The SNP budget proposal to increase council tax by 2.4 per cent and allocate £250,000 of extra funding to the Scottish Welfare Fund passed instead due to the casting vote of Provost Peter Smaill.
The Conservative proposals, which included a council tax freeze, were also rejected.
Midlothian Council leader Derek Milligan told the council meeting on Tuesday: “The cabinet secretary for finance and economy has stated that she does not expect inflation busting Council Tax increases, and our amendment recognises that expectation by keeping our recommendation for the increase in council tax below the current rate of inflation.
“Keep in mind the new administration is already starting with a £12 million black hole for next year and inflation is running at 4.8-5 per cent . This amount keeps us below this figure. It is about £1.27 a week in council tax rises.”
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However, furious SNP Councillor Kelly Parry attacked Labour.
She said: “It’s an absolute failure of responsibility of the Labour Party to try and increase council tax bills by almost five per cent during a cost of living crisis.
"It’s clear that they are out of touch with the pressures Midlothian residents are under and they are not fit to lead Midlothian.
“They should now stand aside and resign as the administration and let SNP Councillors carry on with doing a better job.”
Urging councillors at the meeting to back a zero per cent increase for the Conservative group, Councillor Andrew Hardie said: “We have to acknowledge to situation many people in Midlothian find themselves in. We have some wages not keeping up pace with inflation and the average shopping bill.”
Councillors were asked to vote for either the SNP or Conservative motion with the winning amendment then put forward against the Labour administration proposal.
The SNP amendment won by seven votes to five with Labour councillors abstaining.
When the SNP motion for a smaller increase went head to head with the Labour administration’s plans the vote was split by nine votes to nine with three Conservative councillors, including Councillor Hardie who proposed the council tax freeze, backing the 4.7 per cent administration increase.
Provost Peter Smaill (Cons) who chaired the meeting had the deciding vote and gave it to the SNP group’s 2.38 per cent increase which will now be introduced.
It will mean Band D council tax will rise from £1,409 to £1,442.60.