Jim Murphy claimed there was a “vast, vast, vast amount of waste” inside Scotland’s public sector bodies and that a “transformation” in service provision was needed.

In an exclusive interview with The Herald, the Labour MP issued his starkest warning yet about Scotland’s dependence on the public sector.

Asked if it was inevitable that money would be much tighter in Scotland in the next few years, Mr Murphy replied bluntly: “Alex Salmond’s Government is going to have to go on a bit of a diet.”

He added: “There’s going to be less money around and people have got to make it work harder. That means politicians of all parties have got to make it work harder. In terms of the size of the Scottish budget, we haven’t seen the size of the British budget yet.”

According to the Treasury, Scotland’s annual block grant is due to shrink from £29.6 billion this year to £29.3bn in 2010/11. Some £350 million in capital spending was brought forward from next year’s allocation to combat the recession.

Last week, a report by the Centre For Public Policy In The Regions predicted the Scottish Government budget would suffer an after-inflation annual cut of more than 3% for the three years up to 2013/14. This has already seen Glasgow announce 600 job losses and £60m savings.

The prospect of rolling cuts in Scotland’s budget as a consequence of the Chancellor’s determined bid to reduce Britain’s ballooning deficit will further raise SNP hackles.

In his autumn budget, the spending priorities set out by John Swinney, the Scottish Finance Secretary, caused a major row, not least over the axing of the £395m Glasgow Airport Rail Link.

Mr Swinney argued that this year the money available to him in Scotland’s assigned budget fell by just under 1% in real terms.

While the UK Government’s spending figures only go as far as next year, Alistair Darling last week made clear he aims to publish internal ­estimates showing how deep the departmental spending cuts will have to be over the next few years to meet the Government’s intention of halving the deficit, which over the next five years will total £700bn.

In his interview with The Herald, Mr Murphy also:

 

accepted there would be a referendum on Scottish independence in the “next however many years”;

 

 

asserted that having different tax rates north and south of the Border can be a product of devolution;

 

 

signalled a commitment to ending anti-Catholic laws would be in Labour’s manifesto.

 

As a weekend poll gave David Cameron’s Conservatives a 17-point lead over Labour, the Scottish Secretary gave short shrift to colleagues who have already given up the next election as a lost cause.

“They’re wrong,” he declared. “They should get their chin off their chest and fight for what they believe in.”

Mr Murphy added: “If you think we’re finished, you think we’ve lost, go do something else. Do the Labour Party and do the country a favour.”