DELAYING moves to put Holyrood in charge of all Scotland's tax and spending decisions would not spare the country from higher borrowing or cuts, a leading think tank has warned.

 

The independent group said the country's finances would remain in a weaker position for the foreseeable future under the SNP's plans for full fiscal autonomy.

According to the Fiscal Affairs Scotland, full fiscal autonomy would leave the country £8billion worse off this year, rising to £8.8billion in 2020, as oil revenues are forecast to remain at historically low levels.

The figure is equivalent to £1600 per head.

Nationalist leaders have suggested the policy would be introduced after a transition period of several years, but FAS economist John McLaren said the country could still face painful economic decisions.

Labour stepped up its attacks on the SNP's key election demand, which would make the Scottish Government reliant solely on taxes raised in Scotland to meet its spending commitments.

During Wednesday's televised election debate, SNP leader Nicola Sturgeon pledged that her MPs would press for the policy, sometimes called devo max, as early as next year, despite figures from the Institute for Fiscal Studies think tank showing that ending UK-wide funding arrangements would leave Scotland £7.6billion billion worse off this year than under the present UK-wide funding arrangements.

Mr McLaren said full fiscal autonomy could be introduced in two years.

He said the Scottish Government would be able to borrow in the short term to plug the gap.

But he added: "The only way to overcome the gap in the long run is to have a faster growing economy.

"But it's difficult to know how to do that and there is no evidence that Scotland's economy would be growing faster."

The SNP insists it would be able to boost the economy with greater fiscal powers at its disposal.

However, in one of her first moves as First Minister, Ms Sturgeon ditched the Scottish Government's commitment to a 3p across-the-board cut in corporation tax, which had been at the heart of its plan to boost the economy in the event of Scots voting for independence.

Scotland's finances have been hit by the dramatic slump in oil prices, which has wiped £9.6billion off the revenue expected from the North Sea between now and 2019/20.

Even if the prices recover from $55 a barrel at present to $100, Scotland would still be around £7billion worse off, Mr McLaren said.

Scottish Labour leader Jim Murphy said Ms Sturgeon's plan to press for full fiscal autonomy was the "first genuine big moment" of the election campaign in Scotland.

He said Ms Sturgeon had made a "stupid strategic error" during the BBC debate.

Campaigning in Cumbernauld, Mr Murphy said: "What we saw last night in the debate was Scotland's First Minister admitting under her plans Scotland would be £7.6 billion worse off - it's full fiscal austerity.

"We will oppose Tory austerity by the front door and we will also oppose the SNP's austerity by the back door.

"Between now and polling day, no one is going to be left in any doubt that if you vote for the SNP, you are voting to opt out of the UK state pension system. "That is awful news for Scottish pensioners."

He added: "I'm confident after these debates that we have a spring in our step, we have the arguments on our side, we have the truth on our side, and we're the party with momentum and self-belief."

Also out on the stump, Liberal Democrat business minister Jo Swinson said: "Yesterday we heard Nicola Sturgeon pledge that SNP MPs would vote for full fiscal autonomy in the first year of a new parliament.

"How on earth would that help us fund our NHS properly?"

SNP deputy leader Stewart Hosie defended the proposal, saying: "Labour are in the same place as the Tories, which is why so many people are switching to the SNP.

"They are proposing more cuts, and defending Westminster controlling over 70 per cent of Scotland's revenues and 85 per cent of the welfare spending in Scotland. "People in Scotland want the vow of extensive new powers delivered."

He added: "The whole purpose of financial autonomy is having control of our employment, taxes and spending to grow our economy instead of facing Tory and Labour cuts.

"Labour are just trying to hide their plans for £30 billion of real cuts.

"Labour's referendum alliance with the Tories is clearly still in operation."