Labour takes aim at SNP fiscal autonomy 'bombshell'

Labour has wheeled out its big guns to take aim at what it considers a weak point in the seemingly inexorable advance of the Scottish National party - the SNP demand for "full fiscal autonomy" within the UK.

Ed Miliband and Ed Balls joined the Scottish Labour leader Jim Murphy in Edinburgh on Friday to warn voters of a spending crunch if Scotland embraced tax autonomy. They drove the point home with images of a falling bomb labelled "full fiscal austerity".

Yet analysts are sceptical that the fiscal autonomy debate can stem Labour's collapsing fortunes in Scotland, where the latest opinion poll by YouGov for The Times newspaper showed the SNP extending its already commanding lead to 24 points. 

The polling expert John Curtice, from Strathclyde university, said Labour should focus on persuading former supporters who voted Yes in last year's referendum that the general election was not about independence and that Labour was really a party of social justice.

"Relatively complex arguments about the finances of devolution are not what Labour needs," said Professor Curtice. "They don't directly address the problems Labour has in Scotland."

It is not that Labour lacks credible ammunition. As Mr Miliband stressed, the party's headline claim - that full fiscal autonomy would mean a "£7.6bn bombshell for Scotland" - is based on research by the independent Institute for Fiscal Studies.

The figure reflects the impact that oil price falls would have under the SNP's devolution proposals, in which Edinburgh would take control of all taxes raised in Scotland, paying the UK government for shared costs such as defence and foreign affairs.

Such autonomy would spell the end of the block grant from London that is currently used to fund much Scottish spending and which is calculated according to the "Barnett formula".

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The IFS says Scotland's projected government deficit in 2015-16 is twice as high as a proportion of its economy as that for the UK as a whole - a gulf equivalent in cash terms to £7.6bn.

"Unless oil and gas revenues were to rebound, onshore revenues were to grow more quickly than in the rest of the UK, or government spending in Scotland were cut, a similar-sized gap would remain in the years ahead," it said.

Nicola Sturgeon, Scotland's first minister and SNP leader, waved aside such worries this week, declaring that her party would push for fiscal autonomy "as quickly as possible".

Yet while Labour, the Conservatives and Liberal Democrats seized on Ms Sturgeon's comments as a disastrous own goal, their previous attempts to make capital out of the issue have done little to slow the SNP's rise.

Michael Keating, professor of politics at Aberdeen university, says critics of full fiscal autonomy "certainly do have a point", but that many voters are disregarding the warnings just as they did pro-union "catastrophic predictions of doom" during last year's independence vote.

"People don't like being threatened . . . and they are also bamboozled by the trading of statistics," said Prof Keating.

Even SNP-inclined voters willing and able to grapple with block grants and the Barnett formula are likely to discount the issue out of a belief that full fiscal autonomy will almost certainly be blocked by pro-union parties or implementation would take long enough to allow oil prices to recover.

"The whole purpose of fiscal autonomy is that it would give Scotland the powers to grow the economy," said John Swinney, Scotland's deputy first minister. "Obviously, greater economic and welfare powers would be introduced over a period of time."

The SNP appears confident that the fiscal autonomy issue will cause it little damage. Party strategists cite strong support for greater devolution from a public that wants to hear a positive vision of Scotland's economic future. And the party has been quick to portray questions about fiscal autonomy as "doing Scotland down".

"Labour's campaign is becoming so desperate in Scotland that they are resorting to the same fears and smears that caused such a huge surge in the Yes vote during the referendum," said Mr Swinney.

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