MPs are set to vote on whether to hand the Scottish Parliament full control over tax and spending as part of the Scotland Bill currently going through Westminster.
First Minister Nicola Sturgeon made a manifesto pledge during the general election campaign to try to introduce the radical measure, which would see an end to the block grant calculated through the Barnett Formula, which is used to distribute cash across the UK and paid by Westminster to Holyrood.
However, Mr Mundell said MPs faced a “deal or no deal moment” when they have to decide to either back the SNP’s plan – which he said would lead to a £10 billion cut to Scotland’s budget – or the devolution of £15bn worth of new tax powers.
The Scotland Bill will bring into law many of the new powers agreed by the all-party Smith Commission, which was given the task of recommending more powers for Holyrood after last year’s independence referendum, and make Holyrood one of the most powerful devolved parliaments in the world.
Westminster has already rejected moves by the SNP to make plans to give Holyrood total control of taxation and spend north of the Border part of the Scotland Bill, which is aimed at devolving the powers agreed by Smith including income tax and £2.5 bn of welfare spending.
However, MPs will today examine the tax section of the legislation line by line and take part in a fresh vote as the second day of the committee stage of the bill comes before the House of Commons.
Mr Mundell, who is the only Conservative MP in Scotland, attacked the SNP’s demand for full fiscal autonomy as a “black hole plan”, saying the move would starve frontline services such as schools and policing of cash.
Mr Mundell said: “This is a ‘deal or no deal’ moment for the fans of full fiscal autonomy. They can either vote for a more powerful Scottish Parliament that share risks and resources with the rest of the UK or they can support a black hole plan that would cost Scotland the same amount as we currently spend on education and justice combined. Most people would consider this a bit of a ‘no-brainer’.”
He added: “This government will not accept amendments that are not good for Scotland. Full fiscal autonomy would be bad for Scotland, leaving us with £10bn less to spend by the end of this Parliament.
“To put this number into context, last year the Scottish Government spent £10bn on education and justice, this is everything from schools and colleges to our police force, prisons and court service.”
However, SNP deputy leader Stewart Hosie MP hit back and said that full fiscal powers for Holyrood would allow the parliament to do more to grow the economy.
Dundee East MP Mr Hosie said: “Mr Mundell’s claims are patently ludicrous. Scotland already more than pays its way, with more revenue generated per head than the UK for every one of the last 34 years.
“But we need significant new powers over our economy, job creation, welfare, wages and living standards if we are to make the most of our nation’s potential.”
Shadow Scottish Secretary Ian Murray accused the Conservatives and the SNP of “playing games with the constitution” and called for support for Labour amendments that would guarantee Holyrood the final say on benefit rates.