The SNP’s plans to transfer all tax and spending to Holyrood would leave Scotland with a black hole of almost £40 billion by 2020, a Treasury paper claimed last night.
The multi-billion pound shortfall was identified by Treasury analysis conducted on Nicola Sturgeon and Alex Salmond’s plans to campaign for full fiscal autonomy at the general election.
Following their defeat in the referendum, Ms Sturgeon and Mr Salmond made full fiscal autonomy – a settlement whereby all tax and spending is devolved – a red-line issue in any coalition negotiations after the May vote.
Last night, the Chief Secretary of the Treasury Danny Alexander claimed the Treasury’s analysis showed that the SNP had “lost the plot” on the economy.
The SNP countered by claiming that Mr Alexander had “no credibility whatsoever” in Scotland.
The paper titled Opposition Costing Full Fiscal Autonomy for the Scottish Government examined the implications of Scotland raising its own revenue.
Under that arrangement, onshore taxation would be devolved to Edinburgh and the Scottish government would receive a geographic share of North Sea oil tax revenue.
All spending would be devolved to Scotland apart from that on defence, foreign affairs and debt interest.
The Treasury assumed the Scottish government would pay the UK government a population share-based contribution towards spending areas that remained under Westminster control.
Devolving tax and spend to Holyrood would spell the end of the Barnett Formula, the funding mechanism which sees Scots receive £1,200 per head per year more than the UK average in public spending.
Full fiscal autonomy would also result in Scotland becoming increasingly reliant on North Sea revenues.
According to the Treasury analysis which was calculated using 2013-14 oil figures, there would be a funding gap of £7.7bn in 2015-16.
In 2016-17 it would be £7.8bn. The same £7.8bn shortfall would be experienced in 2017-18. In 2018-19 the gap would increase slightly to £7.9bn before rising to £8.4bn at the end of the next Scottish parliamentary term in 2019-20. Over the course of the next parliament the total gap would be £39.6bn.
Mr Alexander said: “These new figures back up what the majority of Scots have always suspected. That the SNP is so fixated on separation, that it’s lost the plot on the economy. Sturgeon and Salmond’s plans for full fiscal autonomy would saddle us with a £40bn funding black hole.
“And that black hole can only be filled by severe cuts to our schools and hospitals, or massive tax rises to plug the gap.
“This is not the SNP standing up for Scotland as they claim. It’s the SNP flying in the face of economic reality.”
The Chief Secretary to the Treasury added: “I’m now calling on the SNP leadership either to come clean and publish exactly what services they will cut and how much they will raise taxes to plug their funding black hole, or to acknowledge that their plan for full fiscal autonomy is fatally flawed and withdraw it.”
On the eve of its conference in Glasgow, the SNP reacted angrily to Mr Alexander’s remarks.
The SNP Deputy Leader and Treasury spokesman Stewart Hosie said: “The Lib Dems and Danny Alexander – George Osborne’s loyal sidekick in pushing through Tory cuts – have no credibility whatsoever in Scotland.
“Today, they have given up all pretence of impartiality with this contrived paper – issued hours in advance of publication via a party press release.
“The Treasury ignore the fact Scotland has paid more in revenues per head in every year of the last 34 years, including more than £300bn in oil receipts to the UK exchequer – and also ignore the fact that the UK government is estimated by the OBR [Office of Budget Responsibility] to require borrowing of a further £150bn in the five years to 2019-20.
“There is a clear dividing line between those, like the Lib Dems and Danny Alexander, who want us to be at the mercy of Westminster cuts and those of us who want Scotland to have the powers needed to do better.
“The only risk to Scotland’s public finances and services are the cuts planned by all the Westminster parties.”
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