Election 2015

Election 2015: Labour and SNP in tax 'black hole' row

Jim Murphy, Ed Miliband and Ed Balls in Edinburgh (pictured left to right) Image copyright Getty Images
Image caption Labour insist there is plenty of time for them to make up lost ground in Scotland

The Scottish National Party's aim to have full control of tax in Scotland would create a £7.6bn financial "black hole", Ed Miliband has claimed.

He said the SNP's economic plans would have a "devastating" impact on Scotland.

The SNP says Labour is "simply making this up", with leader Nicola Sturgeon citing the usual "fears and smears".

The Tories say Mr Miliband's comments show the SNP is "pulling Labour's strings".

In other election news:

Labour has been trailing the SNP in the polls in Scotland for months and, as Mr Miliband arrived in Edinburgh to deliver his speech, a YouGov poll for the Times suggested Labour could be on course for its worst result in about 100 years.

It put the SNP on 49%, with Labour on 25%, which - if borne out on 7 May - would leave Labour with only a handful of Scotland's 59 seats and significantly harm the party's chances of a Westminster majority.

Analysis by BBC Political Correspondent Iain Watson

Ed Miliband is usually most comfortable attacking opponents to his right.

But in the shadow of Edinburgh castle, Mr Miliband claimed today he had found a chink in the centre-left SNP's armour.

Nicola Sturgeon said she wanted full fiscal autonomy as soon as possible.

So Labour have latched on to a recent analysis by the independent Institute for Fiscal Studies suggesting that with a lower tax base than the UK as a whole - and volatile North Sea oil revenues - there could be a gap of more than £7bn in the Scottish budget.

This allows Labour to say - look, the SNP are an austerity party too because they would have to make cuts to close this chasm.

But Labour have to be careful of how they advance the argument - the SNP say they are facing more "fears and smears" from their opponents.

And if Labour are, in part, being punished for too negative tone during last year's referendum campaign they will have to mix a negative attack on Ms Sturgeon's plans with a positive vision of Scotland's role in the UK.

However, Mr Miliband attacked SNP plans for the Scottish Parliament to take control over all taxation in Scotland, known as full fiscal autonomy. He said this would mean the end of the Barnett formula, the mechanism used to distribute government funds across the different nations of the United Kingdom, and leave a £7.6bn "black hole" in Scotland's finances.

"Which services will be cut? Which taxes will be raised and what cuts will it mean for pensioners in Scotland when they are taken out of the UK pension system?" he asked.

Mr Miliband said the SNP's claims that they would end "Tory austerity" were false and that they would actually "extend" it because their plans for fiscal autonomy would cut Scotland off from sources of UK-wide revenue and increase its pension liabilities.

Image copyright PA
Image caption The SNP say full fiscal autonomy would place Scotland's destiny in its own hands

SNP leader Nicola Sturgeon described his speech as "desperation" and her deputy, Stewart Hosie, told BBC News:" The Labour Party are simply making this up."

He said Labour's figures - taken from independent Institute for Fiscal Studies data - were based on the current financial year, and that tax control could not be transferred in that time.

Neither did they take into account the effect of SNP anti-austerity policies to grow the economy, Mr Hosie said, adding: "The only cuts which we know are actually coming to Scotland are the £30bn of austerity cuts from the Conservative and Liberal coalition which the Labour party voted for."

What is fiscal autonomy?

Image copyright Getty Images

The SNP wants the Scottish Parliament to have control over all of taxation in Scotland.

For the shared costs of continuing to run the United Kingdom, it would pay Whitehall a portion of the takings - for defence, the Foreign Office, the Treasury and shared regulators such as Ofcom and Ofgem.

Those in favour say such a move would respond to public demand for more powers at Holyrood. They say it would provide the levers of power over economic policy that could help grow the economy faster. That includes targeted business tax breaks.

Those against say that it would leave a large gap in the nation's finances - a £7.6bn shortfall next financial year over and above a share of the deficit that the UK is already running.

Labour has ruled out a coalition with the SNP in the event of a hung Parliament, saying there are "big differences" between the two parties over a range of issues, including the extent of financial powers to be given to Scotland and the renewal of Trident.

The SNP, which has called for modest rises in UK spending in the next Parliament and made a number of spending commitments of its own, has said it is prepared to support a Labour government on a "vote-by-vote" basis, if Ed Miliband's party wins the greater number of seats in the Commons, but not an overall majority.

Such an arrangement, the Conservatives warned again on Friday, would give SNP the power "to sign off" all Labour's plans.

Tory Defence Secretary Michael Fallon said: "Ed Miliband's visit to Scotland shows that the SNP are already pulling Labour's strings."

"Nicola Sturgeon makes a statement, and the Labour leader rushes to Edinburgh to respond. If it's like this now, imagine what it would be like with the SNP propping up Ed Miliband in Downing Street."

The Liberal Democrats said that, in pressing for full fiscal autonomy, the SNP were "veering away" from an economic strategy "that has delivered 174,000 new jobs for Scotland and putting the recovery at risk".

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