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Spending Review Sets Scene for Scottish Tories to Beat Labour Into Second Place at Holyrood Election

Was George Osborne's spending review drawn up with an eye on the forthcoming Holyrood election?

Was George Osborne's spending review drawn up with an eye on the forthcoming Holyrood election?

With his U-turn on tax credits, he has certainly redrawn the political landscape; shooting Scottish Labour's fox and perhaps creating the conditions in which the Scottish Conservative Party could become the second party in Scotland. That would be an earthquake in Scottish political terms.

Perhaps 'Earthquake' will be the title of Iain McWhirter's next book as 'Tsunami: Scotland's Democratic Revolution' about the SNP landslide at the General Election is piled high in Scotland's bookshops in time for the Xmas market, illustrated with a Japanese-style drawing of a huge wave.

A poll reported in the Herald last week showed the Scottish Tories on 18%, two points behind Labour on 20%. On these numbers, the SNP, on 50% end up with 72 seats out of Holyrood's 129, and with all of the constituency seats while the other parties fight over the list seats awarded on proportional representation. However even if the number of seats they gain is not huge, the psychological effect of the Tories edging into second place would be massive.

Scottish Labour leader Kezia Dugdale had been pinning much of her electoral campaign on a promise to reimburse the families who were set to fall of a financial cliff when their working families tax credits were slashed. That will have to be rethought now.

Dugdale's announcement that Scottish Labour members would have a free vote on any future independence referendum also leaves the Scottish Conservatives as the strongest pro-Union voice in Holyrood.

Scottish Conservative leader Ruth Davidson had a good referendum campaign but her chances of building on that were not helped by the tax credit debacle. She was clearly uncomfortable when grilled about it by the Scottish media and was relatively frank in her criticism of the policy. She attends monthly cabinet meetings and has presumably let her colleagues know that it was electoral poison.

The U turn on tax credits in fact lets the SNP off the hook to a certain extent too as they were being pushed by Labour to agree to reimburse hard-hit families.

But there was more in the Spending Review that was aimed at the Nationalists. Osborne made hay with the plunging oil price, declaring that if Scotland had become independent it would have faced "catastrophic" cuts in Scottish public spending. He revealed the Office for Budget Responsibility's forecast for total offshore receipts next year was about £100 million, while the independence white paper forecast between £6.8 and £7.9 billion, a 98% overestimate.

Osborne also indicated that subject to agreement over the fiscal framework, more tax powers are headed the SNP's way.

The fiscal framework which has been compared to the famously complex Schleswig-Holstein question which only three people understood, has been occupying the minds of Scotland's political anoraks of late. The Herald's estimable letter writers appear to understand it as well as anyone.

In the Herald, Magnus Gardham suggested last week that the SNP might choose to find fault with the framework and block the Scotland Bill as a way of avoiding tax becoming the main plank of the 2016 Holyrood election.

On the Today programme after the review, George Kerevan immediately faced a grilling over the SNP's tax policy as he was repeatedly asked if the Scottish Government would raise taxes in order to replace welfare cuts. He refused to answer, saying the ball was in John Swinney's court.

The Scottish Labour Party is clear that it supports a 50% tax rate for high earners. The SNP has supported that in the past. But Scotland has only 11,000 higher rate taxpayers from whom it gets 20% of tax revenue and economist David Bell warned recently that a relatively small change in the behaviour of this group could be damaging. And regardless of the maths, fighting an election on a promise to raise taxes, even if only for high earners, may have an electoral cost.

The SNP is effectively a coalition between different factions: people who work for financial institutions and send their kids to private school; prosperous farmers; the young; the old; the rural and urban poor and the middles class. But it is conceivable that it may become harder to hold those disparate groups together in the future.

The Conservatives have made no secret of their hope that increasing the amount of its own revenue Holyrood has to raise through taxation will crack Nicola Sturgeon's mirror. One day when she asks: "Mirror Mirror on the wall, who is the top banana of Scottish politics?" she may get an unexpected answer.