LABOUR has positioned itself to ditch popular Scottish Government policies including the council tax freeze, free prescriptions for all and free university tuition in a dramatic policy shift unveiled by Johann Lamont.

The Scottish party leader accused Alex Salmond of trying to bribe Scots with a string of giveaways.

In a major speech to party activists, Ms Lamont promised she would be honest about the country's spending priorities, and added: "Scotland cannot be the only something- for-nothing country in the world. I will not tolerate a country where the poorest pay for the tax breaks for the rich."

Ms Lamont is to set up a new economic group, chaired by MP Cathy Jamieson and MSP Ken Macintosh and advised by Edinburgh University academic Arthur Midwinter. Its mandate will be to examine Government commitments over the next two years.

Deputy First Minister Nicola Sturgeon dismissed Ms Lamont's policy shift as a "cuts commission", and added: "It will only increase support for an independent Scotland."

Ms Lamont also made a scathing attack on the council tax freeze –introduced in 2007 – arguing the "cost" was being paid in job cuts and reduced services across Scotland.

She also took aim at free university tuition and free prescriptions, which have been described by Mr Salmond as part of Scotland's "progressive beacon". Free prescriptions cost £57 million last year. Free university tuition for all Scottish and EU students cost a further £220m.

Ms Lamont told a gathering of party members in Edinburgh: "What price your free prescription when an elderly relative spends five hours on a trolley in A&E or the life-saving drug they need isn't available at all?

"What price free tuition fees when your neighbour can't get a place at college or when university standards are now lower than when they went to uni?"

Ms Lamont also questioned the Nationalists' flagship policy of funding 1000 extra police officers compared with 2007, claiming many were now doing the work of axed civilian workers.

She talked of funding "fewer but better quality" apprenticeships following anger that many training places had gone to people already in work to meet Government targets.

She said Finance Secretary John Swinney's cautious Budget had "kicked tough problems into the long grass", adding: "I know that there are families, working hard, on average or above-average incomes, who feel they pay enough and are attracted by policies like free prescriptions, free tuition fees and the council tax freeze.

"I know where they are coming from but I ask them to look at how they are paying for those free things.

"I am not going to get into an auction with the SNP. They might cry freedom, but the idea that Scotland is a land where everything is free is a lie.

"Someone always pays for it in the end."

Labour sources indicated the £192 million per-year free bus travel scheme for all over-60s, and free personal care at £340m per year, are not in the commission's sights.

In his budget, Mr Swinney continued to support costly Government handouts for 2013/14, despite a 3% real terms cut in the cash at his disposal, and announced new initiatives amounting to £180m, less than 1% of the total. Lord Sutherland, the architect of free personal care, is among a growing number to have questioned the long-term sustainability of Government commitments as it grapples with an 11% cut to its budget between 2010/11 and 2014/15.

Labour backed free university tuition, free prescriptions and a two-year council tax freeze at the last election and Ms Lamont's comments are being viewed as a clear sign of her plans for the 2016 poll.

Ms Sturgeon said: "What Johann Lamont fails to realise is that the social wage put in place by this SNP in Government delivers protection to households and families across Scotland from the impact of the UK Government's attack on living standards and economic growth.

"Tory cuts to spending are happening now and it is by taking the difficult decisions that this SNP Government has been able to protect support for households."

Scottish LibDem leader Willie Rennie said Labour "was prepared to have a decent discussion" and a "much more realistic approach to budget setting".

On free personal care, Mr Rennie said it had great advantages, but "we would need to look at what they say".

Professor James Mitchell, at Strathclyde University, said: "Labour is in a difficult place – it must either align itself with policies from south of the Border in order to emphasise its Unionism or with the SNP and its own previous policies but thus undermine the Union."