ED Miliband could sign up to Nicola Sturgeon's demand for billions of pounds of extra public spending and still meet his financial targets, a leading economic think tank has said.

 

The First Minister was accused of wanting to "bankrupt Britain" when she first made her call last month.

But the Institute for Fiscal Studies (IFS) said new figures in this week's Budget showed that not only was her plan feasible, but if Labour agreed to the proposals the party could still meet its aim to balance UK's books by 2020.

When she made her call the SNP leader estimated that £180 billion would be required to meet her proposal - for a 0.5 per cent rise in departmental spending.

The IFS said that an analysis of the latest calculations in the Budget suggested that that figure had dropped dramatically.

Its analysis showed that Labour could meet its target for a balanced Budget by the last year of the next parliament and still increase departmental spending in real terms by £9bn a year between 2015-16 and 2019-20.

The think tank said that this £9bn increase equated to an average growth of 0.5 per cent a year - the same as the SNP proposals.

Gemma Tetlow, programme director at the IFS, said: "On the basis of projections Labour could achieve a current budget balance by 2019/20 and increase departmental spending by 0.5 per cent per year on average over the four years from 2015-16, without requiring any further tax rises or changes to welfare spending beyond the £1.2bn they propose to raise from a mansion tax."

SNP Deputy Leader and Treasury spokesman Stewart Hosie MP said that the First Minister had shown it was "perfectly possible" to increase spending by a modest amount, "relieving the pressure on public services, on hard pressed households and on the economy", and still balance the books.

"It is increasingly clear that austerity must end and it is only the SNP that can make Westminster see sense and invest to protect our public services," he said.

"I believe there will be mainstream support south of the Border as well as in Scotland for the SNP plan to invest in jobs and growth, instead of cuts."

Ms Sturgeon has also appealed to Labour voters, north and south of the border, to back her anti-austerity call.

Scottish Labour Finance spokesman Jackie Baillie said: "Labour has a better plan than Tory austerity. By introducing a mansion tax and a tax on bankers' bonuses as well as reintroducing the 50p top rate of tax, Labour will fund its spending promises.

'Labour will end Tory austerity. It's time the SNP stopped telling lies about our plans and the truth about theirs - their spending plans would increase the debt, and their plans for full fiscal autonomy would mean austerity max for our public services"

Earlier this week Mr Miliband said he would not enter a formal coalition with the SNP, although he stopped short of ruling out a deal on a vote-by-vote basis.

However, the Herald understands Labour MPs were briefed that the party would not offer the SNP policy concessions to back its legislation.

The IFS analysis is not all good news for the SNP.

The think tank warned that a 'devo max' Scotland would be £7.6bn worse off next year.

A fiscally autonomous Scotland, reliant on taxes raised north of the Border, would require deep spending cuts unless the price of oil recovered or the economy grew much faster than the rest of the UK.

At his party's conference in Aberdeen Lib Dem Treasury minister Danny Alexander accused the SNP of "misjudging all the big calls" on the economy.