Alex Salmond won't accept spending cuts in Scotland

And so to the SNP conference in Glasgow - the 75th anniversary of the party's founding. We heard an uncharacteristically low key speech from the SNP leader Alex Salmond. The toughest street fighter in Scottish politics has reined in his invective, curbed his killer instinct and called for consensus and constructive engagement. .

So, do we buy this user friendly, positive Alex Salmond, eager to pull together, even with bis most bitter enemies? The FM said the SNP "is not the anti Labour party". Well, that'll come as a surprise to those bruised Labour leaders who've suffered rough end of his tongue in Holyrood.

But this is sensible politics. The last thing the Scots want to see right now is endless party political bickering while people are thrown out of their jobs. The numbers claiming job seekers allowance in Glasgow has risen by nearly a third in less than a year. They expect the political classes to join together and do something about it.

Salmond is right that Scotland faces unprecedented problems. "I can't stand here and say when it will end, but I can say that it will end", he told conference. Yes, but not anytime soon, I fear. He insisted that investment in skills and schools will do the trick. "Public investment leads to confidence,confidence leads to private investment and growth".

The First Minister also has a point when he says that Scotland has strengths in renewable energy, life sciences, creative industries. But the problem is that these are all taking a severe beating in the recession - especially renewable energy which has been undermined by the collapse of the oil price. Scotland's big money earner in recent years has been the financial services sector which is being downsized faster than the twn towers in 200i.

There's somethingin the argument that public invesment is crucial to maintaining economic activity, and that "stimulus is best delivered at state level". But whether he can expect public spending to be retained at historic levels in Scotland in the next decade is another question entirely. Britain is in severe debt - at every level. The kind of increases in Scottish spending that have happened in the last decade - when the Scottish budget almost doubled - cannot be repeated. A disproportionate number of Scots are employed by the public sector, and there is going to have to be some shrinkage.

The First Minister's speech was a pre-Budget warning to the Chancellor, Alistair Darling, not to proceed with his threatened £1bn cut in the Scottish budget. That is understandable politics, but dodgy economics. I don't see how Scotland can fail to experience a big reduction in public spending over the next few years. It would be perverse for the UK exchequer to exclude one part of the UK from an austerity programme designed to pay back the trillion pound deficit being racked up during the bank rescues.


Of course, if Scotland had control of its own finances, it could borrow to the extent that the markets allowed it; and it could raise taxes to finance public projects. The argument for this is becoming stronger by the week. Indeed, the only way to rebalance the Scottish economy, and to introduce fiscal discipline, might be through full fiscal autonomy. The Conservatives understand this now, and it can surely be only a matter of time until Labour get the message too.