FAME at last: the Prime Minister took my name in vain at last week’s PMQs, citing me (erroneously) as saying that fiscal autonomy would be “suicide” for Scotland. What I actually said was something quite different. Cameron was quoting selectively from a piece I wrote in The National just after the election – but good to know he reads this paper.

I began with this prediction: “The constitutional ball is well and truly in David Cameron’s end of the field. Cameron’s opening gambit may well be to offer Scotland fiscal autonomy, in return for termination of the Barnett Formula (a mechanism that matches per capita spending changes across the UK constituent nations).”

Lo and behold, some Tories have spent the days since the publication of the draft Scotland Bill suggesting that they might indeed tear up the narrow Smith Commission proposals and put a form of full fiscal autonomy (FFA) on the constitutional table. Backbench maverick Sir Edward Leigh has already tabled an amendment to that effect – but with precisely the caveat I mentioned. In this scenario, Barnett could go overnight, meaning Scottish spending per head would be slashed instantaneously, if there were no compensating borrowing powers. Welcome to Greek-style austerity.

These offers of FFA are booby-trapped. We are not being given genuine autonomy over our domestic finances in Scotland. We are being proffered a pseudo FFA in which the Treasury effectively will offload on to the Scottish Government its debt liabilities, contracted as a result of financial incompetence under Gordon Brown’s chancellorship, and subsequent massive borrowing by George Osborne. As of Q1 2015 UK Government debt amounted to £1.56 trillion, or 81.6 per cent of total GDP.

For the record, I favour genuine FFA – full Scottish control over domestic taxes, spending and borrowing – as a step towards independence. I penned an article saying so on the Scot-Buzz business website just before the election, saying: “I remain of the view that FFA is key, not just to making Scotland’s politicians fully accountable to Scottish voters (who pay the taxes). It is also cardinal to readjusting the economy away from consumption to productive investment.” By that I mean that unless Scotland controls its own fiscal destiny we will never be able to raise industrial investment, and improve productivity to global standards, in order to maximise economic growth.

A successful Scotland, free from Treasury tutelage, would give the lie to Project Fear – the myth perpetuated by Labour and Tory parties alike that Scotland cannot stand on its own two feet economically. After the SNP’s stunning victory on May 7, the Unionists have come up with a new variation on Project Fear. At any time in the past 50 years they would have fought tooth and nail against FFA, just as they begrudged any transfer of tax powers until wrenched piecemeal from the Treasury’s tight grip. But the banking crisis of 2008 and the subsequent ballooning of Treasury debt has created a unique circumstance in which the Unionist Establishment can offer a bowdlerised FFA – leaving Scotland to shoulder an unfair share of this debt burden, while its economy is still encumbered by deficiencies imposed from decades of poor management from London.

WHICH is why I gave this warning in The National last month: “We all know that in present UK economic circumstances a fiscally autonomous Scotland would face a significant budget deficit. For Scotland to accept fiscal autonomy without inbuilt UK-wide fiscal balancing would be tantamount to economic suicide. However, all federal systems have mechanisms for cross subsidising regions in economic need by regions in surplus. To deny that to Scotland suggests a disingenuous Mr Cameron is hoping to derail any move to Scottish Home Rule in the UK.”

Critics have tried to twist this, claiming the SNP wants English taxpayers to bail out Scotland in perpetuity – having our cake and eating it. For starters, English taxpayers are not subsidising Scotland. On the contrary, the UK as a whole is running a massive budget deficit which means every single region and nation of the UK is running its own individual deficit, London included. Which brings us to the infamous “black hole” in Scottish finances identified by the Institute of Fiscal Studies (IFS) that the Scottish Government supposedly will have to fill from higher taxes, if we get FFA.

David Mundell, Scotland’s only Tory MP and by default the new Secretary of State, captured the headlines on Saturday with his claim that the basic rate of income tax in Scotland will need to double to keep spending at current levels, under FFA. Quoth Mundell: “Even the First Minister now accepts that fiscal autonomy would be a burden for Scotland to shoulder.” Not so, David, we want genuine FFA. But are you actually offering it or playing? You were asked that question in the Commons several but went on doggedly reading your speech without giving a reply.

The real debate is this: the SNP starting point for transitioning to FFA is the Smith Agreement, by which all the main parties agreed that neither Scotland – nor the UK – should be disadvantaged by the introduction of a new tax regime north of the Border. It is the transition we are discussing, not some permanent mechanism to “subsidise” Scotland forever. Messrs Mundell and Cameron are wilfully ignoring that point.

They are also deliberately obscuring the fact that the UK deficit already exists, including its notional allocation to the regions, of which Scotland is only one. Leave aside debates over how big any Scottish “black hole” would be under FFA – the point is that this already exists without FFA, albeit subsumed into the UK debt structure, and already funded by collective Treasury borrowing. Under FFA, Scotland will grow its economy faster. That will pay down the collective UK debt faster, and without recourse to the socially-divisive spending cuts envisaged by Chancellor Osborne. It is in the Treasury’s interest, assuming Scotland stays inside the UK, to give Scotland the fiscal autonomy to increase its productivity and growth.

However, the transition timetable to FFA will require a defined number of years in which Scotland’s share of the UK debt overhang is reduced and the Scottish economy grows, expanding its domestic tax base. In the interim, the Barnett Formula would stay in place, albeit with negotiated annual abatements as envisaged under the Smith Agreement. Another deal breaker is that under FFA, the Scottish Treasury will have to have unencumbered capital borrowing powers. Without those, it will be impossible to undertake economic restructuring. FFA without capital borrowing powers would indeed be a poison chalice.

No self-respecting Scot wants to be subsidised by England, even if this was the case. Obviously I want Scotland to be an independent country and for England to have its own parliament and keep its own tax revenues. In the interim, with good faith on all sides, it is possible to escape the endless piecemeal attempts at a devolution settlement and move straight to Scottish Home Rule within the UK. But the essence of any Home Rule package is FFA. Can’t we discuss the operational boundaries of how that might work instead of using fiscal autonomy as a political Aunt Sally?