Party on a 'moral quest' to shrink public sector and thus free up cash to spend creating 250,000 new jobs and apprenticeships
Labour has promised to eradicate youth unemployment in Scotland by saving more than £2bn and shrinking the public sector as part of a "moral" quest to protect the economy and frontline services.
The party claims it can squeeze £2.2bn in efficiency savings from public services – partly through merging Scotland's eight police and fire services, and closing health boards – and divert that money to create 250,000 new jobs and apprenticeships over the next five years.
Iain Gray, the Scottish Labour leader, attempted to simultaneously position the party as the toughest on public spending while remaining the most effective opponents of the Tory-led government in Westminster when he unveiled Labour's manifesto for the 5 May election at Clydebank College near Glasgow.
Gray said the college was built on the site of the now demolished John Brown shipyard, part of an industry which became symbolic of "the economic vandalism" of Tory governments.
The yard was bailed out by Ted Heath's government after the Clyde shipyards work-in. It closed for business in 2001, under Labour.
Claiming that Labour had set up Holyrood in 1999 as a "barrier to the excesses of the Tories", Gray said only Labour could effectively defend Scotland against the cuts introduced by Westminster.
"I tell you, the last thing the Tories want is a Labour government in Scotland," he said.
Describing his party's manifesto as a "serious document for serious times", Gray said he would "undertake the most radical programme of public sector reform since Labour created the Scottish parliament".
That would involve job losses, he admitted. "There are difficult choices here and difficult choices ahead."
Gray is hoping to win Labour's first significant political victory since the general election defeat and the election of Ed Miliband as UK party leader by retaking the Scottish parliament.
Labour narrowly lost power to Alex Salmond and the Scottish National party by a single seat at the 2007 Holyrood elections.
Most opinion polls put Labour clearly ahead of the SNP in this campaign. It has been the greatest beneficiary of a steep slump in support for the Liberal Democrats after they formed a coalition at Westminster.
Many observers believe the Lib Dems, who launched their campaign on Tuesday pledging to create 100,000 new jobs, will lose about six of their 16 seats at Holyrood, with most expected to go to Labour.
But Labour strategists believe the polls overstate the extent of its lead. They admit the party has failed to match the SNP's publicity campaign: the nationalists won another coup when the Scottish actor Brian Cox, who described himself as a lifelong Labour supporter, endorsed the nationalists.
Gray tried to kill off complaints that Labour has been far too timid by setting out proposals to create one police force and one fire brigade; to force councils to share services; to merge and close health boards; to cut £100m from the NHS drug bill; and to merge local social care services into one national service.
He also confirmed he would allow councils to increase council tax from 2013 – a pledge so far avoided by other parties, but one which will be seized on by the SNP. Council tax has been frozen in Scotland since 2007.
He also promised to cut his own pay as first minister and that of all other ministers by 10%.
However, plans to reform council tax or introduce a new local taxation system have been abandoned for the next parliament.
Gray hopes the reforms will be welcomed by voters as a necessary price to achieve the anticipated but still highly speculative savings of £2.2bn by 2015 in order to spend on frontline services and the economic recovery.
The Scottish government's £30bn budget is also due to lose a total of £1.2bn by 2015, but Labour still claims its efficiencies and cuts would release nearly £700m in so far non-allocated savings by 2015, which it would spend on as yet unspecified areas.
Labour estimates it will lay out £150m on reaching the full youth employment target, introducing a public sector minimum wage of £7.15 an hour and adding 250,000 jobs.
The new "Scottish living wage" would cost £20m a year while a new Scottish future jobs fund – creating 12,500 new apprenticeships – would cost £10m annually, plus an extra £12.5m a year in 2013 and 2014.
The party also claims to have the most generous policies on student funding, including a new maintenance allowance for college students and 1,000 new specialist literacy and numeracy teachers for schools.
But Gray refused to accept warnings from Scotland's university principals that they face a spending gap of at least £200m after English universities introduce new, higher tuition fees.
Gray said his spending plans were based on the much lower £93m figure used by Salmond's government.