Scots nationalists say want end to austerity as price for UK power support

(Recasts, updates after Sturgeon speech, adds context)

By Andrew Osborn

LONDON, Feb 11 (Reuters) - The Scottish National Party said on Wednesday it would demand an end to austerity and billions of pounds in more British government spending if the opposition Labour Party needed its support to govern after a UK-wide national election on May 7.

Seeking to parlay its growing popularity in Scotland into more influence in British politics, Nicola Sturgeon, the SNP's leader, gave a speech in London in which she argued for a slower rate of deficit reduction and a more left-wing approach to managing the world's sixth largest economy.

Specifically, she proposed allowing government departmental spending to grow by half a percent each year in real terms, a step she suggested would unlock state investment worth 180 billion pounds ($274.09 billion).

"I would certainly hope that if there was a Labour government and if it was dependant on SNP support ... then we could persuade and influence a Labour government to take a more moderate approach to deficit reduction," she told BBC radio, before delivering her speech.

Labour, which has traditionally regarded Scotland as a power base, is facing a serious challenge from the SNP whose electoral appeal could make it much harder for Labour to unseat Prime Minister David Cameron's Conservatives.

Labour says it wants to win outright and isn't after an SNP deal.

But Sturgeon's intervention underlines the scale of the SNP's ambitions and if, as opinion polls suggest, no one party wins a workable majority, Labour could be forced into some kind of an arrangement with the SNP.

The party, which still wants to break up the UK and for Scotland to go it alone, has spoken of the possibility it might prop up a minority Labour government since both parties, though rivals in Scotland, are left-wing.

It has previously named removing Britain's submarine-based Trident (BSE: TRIDENT.BO - news) nuclear deterrent from Scotland as a condition of any deal.

Though Scots voted to stay part of the United Kingdom in a Sept. 18 referendum, support for the SNP has since soared amid mistrust the London government won't deliver to Scotland's parliament the extra powers it promised to swing the poll result.

Labour has proposed balancing the country's books at a slower pace than Cameron's Conservatives using tax rises to mitigate the need for spending cuts.

But the SNP has portrayed itself as more left-wing than Labour, accusing it of abandoning its core values, an effort to poach Labour's voters and advance its desire to secure independence for Scotland.

($1 = 0.6567 pounds) (Editing by Angus MacSwan and Andrew Heavens)