GEORGE Osborne and Iain Duncan Smith attempted to water down the Smith Commission package to give UK ministers a veto over key tax and welfare policies, Scotland on Sunday has learned.
The Chancellor and the Work and Pensions Secretary made a last-minute bid to exert control over some of the new powers that are to come to Scotland as a result of the pre-referendum vow.
Just days before the draft legislation for more powers was published last week, the Conservative ministers intervened in an attempt to ensure that Westminster retained control over aspects of income tax and benefits that are to be transferred to Holyrood. Scotland on Sunday understands that the move threatened to derail the transfer of more powers until it was thwarted by the Lib Dem arm of the UK coalition, which insisted that the Smith package should be implemented in full.
In the days leading up to Thursday’s publication of Scotland In The United Kingdom – An Enduring Settlement, Osborne was lobbying for control over a crucial part of income tax.
Under the Smith proposals, Scotland will become responsible for setting the bands and rates of income tax.
The Smith Commission report published in November last year accepted that Westminster should retain control of the personal allowance – the portion of a person’s income that is not liable for income tax.
But under the Smith arrangement, the Scottish Government would have the power to effectively increase the personal allowance by setting a zero tax rate.
Yesterday sources close to talks between the Conservatives and Lib Dems claimed that Osborne wanted to have the final say-so if a Scottish Government wanted to set a zero rate.
Similarly, Duncan Smith was calling for a veto on an important welfare proposal that will allow a Scottish Government to create its own benefits in devolved areas.
Duncan Smith was also proposing that Westminster should still have the power to run UK welfare initiatives, such as the work programme, while the Scottish Government was pursuing its own devolved work programme.
Critics of his plans believed that such a proposal would have caused chaos in the new Scottish welfare system.
Yesterday Michael Moore, the former Scottish Secretary who represented the Lib Dems on the Smith Commission, said: “It is not a surprise to me that the Conservatives fought tooth and nail to remove some of the key elements of the Smith agreement.
“We saw in the commission itself they adopted two or three different positions in the space of 48 hours on welfare and were clearly in touch with London colleagues at every stage.
“We resisted it there and I am glad that my Liberal Democrat colleagues have resisted it in terms of the bill. There is no question in my mind that without Scottish Secretary Alistair Carmichael, Chief Secretary to the Treasury Danny Alexander and Deputy Prime Minister Nick Clegg digging in on this over the last crucial 48 hours before the bill was published, we would have ended up with the whole Smith process unravelling.”
Meanwhile, the Scottish Government stepped up its attack on the draft legislation.
Deputy First Minister John Swinney said: “We have acknowledged that the draft legislation represents progress. However, too much of what is set out imposes restrictions and, whichever way you read it, the UK’s proposals would hand a veto to UK ministers.
“There are a total of 12 instances across key areas such as welfare, universal credit and fuel poverty where we will have to consult UK ministers before acting, and in eight of these ‘permission’ from the secretary of state must be sought: a veto.”
A spokesman for the Scottish Conservatives said: “Last week’s plan strikes absolutely the right balance for us all. Scottish ministers will have to raise far more of the money they spend, making them directly accountable to taxpayers. They will also have far greater say on how welfare benefits are paid. At the same time, we will keep our single market and the bedrock of our UK welfare state so that things like your pension are secured.
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