David Cameron: Britain is bankrupt and broke

• Uneasy: PM David Cameron and Labour deputy leader Harriet Harman walk through the Commons to the Lords yesterday. Picture: Getty

In his first major speech at the Commons dispatch box, the Prime Minister launched a savage attack on the previous administration, accusing it of leaving the country in tatters with its economic profligacy.

He said Labour's legacy was an "economy that's nearly bankrupt, a society that's broken and a political system that is bust", as his new coalition government unveiled its first legislative programme.

Addressing MPs after the Queen's Speech, the Prime Minister made it clear that his government's priorities will be to tackle Britain's 156 billion budget deficit at home and the threat of Iran obtaining nuclear weapons abroad.

However, there was an ambitions programme for government with 23 bills and one draft bill for the first 18-month session, with 20 of them having a direct impact on Scotland.

Of these, the Scotland Bill promising new powers for Holyrood was the most significant north of the Border.

But long before the bill will be tabled in the autumn, it has already run into controversy.

Lib Dem Scottish Secretary Danny Alexander confirmed a report in The Scotsman that powers to control the top 10p of income tax may not be included – leaving the bill without its flagship proposal.

Mr Alexander said that the decision on the tax powers would be made after he had held talks with the Scottish Government.

SNP First Minister Alex Salmond has made it clear he would rather have the status quo than new tax powers, which he has claimed is a "mirage" of extra power and would damage Scotland by reducing its finances.

Mr Alexander revealed that a question mark over whether the tax powers would be in the bill had come up after he and Mr Cameron met Mr Salmond in Edinburgh.

"We are committed to having a conversation with them (the Scottish Government] and are waiting to see details of their concerns on the tax proposals", said Mr Alexander.

"I have asked our officials and the Scottish Government's officials to sit down and have this conversation very quickly around this issue (tax], but I don't intend to prejudge the outcome."

Crucially, his deputy, Tory Scotland Office minister David Mundell, said: "If we are to have a proper 'respect' agenda then we have to listen to what they have to say". But he added: "The SNP don't have a veto on tax powers".

However, the overall approach has been welcomed by the Scottish Government and SNP. The party's Westminster leader Angus Robertson

said: "While the legislative programme was light on detail, some of the ideas contained within it have potential to deliver improved economic decision making for Scotland.

"The opportunity to devolve more powers to the Scottish Parliament is welcome – but these have to be the right powers. On areas such as air weapons, the drink-drive limit and responsibility for Holyrood elections, there is no disagreement, and these powers should be transferred as quickly as possible".

But the UK government was under pressure not to allow the SNP's opposition to get in the way of the new tax powers. Scottish Labour leader Iain Gray, who polls suggest could be the new First Minister by the time the bill is passed late next year, held talks with Jim Wallace, the new Advocate General who will take the bill through the Lords.

Mr Gray said: "The Tory-Lib Dem government has said they will bring Calman forward but, as ever, the devil is in the detail. The government must not backtrack on the commitment they gave before the election to implement the Calman Commission recommendation including extra tax powers for Holyrood.

"Also, it's important that there is no unnecessary delay. People in Scotland need to know what powers the Scottish Government will have when they vote in May 2011 so there cannot be any drift now from this Tory-Lib Dem government".

Mr Alexander hailed the first coalition Queen's Speech as one which will have a major impact on Scotland with 20 of the 24 bills applying north of the Border.

Among the bills that will impact on Scotland will be a Financial Services Reform Bill which Mr Alexander claimed will "strengthen" the industry in Edinburgh. There will be an overhaul of the benefits system which could see hundreds of Scots currently on the unemployment of incapacity benefits forced to go to work.

However, Mr Alexander denied that the reform of parliament will lead to pitfalls for his government in Scotland on equalising the size of constituencies and concerns about holding a UK general election on the same day as the Holyrood elections in May 2015.

He said he was "relaxed" about the elections being held on the same day, arguing that the problem which led to tens of thousands of spoilt papers in the Holyrood election of 2007 was down to poor administration, badly designed ballot papers and problems with new counting technology. But he said he would "treat concerns with due weight".

On constituencies, he said the changes would be put together by the Boundary Commission, but said he would "be astonished" if constituencies like Orkney and Shetland and the Western Isles disappeared.

Reform of the Lords has been postponed, although part-privatisation of the Royal Mail will go ahead despite fears of a fight with the unions.

Mr Alexander said: "The people of Scotland will benefit from these measures which will safeguard jobs, cut taxes and restore the earnings link for the basic state pension.

Comment

• Gerry Hassan: The taxing question is: what sort of fiscal powers can we expect to end up with?