More tax powers for Holyrood under devolution shake-up

Westminster will cut the UK rate of income tax by 10p in Scotland but this, and the other changes, will not happen before the next UK general election.

With the tax cut, Westminster will make a corresponding cut in Holyrood's share of public spending.

This will require Holyrood to impose a Scottish income tax of 10p if it wants its budget to remain unchanged, or more if it wants extra money.

Scottish Secretary Jim Murphy told the Commons: "Since the first day of devolution, the Scottish Government has been accountable for how it spends taxpayers' money.

"Under today's proposals they will also be held to account for how they raise it.

"We will give the Scottish Parliament greater freedom but also the responsibility to set the level of income tax in Scotland."

Scotland is also to get control of some other taxes collected north of the border: stamp duty land tax, landfill tax, and the aggregates levy, Mr Murphy told MPs.

Holyrood will also be given powers to set national speed limits, the drink-driving limit north of the border and the power to regulate air weapons.

It will also gain new borrowing powers.

Mr Murphy told MPs the Government wants to take forward with "consensus and momentum" the proposals in the White Paper published today.

"We will introduce a Scotland Bill as soon as possible in the next Parliament to introduce the Calman package," he said.

"We will phase in the new financial arrangements carefully.

"We plan to have the changes in place during the next term of the Scottish Parliament."

Mr Murphy said support for devolution, and for the Union, remained strong in Scotland and elsewhere in the UK.

"The plans which the Government is setting out today will create a stronger, more accountable Scottish Parliament within the framework of the United Kingdom," he said.

But the Tories immediately said that, if they won power, they would ditch Labour's plans and come up with their own proposals.

Shadow Scottish secretary David Mundell told the Commons that today's White Paper should not "bind" an incoming Tory Government.

"Conservatives accept that the Scottish Parliament needs to be more financially accountable, that the devolution settlement needs to be tidied up, and that Westminster and Holyrood need to start working constructively together for the good of Scotland and Britain.

"But we will do this through our own White Paper, not with this Government's proposals launched in the dying days of this Parliament."

Mr Murphy told the Commons: "Since the first day of devolution, the Scottish Government has been accountable for how it spends taxpayers' money.

"Under today's proposals they will also be held to account for how they raise it.

"We will give the Scottish Parliament greater freedom but also the responsibility to set the level of income tax in Scotland."

The package set out by Mr Murphy is the Government's response to the recommendations of the cross-party Calman Commission on devolution.

The Government is taking up 39 of the 42 Calman recommendations which apply to Westminster.

One Calman proposal on tax, that air passenger duty be devolved to Holyrood, would undergo "review".

Overall the tax proposals would give Holyrood power for raising about 4.5 billion at current rates, or 14% of its current spending.

The three minor taxes to be devolved, stamp duty land tax, aggregates levy, and landfill tax, would raise about 500 million and this would be deducted from the block grant.

The financial changes would have a transitional phase.

At first, Scotland's block grant would be calculated in the conventional way, then reduced based on estimates of the tax that would be raised under the new system.

Eventually Westminster would move to a system based on actual tax receipts and a one-off percentage reduction in the block grant.

Only three of the Calman recommendations have not been accepted by Westminster: devolving some aspects of housing benefit and council tax benefit, changes to inter-government arrangements on finance, and devolving a deprived areas fund in Scotland.

In a preface to the White Paper, Prime Minister Gordon Brown said: "The Scottish Parliament and the other devolved legislatures are now firmly entrenched in the United Kingdom's constitution. They held to make that constitution one fit for the 21st century.

"But there is more reform and modernisation to come. The plans in this White Paper are an important part of that."

Tory leader David Cameron, whose party backed the cross-party Calman Commission, said a Conservative government would use the Calman proposals as a "base" to repair the London-Edinburgh relationship which had deteriorated under Labour and the SNP.

The Calman recommendations on financial powers were a "starting point" for finding a better balance, said the Tory leader.

"We accept that the Scottish Parliament needs to have more financial accountability through greater powers over raising and spending taxes and over borrowing.

"However, we will not be bound by any White Paper produced by the present Government in the short time that remains before the election.

"If the Conservatives win the next general election, we will produce our own White Paper and legislation to deal with the issues raised by Calman."

Meanwhile Mr Murphy's Commons statement saw sharp exchanges between the Scottish Secretary and Angus Robertson, the SNP's Westminster leader.

Mr Roberston challenged him to explain why action on measures where there was already agreement was being put off until after the election.

But Mr Murphy accused him of behaving like a nationalist, rather than a patriot.

"A Nationalist puts the SNP first, a patriot puts Scotland first, and that's the difference between my party and yours, and why increasingly Scotland is turning its back on the SNP."