Households 'face £2,700 tartan tax'

SCOTTISH households would each have to pay an extra £2,700 a year to maintain current benefits levels if welfare was paid through taxes raised by the Scottish Parliament, the Scotland Office has claimed.

• All smiles: Prime Minister Gordon Brown addresses the Fabian Society's conference at Imperial College, London.

The figure has been calculated in a paper looking at the cost of welfare spending if more tax-raising powers were devolved to Holyrood. Currently, welfare and benefits are paid by the UK Treasury and administered by the department for work and pensions.

But the Scotland Office's analysis was disputed by the SNP, which claimed the figure was "dodgy" and did not take into account revenue from North Sea oil, which would amount to 20,000 per household.

The cost of devolving welfare to Holyrood has been included in the Scotland Office paper Expenditure and Revenue in Scotland, which examined what "full fiscal autonomy" would mean for Scotland.

Under that scheme the Scottish Parliament would receive taxation raised in Scotland rather than being financed by a block grant from Westminster.

In Scotland, 60 per cent of government spending is by the Scottish Government and 40 per cent by Westminster.

The biggest overall expenditure by either government is on welfare spending, which includes pensions, disability allowance, Jobseekers Allowance, Child Benefit and tax credits.

According to the Scotland Office, in 2007-08, the Scottish Parliament spent 32.3 billion, while the UK government spent 12.6bn on social protection payments in Scotland.

This comes to 44.9bn, while total tax receipts in Scotland that year (including non-domestic rates) were 38.7bn.

The paper said this gap equated to 2,700 for every Scottish household.

Scotland Office minister Ann McKechin said fiscal autonomy would mean "massive new burdens" for Scottish businesses.

She went on: "Those pressing for fiscal autonomy because they want power for power's sake have some difficult questions to answer. UK government spending to protect the most vulnerable people in Scotland is not something to be discarded lightly.

"Fiscal autonomy would mean massive new burdens for Scottish businesses and it would also mean public expenditure in Scotland would be drastically reduced. The fiscal autonomy sums simply don't add up."

A spokesman for finance secretary John Swinney said: "

Government Expenditure and Revenue Scotland (GERS) is the official report … it contains the real figures for 2007-08 – not this drivel from Ms McKechin.

"Unlike this Labour dodgy dossier, GERS includes all revenue from Scotland, including North Sea oil, and all spending in Scotland – devolved and reserved – including social security.

"The GERS report demonstrates that Scotland recorded a current budget surplus over the three years to 2007-08 of 2.3bn, while the UK ran up a deficit of 24bn over the same period."