Queen's Speech: Revealed: coalition to give Holyrood more powers to control income tax

• In her speech next week, the Queen will announce new powers for the Scottish Parliament, notably the control of income tax. Picture: PA

A senior source at the Scotland Office has confirmed that the recommendations by the Calman Commission are to be introduced in the first raft of legislation by the new Conservative/Liberal Democrat government unveiled on Tuesday.

This will include controversial powers to control the top slice of income tax, allowing MSPs to reduce it by as much as 10p or increase it as far as they want. It will also allow the Scottish Parliament – with Treasury permission – to create its own devolved taxes, such as the SNP's proposal for a centrally set local income tax to replace the council tax.

The move to accelerate the Calman proposals had been predicted over the weekend by the Scottish Lib Dem leader, Tavish Scott.

It is understood that the acceleration of Calman was partly to help sell the coalition to disillusioned Scottish Lib Dems.

It is understood the new Tory Scotland minister, David Mundell, also lobbied hard for an early bill to help to restore the party's reputation north of the Border.

New Scotland Secretary Danny Alexander will lead on the legislation, and it may be tied in with other constitutional reforms he is working on.

One of the clinching arguments was that by prioritising the reforms, the coalition will nullify any threat from the SNP for a multi-option referendum on Scotland's constitutional future ahead of the Holyrood election next year.

A senior Scotland Office source said: "There are competing bills vying for a place in the first Queen's speech, but Calman will be there. The important thing is that the first session is 18 months long, so that will give us plenty of time to iron out any difficulties".

These difficulties will mostly focus around the Treasury being tasked with making the tax reforms work.

The Scotsman has learned that, despite the last government producing a white paper on the proposals, some Scottish Labour MPs are questioning some of the recommendations on power being handed over. In particular, they will question drink-drive and speed-limit powers to Holyrood when there was no evidence taken by the commission in these areas.

One Labour MP said: "These were pet SNP issues. All it was about was making the Border something more significant."

One of the authors of the Calman report, the CBI Scotland director, Iain McMillan, welcomed its prioritisation. "All these proposals, but the ones on tax in particular, were very carefully thought through," he said.

Scottish Labour leader Iain Gray said the changes would need to be in place by the time of the 2011 Holyrood election. He said: "People going to the polls next year must know what powers and responsibilities their next Scottish Parliament will have.

Changes Calman could bring

1. Cutting basic and higher rates of income tax levied by the government in Scotland by 10p in the pound, with a corresponding reduction in the block grant.

2. Giving Holyrood the power to set a Scottish income tax rate, applying to all bands. A 10p rate would replace the reduction in the block grant.

3. Devolving Stamp Duty, Landfill Tax, Air Passenger Duty and the Aggregates Levy paid on mineral extraction to the Scottish Parliament.

4. Giving Scottish ministers additional borrowing powers to cover capital projects, or temporary budget shortfalls.

5. Devolving powers for the administration of elections.

6. Devolving the regulation of airguns. The Scottish justice minister has said he will use this to ban the weapons.

7. Devolving power to set drink-drive limits. SNP ministers want the limit cut from 80g per 100ml of blood to 50g.

8. Devolving the power to set speed limits.

9. Devolving responsibility for nature conservation at sea.

10. Improving relations between Holyrood and Westminster by creating mechanisms for regular meetings.

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