Transferring control over the coalition government’s unpopular benefit cut is being seriously examined at Westminster as part of a package to extend devolution in the event of a No vote.
Ministers in David Cameron’s government are believed to be increasingly concerned about how the bedroom tax has become a toxic issue for the coalition.
First Minister Alex Salmond has been a vociferous critic of the welfare reform, which Cameron prefers to present as the removal of a “spare room subsidy”.
The bedroom tax cuts the amount of housing benefit people can claim if they are deemed to have a spare bedroom in their council or housing association home.
On the issue of what new powers could be given to Holyrood if Scots vote against independence in next year’s referendum, a senior government insider told Scotland on Sunday that devolving housing benefit is now a strong possibility.
“I think there is a feeling that as far as non-financial matters are concerned, there is not much more that can be devolved and the balance is about right,” he said.
“That leaves taxation and welfare, and we have to look at where we can feasibly devolve more. There is an argument for devolving income tax further because the principle of devolving is in place with the most recent reforms.
“It is difficult to see how welfare could be devolved, but housing benefit is a possibility given the issues that have been raised about it recently.”
The bedroom tax proposal came to light as the Scottish Conservative leader, Ruth Davidson, called for a UK-wide constitutional convention to decide on a devolution settlement that meets the needs of all parts of the country, not just Scotland.
Davidson made her call in a Scotland on Sunday interview ahead of the party’s UK conference, which starts today in Manchester, and will place the future of Scotland and next year’s referendum as one of its top issues.
The importance the Prime Minister is attaching to the referendum will see it feature in many of the conference platform speeches and Davidson will deliver the speech that introduces Cameron ahead of his own keynote address on Wednesday.
With the Scottish Tories looking at the future of devolution north of the Border in a commission chaired by former cabinet minister Lord Strathclyde, government insiders have made it clear that ministers are already identifying areas that can be devolved to Scotland.
With Labour now committed to removing the bedroom tax, the prospect of devolving housing benefit will be seen as another attempt to neutralise one of the SNP’s strongest lines of attack against the “No” campaign.
But last night Scottish Government and SNP figures said that UK governments had broken promises on more Holyrood powers in the past.
A spokesman for Deputy First Minister Nicola Sturgeon said: “The SNP government secured resounding re-election two years ago on a manifesto which included additional powers for the Scottish Parliament in specific areas – and Westminster refused to budge an inch.
“The lesson is clear – the way to achieve powers over housing benefit, social security, and all the other areas Scotland needs, is to vote Yes next September.”
Sturgeon’s SNP colleague Linda Fabiani, MSP for East Kilbride, said: “History tells us that promises for better devolution and more powers in return for a No vote are quickly broken by Westminster – which is why a Yes vote next September is vital.
“A No vote is a vote for no more powers. All Scotland got after the 1979 referendum was 18 years of Tory government we didn’t vote for.”
Davidson refused to be drawn on whether she would support devolving housing benefit or not until her commission on devolution reports back.
In the light of a speech by Labour’s shadow foreign secretary, Douglas Alexander, calling for a constitutional convention in Scotland after the referendum, she said: “I like the idea of having some form of convention or commission or even Royal Commission to look at devolution.”
However, she was wary of a convention which looked purely at Scotland and backed a UK-wide proposal from Labour’s Welsh First Minister Carwyn Jones for a UK constitutional convention.