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Scotland should control income tax - Smith Commission

Scotland is to be given the power to set income tax rates and bands, giving its parliament control over an estimated £14bn, according to the report from the Smith Commission published today.

Lord Smith of Kelvin was appointed by PM David Cameron to make recommendations on which powers should be devolved to Scotland following the No vote in the independence referendum.  

His report suggests that Holyrood should have the power to set income tax rates and bands in Scotland, and retain all of the income tax raised north of the border. It also said around £3bn of welfare powers, including the housing elements of universal credit, attendance allowance, carers allowance, the disability living allowance and personal independence payment should also be devolved.

It added that Air Passenger Duty should be fully devolved while 10% of VAT raised in Scotland should be retained by the Scottish parliament. Fracking licensing will also be devolved.

Lord Smith also believes the Scottish parliament should be made permanent in UK legislation and given powers over how it is elected and run, and also have the power to extend the franchise to 16- and 17-year-olds, allowing them to vote in the 2016 Holyrood election. Changes to the franchise or electoral system would require a two-thirds majority.

A summary of the commission’s recommendations are:

• The parliament should be given the power to set income tax rates and bands on earned income and will retain all of the income tax raised in Scotland.
• The parliament should be given powers to allow 16 and 17-year-olds to vote in Scottish elections.
• The parliament should be given powers to create new benefits in devolved areas and make discretionary payments in any area of welfare.
• A range of other benefits that support older people, carers, disabled people and those who are ill should also be fully devolved.
• The Scottish government and Scottish Parliament should have a "formal consultative role" in the process of reviewing the BBC Charter.
• Holyrood should be given responsibility for the management of Crown Estate’s economic assets in Scotland.

Unveiling the report at the National Museum of Scotland in Edinburgh on Thursday morning, Lord Smith described the recommendations as “the biggest transfer of powers to the parliament since its establishment”. He said: “Taken together, these new powers will deliver a stronger parliament, a more accountable parliament and a more autonomous parliament.”

“This agreement is, in itself, an unprecedented achievement,” Lord Smith added. “It demanded compromise from all of the parties. In some cases that meant moving to devolve greater powers than they had previously committed to, while for other parties it meant accepting the outcome would fall short of their ultimate ambitions. It shows that, however difficult, our political leaders can come together, work together, and reach agreement with one another. I pay tribute to them for doing just that.”

Several powers that were considered for devolution were ultimately rejected. The national minimum wage will remain reserved by Westminster, as will equalities legislation. A controversial plan to devolve abortion law to Scotland was also scrapped after protests from leading women’s groups.

David Cameron said he was "delighted" with the report, adding: "We are keeping our promise to the Scottish people."

However the SNP were less impressed, Scotland deputy first minister, John Swinney, said that the proposals “fall far short” of the powers promised in the vow.

“The proposals clearly do not reflect the full wishes of the people of Scotland, and also fall far short of the rhetoric from the no campaign during the referendum,” he said. “Then, Gordon Brown promised ‘nothing less than a modern form of Scottish home rule’ and ‘as close to a federal state’ as the UK can be. That was the context for the ‘extensive new powers’ promised in the vow.

“Regrettably, the Westminster parties were not prepared to deliver the powerhouse parliament the people of Scotland were promised. Under these proposals, less than 30% of our taxes will be set in Scotland and less than 20% of welfare spending will be devolved to Scotland. That isn’t home rule – it’s continued Westminster rule.”

Lord Smith's recommendations will form the basis of draft legislation due to be published by 25 January, with the main parties at Westminster pledging to take it forward, regardless of who wins the UK election, in May 2015.

Local government in England responded to the report by calling for a comparable devolution process to local authorities. In a joint letter, senior figures including London’s mayor, Boris Johnson, and six Labour leaders of English city councils called on the UK government to set up a similar commission to agree a “comparable package of measures for local government in England”.

Cameron said he would bring forward proposals on 'English votes for English laws', restricting the Westminster voting rights of MPs for Scottish seats, before Christmas. Labour will oppose that plan.

(Image: c. Andrew Milligan/PA Wire)

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