Smith Commission: Scotland to get tax and benefit powers

27 Nov 14

Holyrood is set to retain all income tax raised in Scotland under cross-party plans for further devolution of fiscal powers to Edinburgh following the no vote in September’s independence referendum.

The agreement, backed by Scotland’s five main political parties including the pro-independence Scottish National Party, will also see a share of VAT assigned to the parliament and Air Passenger Duty fully devolved.

Under the plans, which come after unionist parties promised to set out plans for more powers by the end November if Scotland voted no, Holyrood will also be given power over benefits that relate to devolved areas. These include Housing Benefit, disability benefits such as Disability Living Allowance and Personal Independence Payment, as well as responsibility for Winter Fuel Payment.

Setting out the plans in Edinburgh this morning, Lord Smith, who was appointed by Prime Minister David Cameron to chair a commission to devise the plans, said the powers would deliver ‘a stronger Parliament, a more accountable Parliament and a more autonomous Parliament’.

He added: ‘The recommendations, agreed between the parties, will result in the biggest transfer of powers to the Parliament since its establishment.

‘This agreement is, in itself, an unprecedented achievement. 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.’

Under the proposals for tax devolution, locally-raised tax revenue will account for around two-thirds of spending by the parliament, which is currently around  £30bn.

Although the Scottish Parliament will be given responsibility for setting bands and rates of income tax, the level of the tax-free personal allowance will remain reserved.
In addition, the report also recommended that the controversial Barnett Formula, which is used to determine allocations of increased spending, would remain in place for the funding that continues as a bloc grant from Westminster.

To balance this increased financial responsibility, Holyrood will also be given new borrowing powers, to be agreed with the Westminster government, that can support capital investment and ensure budgetary stability.

Responding to the recommendations, Cameron said the UK government was keeping its promise to the Scottish people.

‘I always said that a ‘no’ vote didn’t mean no change, indeed, we made a vow of further devolution to Scotland and today we show how we’re keeping that vow to keep that promise,’ he added.

‘The Scottish Parliament is going to have much more responsibility in terms of spending money but it will also need to be accountable for how it raises taxes to fund that spending and I think that’s a good thing.’

Scottish Deputy First Minister John Swinney, who sat on the commission for the SNP, said the new powers were welcome but that they fell short of pledges made during the independence campaign.

‘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.’


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