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  4. Holyrood to gain control of income tax under Smith proposals

Holyrood to gain control of income tax under Smith proposals

27th November 2014 | government-administration

The Scottish Parliament should have the power to set income tax rates and bands on earned income, and should retain all of the income tax raised in Scotland, the Smith Commission on further devolution to Scotland proposed today.

Set up to consider further devolved powers in the wake of the No vote in the independence referendum, the Commission also recommended that a share of VAT should be assigned to the Parliament, and that air passenger duty be fully devolved. The new powers would not however include the setting of income tax personal allowances.

Scotland currently raises about £10.9bn annually in income tax

The Commission believes that the Parliament should be underpinned by being made permanent in UK legislation, and given powers over how it is elected and run, including the power to allow 16 and 17 year olds to vote.

Further powers would allow the Parliament 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.

Commission chairman Lord Smith of Kelvin said: “Taken together, these new powers will deliver a stronger Parliament, a more accountable Parliament and a more autonomous Parliament.

“The recommendations, agreed between the [representatives of the five political parties with sitting MSPs], 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.”

Alistair Carmichael, the Secretary of State for Scotland,  said a stakeholder group would now be set up to take forward the recommendations. "Having a more powerful Scottish parliament inside a strong United Kingdom will open the door to more constitutional change in the United Kingdom", he commented. "We can achieve home rule all round."

Prime Minister David Cameron, and shadow Scottish Secretary Margaret Curran, both welcomed the report, but First Minister Nicola Sturgeon described the package as 'ultimately disappointing", because many powers, like the personal tax allowance, corporate taxation and child and working tax credits, would remain with Westminster.

Welcoming the proposals, Alistair Morris, President of the Law Society of Scotland, said they offered "a radically enhanced constitutional settlement".

He added: "We are particularly pleased to see that reserved tribunals, such as employment tribunals, are to be devolved. This will undoubtedly benefit those seeking recourse through the administrative justice system. We also welcome the proposals for improving the cooperation between the UK and Scottish Governments in relation to EU matters, and that Scottish ministers are to be fully involved in agreeing the UK position in EU negotiations relating to devolved policy matters.

"It's now important that any new constitutional settlement stands the test of time and crucially maintains cross party support. That is why the UK and Scottish Governments must consider the practicalities of devolving further powers and consult as widely as possible as the new legislation is developed."

Click here to view the full report.

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