The Vow DELIVERED: Scotland to be responsible for more tax and welfare worth billions of pounds in radical devolution package

SCOTLAND'S Parliament will be responsible for billions of pounds of extra tax and welfare spending under a radical devolution package unveiled today.

The Smith Commission on Devolution will hand Holyrood huge new powers to set the rate and bands for personal income tax in Scotland and control over a third of Scotland's £10 billion welfare budget.

The historic power shift from Westminster should see the Scottish government’s current budget of about £30 billion boosted by over 50 per cent.

The deal, trashed out between rival political parties in the space of just two months, represents the biggest shift of power from Westminster since the inception of the Scottish Parliament in 1999.

The recommendations from the Smith Commission come after the main party leaders at Westminster made a now famous “vow” to deliver extra powers to the Scottish Parliament after the independence referendum.

As well as responsibility for setting more than £10.8 billion of income tax, Scotland will be allocated £5 billion of VAT receipts, 50 per cent of the VAT take in the country.

But corporation tax, personal allowances and tax reliefs set in the Chancellor’s budget will remain at Westminster.

Westminster will also retain power over old age pensions and the new Universal Credit for the unemployed.

The Commission concluded that these parts of welfare spending should stay with Westminster because Scotland benefits overall from the pooling and sharing of resources across the UK.

Welfare campaigners in Scotland will be disappointed not to have the complete devolution of benefits but Scotland will have the ability to create new benefits and top up existing ones to

There will be full control of all disability benefits in Scotland, allowing the parlaiment to reverse painful Coalition cuts.

But crucially the all-party Smith Commission includes a guarantee that Scottish MPs will continue to have the right to vote on budgets at Westminster.

The move is an attempt to maintain the bonds of the Union that Scots voted for in the independence referendum and sees off the Tory demand of English Votes for English Laws.

The Commission also guarantees the continuance of the Barnett formula, a key part of the referendum Vow, that allocates funds favourably to Scotland whenever there are increases in public spending in the rest of the UK.

The package is one which allows all parties to claim credit for while having to compromise some of the principles they entered the talks defending.

The SNP will not be given economic levers like corporation tax, personal tax allowances or the ability to set the minimum wage, which remain at Westminster to prevent a jobs race to the bottom.

But there will be cross border competition for airports as Scotland is being given the power to vary air passenger duty.

The multi-billion programme will signal a step-change for Holyrood as a real political powerhouse in charge of shaping tax and welfare spending for the first time and open up a new era of devolution.

Subject to fiscal rules there will be no limits to the borrowing powers of the Scottish parliament giving the government of the day the ability to borrow to invest in major road and rail projects or to restart the schools rebuilt programme started under Labour.

Wrapped inside the devo-box of tax powers and welfare policies are air passenger duty, which raised £200 million in Scotland in the last year, and a range of other policies.

The Scottish parliament will be given power over Scottish elections, which could lead to 16 year olds getting the vote in Holyrood elections.

But the new package does not give Holyrood the power to hold referendums on the constitution - with such a move needing to be approved by Westminster to be legally binding.

Licensing for fracking and the seabed and foreshore rights of the the Crown Estate in Scotland, valued at £267 million a year, are to be moved to Holyrood.

The recommendations, to be turned into a Scotland Bill in the New Year, will completely reshape not just Scotland but Whitehall and the rest of the nations and regions in the UK.

Devolving responsibility for tax and welfare moves a massive amount of power to Scotland from the Treasury and the Department of Work and Pensions.

Analysis

We’ve had the vow – now the WOW.

The rollercoaster that is Scottish politics just took another twist with the arrival of the Smith Commission today.

This is the big bang of devolution that Scotland has been waiting for.

Before, during and after the long referendum campaign, the majority of Scots expressed a desire for two things – more power for the Scottish parliament and the continuation of the United Kingdom.

People voted to stay together in September and now in November they are being given a devolution package that exceeds expectations and is being delivered quickly and with surety.

Power to set tax rates – higher or lower depending on what voters demand – the ability to change and shape welfare budgets, borrowing powers, a wedge of VAT receipts to do as we please with – it looks like a big slice of devolutionary cake whichever way you want to cut it.

For some it won’t be enough power, for others it will raise fears of unbinding the very Union that they fought so hard to maintain just a few months ago.

There are plusses and minuses for all parties. It is a binding agreement that required compromise.

What effect this package will have on the volatile mood of the electorate when it is digested, no one can predict.

But this we do know, this massive transfer of powers out of Westminster into the hands of the Scottish people will change Holyrood and the rest of the UK dramatically.

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