UK Government agrees new powers to strengthen Devolution

25 November 2009

The overall size of Scotland's budget will be decided in Scotland in future under the most radical change to the nation's finances since the Barnett Formula 30 years ago, the UK Government announced today.

Income tax levels will be set in Scotland and other tax powers such as stamp duty, landfill tax and aggregates levy will be devolved to Holyrood, Scottish Secretary Jim Murphy announced in a statement to the House of Commons.

Mr Murphy said:

"This new deal for devolution means the Scottish Government will be accountable for how they raise money and not just how they spend it. We will give them greater freedom but with that comes greater responsibility."

Publishing a White Paper, Scotland's Future in the United Kingdom, setting out the UK Government's response to the Calman Commission,  the Scottish Secretary also said the UK Government would transfer powers to Scotland including air weapons, drink drive limits, and national speed limits. The Paper also looks at strengthening the cooperation between the Parliaments and Governments in London and Edinburgh.  In total, the UK Government is taking forward action on 39 of the 42 Calman recommendations that are its responsibility.

The tax proposals from the UK Government would give the Scottish Parliament responsibility for raising a significant proportion of its budget - around £4.5bn at current rates.

The new income tax power means the basic and higher rates of income tax set by the UK Government will be reduced by 10 pence in the pound in Scotland. The block grant from the UK will be reduced accordingly. It will then be for the Scottish Parliament to make an annual decision on the  Scottish rate of income tax. The Scottish and UK rates will determine the overall Scottish Government budget, and the income tax rates for those living in Scotland. The tax will continue to be collected by HMRC.

Mr Murphy told MPs that the Government would take the proposals forward as a package and would introduce a Scotland Bill early in the next Parliament.

Other measures contained in the Government's package of reforms include:

  • The UK will devolve the power to vary the rates of stamp duty land tax to the Scottish Parliament.
  • The UK will devolve landfill tax and Aggregates Levy to the Scottish Parliament.
  • Devolution of powers to regulate air weapons
  • Devolution of the power to set drink driving limits
  • Devolution of the power to set speed limits
  • Taking forward new processes for better working relationships between Westminster and Holyrood despite Scottish Government objections.

Announcing the package to the House of Commons, Jim Murphy said:

'Devolution has proved itself to be the right form of governance for Scotland.  Scots know that as part of the United Kingdom we have the best of both worlds.   Scots are proud of the Scottish Parliament and the way it allows them to find what the late Donald Dewar called, 'Scottish solutions to Scottish problem'.

'The Government agrees with the Commission's conclusions, which were based on a wealth of evidence.

'Mr Speaker, Scotland has two Parliaments - this Parliament, which remains an important symbol of the UK, and which continues to have vital daily relevance to Scotland; and the Scottish Parliament at Holyrood, which has firmly established itself over the last decade in Scottish hearts and minds.

'But ten years on, the Commission recommended a New Deal on Funding - retaining the stability and fairness of the block grant, while improving accountability.

'Since the first day of devolution, the Scottish Government has been accountable for how it spends taxpayers' money.  Under today's proposals, they will also be held to account for how they raise it.  We will give the Scottish Parliament greater freedom - but also the responsibility - to set the level of income tax in Scotland.

'In future, the size of Scotland's budget will be down to decisions made in Scotland.  In addition to new tax powers, we will also give the Scottish Parliament new powers and responsibilities on capital borrowing.

'We will also devolve stamp duty land tax, aggregates levy, and landfill tax, and will keep the Commission's recommendation about Air Passenger Duty under review.

'We will continue to take our plans forward with consensus and momentum.  We will introduce a Scotland Bill as soon as possible in the next Parliament to introduce the Calman package.  We will phase in the new financial arrangements carefully.  We plan to have the changes in place during the next term of the Scottish Parliament.

'Mr Speaker, support for Scottish devolution remains strong, in Scotland and elsewhere in the UK.  And so does support for the Union.

'The plans which the Government is setting out today will create a stronger, more accountable Scottish Parliament within the framework of the United Kingdom.  Strength through unity is such an asset  - today is an important step in building a stronger Scotland and a New Deal for Devolution.

'I commend this statement to the House.'

Link opens in new windowRead the full statement to the House of Commons

Link opens in new windowRead the White Paper: Scotland's Future in the United Kingdom