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Scottish parliament to get control over income tax and welfare spending Scottish parliament to get control over income tax and welfare spending
(about 1 hour later)
Scottish ministers are to be given direct control over billions of pounds of income tax and welfare benefits in far-reaching reforms due to include housing, winter fuel payments and air passenger duty. The Scottish parliament is to be handed direct control over billions of pounds of income tax and welfare benefits, a cross-party committee will propose on Thursday in the biggest shakeup to Britain’s taxation system in the modern era.
High level talks to agree the full package of new powers continued late into Wednesday as negotiators from all the main parties at Holyrood thrashed out the last details of a deal due to be revealed in Edinburgh on Thursday morning. The historic move, which had been resisted by the Labour leadership in London, means powers to set income tax rates and bands are to be wholly devolved to Holyrood as the pro-UK parties move to outflank the Scottish National party, which has surged in popularity since the referendum on Scottish independence.
In a significant switch backed by Ed Balls, the shadow chancellor, and party leader Ed Miliband, Labour has dropped its opposition to allowing the Scottish parliament to set different tax rates to the rest of the UK after watching support for the party plummet. High-level talks to agree the full package of new powers continued late into Wednesday as negotiators from all the main parties at Holyrood thrashed out the details of a deal due to be revealed in Edinburgh on Thursday morning. The far-reaching reforms are due to include housing, winter fuel payments and air passenger duty.
But in a concession demanded by Balls, Westminster will still have overall control over the personal allowance – the figure at which income tax starts and which now stands at £10,000-a-year – and the tax rates on unearned income such as interest on savings and share dividends. But the Scottish deal led to an immediate backlash in England with a cross-party call from all the senior figures in English local government for a comparable devolution process in England. In a joint letter, officials 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”.
The deal is also expected to allow Scottish ministers to control the housing benefit elements of the new universal credit system, potentially worth around £1.7bn. The Smith Commission, which was set up after pledges by the UK’s three main party leaders in the last few days of the Scottish referendum campaign, is preparing to publish its heads of agreement. Lord Smith of Kelvin, the head of the commission, has been working with Scotland’s five main parties – Labour, the SNP, the Tories, the Liberal Democrats and the Greens – to reach broad agreement by St Andrew’s Day on 30 November in line with the timetable laid down by former prime minister Gordon Brown.
The powers, agreed during secret talks overseen by Lord Smith of Kelvin and officials from the Treasury, are expected to be fast-tracked through Westminster next year. They had been brokered by former prime minister Gordon Brown in the closing stages of the Scottish independence referendum campaign. In the most significant move, Labour has abandoned its opposition to the full devolution of income tax to bring it into line with the four other parties in a bid to halt its plummeting poll ratings in Scotland in the face of a surge for the SNP.
Labour has been forced to give ground on income tax, devolving air passenger duty and on allowing Holyrood full control over Scottish parliament and council elections – including allowing 16- and 17-year-olds full voting rights – after a surge in support for the Scottish National party. Brown had described the proposal as a Tory trap while Alistair Darling, the leader of the pro-UK Better Together campaign in the referendum, warned in the Financial Times this week that it would end in “floods of tears” because it would undermine the principle that risks are shared across the UK.
But as Labour, the Tories and the Lib Dems edged closer to a deal with the SNP and Scottish Greens, a controversial plan to devolve abortion law to Scotland, ending a Britain-wide approach to cut-off dates on terminations, caused divisions. But Ed Miliband and Ed Balls, who are expected to offer broad support for the Smith Commission while saying the details will need to be studied with care, have decided to bite the bullet to avoid a further slide in Labour support in Scotland.
Backed by Labour negotiators, leading women’s groups including Abortion Rights and Engender Scotland submitted formal protests about the proposal, leading to the plan being dropped in the final stages. Instead the commission is expected to state on Thursday it was minded to devolve abortion law, but to agree that further work is needed. . It is understood that Balls won two important concessions that will give comfort to the Labour leadership in London. The personal tax allowance – the amount of income people can earn before they pay tax – will remain a UK matter that will continue to be decided by the chancellor of exchequer and voted on by MPs at Westminster.
The Scottish Greens, the SNP and Lord Smith support devolving abortion legislation and are understood to have argued that Holyrood has taken a liberal, pro-equality stance on all other policies on women’s health and equalities. This will make it impossible for a Scottish finance secretary to do what chancellors have done in the past – announce an income tax cut and pay for it by changing the personal allowance.
But critics were furious, claiming that no evidence had been found to justify the move and that there had been no public debate before it was tabled by the Scottish Greens. The groups also said it risked giving anti-abortion campaigners the power to restrict abortions and creating a two-tier system in the UK. In the second key concession, it is understood that the commission will say that there is still a UK income tax system. It is also expected to say there should not be two classes of MPs at Westminster. This is designed to guard against the Tories undermining a Labour chancellor, who may depend on the votes of Labour MPs from Scotland, by saying that he or she should hold a budget for the whole of the UK and a separate budget for England, Wales and Northern Ireland.
The deal is expected to allow Scottish ministers to control the housing benefit elements of the new universal credit system, potentially worth about £1.7bn. The powers, agreed during secret talks overseen by Smith and officials from the Treasury, are expected to be fast-tracked through Westminster next year.
Labour has been forced to give ground on devolving air passenger duty and on allowing Holyrood full control over Scottish parliament and council elections – including allowing 16- and 17-year-olds full voting rights.
But as Labour, the Tories and the Lib Dems edged closer to a deal with the SNP and Scottish Greens, a controversial plan to devolve abortion law to Scotland, ending a UK-wide approach to cut-off dates on terminations, caused divisions.
Backed by Labour negotiators, leading women’s groups including Abortion Rights and Engender Scotland submitted formal protests about the proposal, leading to the plan being dropped in the final stages. Instead, the commission is expected to state on Thursday that it is minded to devolve abortion law, but to agree that further work is needed.
The Scottish Greens, the SNP and Smith support devolving abortion legislation and are understood to have argued that Holyrood has taken a liberal, pro-equality stance on all other policies on women’s health and equalities.
But critics were furious, claiming that no evidence had been found to justify the move and that there had been no public debate before it was tabled by the Scottish Greens. The groups said it risked giving anti-abortion campaigners the power to restrict abortions and creating a two-tier system in Britain.
Maria Fyfe, a leading pro-choice campaigner and former Labour MP for Glasgow Maryhill, said there had been an astonishing lack of consultation on the proposal.Maria Fyfe, a leading pro-choice campaigner and former Labour MP for Glasgow Maryhill, said there had been an astonishing lack of consultation on the proposal.
“There is a huge danger that this will increase attacks on abortion rights if the legislation is devolved,” she said. “Take the likes of Brian Souter, a big funder of the SNP, who strongly opposes abortion rights and funded an anti-gay rights campaign. How can we not be suspicious?”“There is a huge danger that this will increase attacks on abortion rights if the legislation is devolved,” she said. “Take the likes of Brian Souter, a big funder of the SNP, who strongly opposes abortion rights and funded an anti-gay rights campaign. How can we not be suspicious?”
Carolyn Leckie, a former midwife and senior figure in Women for Independence, said devolving abortion would allow the pro-choice movement to make Scottish abortion law more progressive and more flexible than the rest of the UK. The Smith commission’s decision to allow Scotland to set its own air passenger duty to stimulate business travel and tourism will also enfuriate airports in northern England and undermine efforts to cut carbon emissions. Carolyn Leckie, a former midwife and senior figure in Women for Independence, said devolving abortion would allow the pro-choice movement to make Scottish abortion law more progressive and more flexible than the rest of the UK. The Smith Commission’s decision to allow Scotland to set its own air passenger duty to stimulate business travel and tourism will also infuriate airports in northern England and undermine efforts to cut carbon emissions.
Newcastle airport protested about the SNP’s proposal to cut and then abolish APD during the referendum campaign, fearing it would cut passenger numbers. The measure was backed by Ryanair and British Airways. Newcastle airport protested about the SNP’s proposal to cut and then abolish the duty during the referendum campaign, fearing it would cut passenger numbers. The measure was backed by Ryanair and British Airways.
Labour was forced to drop proposals to take full control over housing benefit because it is an integral part of the universal credit single welfare payment. Instead Holyrood is expected to be allowed to vary housing costs, the frequency of payments and also direct payments to either the claimant or housing provider. Labour was forced to drop proposals to take full control over housing benefit because it is an integral part of the universal credit single welfare payment. Instead Holyrood is expected to be allowed to vary housing costs, the frequency of payments and direct payments to either the claimant or housing provider.
Labour sources said these concessions proved the party was listening to Scottish voters, who came close to backing independence. “We needed to show good faith, and show we understand that people voted for change,” said one. Labour sources said these concessions proved the party was listening to Scottish voters, who came close to backing independence. “We needed to show good faith and show we understand that people voted for change,” said one.
The SNP is expected to accept all the Smith proposals, but will insist on Thursday that Scotland needs far greater autonomy, particularly over taxation and welfare. The SNP is expected to accept all the Smith proposals, but will insist that Scotland needs far greater autonomy, particularly over taxation and welfare.
The Labour leadership will move to avoid an English backlash against favourable treatment for Scotland when Balls says that his devolution to England will see £30bn in budgets devolved to English city regions, as well as new powers to keep more of the business rate. Balls will say: “The next Labour government will radically devolve power and £30bn of funding over a parliament to city and county regions in every part of England. Devolution not just to cities, but across all our towns and county regions too.”
In a speech in Birmingham, he plans to say: “We will give groups of local authorities substantial new powers over back-to-work schemes, to drive house building, and to integrate, invest in and plan transport infrastructure.
“And a Labour Treasury will also allow city and county regions that come together in combined authorities to keep all the additional business rates revenue generated by growth.”