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Scottish independence: PM backs giving Holyrood income tax power
Scottish independence: Cameron backs giving Holyrood income tax power
(about 9 hours later)
Proposals for Scotland to cut income tax rates lower than the rest of the UK have the backing of David Cameron and George Osborne, the Scottish Conservative leader Ruth Davidson has disclosed.
David Cameron has backed plans for Scotland to raise and set its own income tax rates, including the freedom for the first time to cut taxes below the rest of the UK.
Davidson said giving the Scottish parliament complete control over tax rates on personal income would be in the party's manifesto for the 2015 general election in the event of a no vote in September's independence referendum.
The prime minister said these proposals, published by Scottish Tory leader Ruth Davidson on Monday, would offer Scottish voters "real powers with real consequences" if they voted no in September's independence referendum.
The prime minister "stands foursquare behind the income tax proposals", Davidson said. "I have spoken directly to the prime minister and the chancellor of the exchequer and there is political will for this to happen."
The new powers, potentially including new freedoms to control housing benefit and spend Scotland's share of VAT receipts, were described by Davidson as a radical and "thoroughly Conservative vision" for greater devolution.
Davidson said she would immediately propose cutting Scottish income tax rates by one penny at the next Scottish election in 2016, using more limited tax varying powers due to come into force in 2016 to amend UK income tax rates by up to 10p in the pound.
"We want to make the Scottish parliament more responsible for the money it spends – these are real powers with real consequences," the prime minister said.
Davidson added that Cameron also backed proposals to consider handing Holyrood control over housing benefit and attendance allowance if that could be done without undermining the new universal credit system for social security.
"We can now say clearly that, with a no vote this September, Scotland can have the best of both worlds: a strong and responsible Scottish parliament underpinned by the security of the whole United Kingdom."
She said that would also allow Scotland to abolish the bedroom tax – a tax introduced by the Tory-led coalition government in London.
The proposals represent a significant shift in Tory thinking on devolution. Cameron has already signalled that he is in greater favour of devolution than any previous Tory prime minister as he attempts to confront growing support for independence amongst Scottish voters.
Cameron gave his blessing in a formal statement issued by Number 10, saying the Strathclyde commission had produced clear and coherent plans. Davidson wanted them implemented, he said, adding: "I agree with her."
With just over 100 days to go before the referendum on 18 September, a further poll confirmed that the gap between yes and no has narrowed, while leaving the pro-UK campaign firmly in front.
"We want to make the Scottish parliament more responsible for the money it spends – these are real powers with real consequences.
The poll by Ipsos Mori for STV found that support for independence has grown since February by four points up to 36%, while support for the UK has declined three points to 54%. Removing the 10% who were undecided, the poll showed a significant and clear lead for the pro-UK Better Together campaign, with 60% saying they would vote no against 40% yes.
"We can now say clearly that, with a no vote this September, Scotland can have the best of both worlds; a strong and responsible Scottish parliament underpinned by the security of the whole United Kingdom."
The results came out as a split emerged in the no camp after Gordon Brown, former prime minister and Labour leader, accused Cameron's government of a tactical error by allowing its decision to veto Alex Salmond's proposal for a sterling currency union to come across as a "Scotland versus Britain" conflict.
Giving Scotland full control over raising rates and setting bands for income tax, on personal income but not on share dividends and savings, would allow Holyrood the power to raise 40% of its spending.
Brown is due to launch the Scottish Labour party's official anti-independence campaign in Edinburgh on Tuesday morning, and in an interview with the Daily Record said he understood why Scottish voters reacted badly.
The measures are at the centre of an 18-page report from a Scottish Tory commission on increasing devolution led by Lord Strathclyde, the former leader of the House of Lords, set up to counter first minister Alex Salmond's push for independence.
"Patriotic Scots need a better reason for supporting what I think is a positive statement and belief – that we can have a strong Scottish parliament and still be part of the United Kingdom," Brown said.
Strathclyde said: "If Scotland votes no in the forthcoming referendum, we believe that the UK and the countries and nations within it need to operate and be at ease with themselves. We therefore need to devolve in tune with the past, make the glue which binds the union stronger."
"But if the only propaganda that comes from the Conservatives is 'Britain says no', it's bound to have a reaction in Scotland. It is bound to make people feel that people are talking down to us or are not taking us seriously or are trying to bully us."
The report is the third and final devolution reform document from the three pro-UK parties as they seek to provide Scotland's voters with concrete alternatives to full independence.
Davidson, who has previously resisted any further tax control for Holyrood beyond modest powers to vary income tax by 10p in the pound which come into force in 2016, said she would campaign for an across-the-board 1p tax cut at the 2016 Scottish elections using those extra powers.
Labour, the Tories and Liberal Democrats have already passed limited powers for Holyrood to vary the UK rate of income tax by up to 10p in the pound, which come into force in 2016. However, Tory support for full devolution of income tax – a measure already proposed by the Scottish Liberal Democrats – puts Scottish Labour on the defensive and raises the prospect of battles between the pro-UK parties over how far devolution can go if Salmond loses the referendum.
The Tory proposals – which echo proposals from senior Welsh Tories for the Welsh parliament – would need Labour and Liberal Democrat support before being implemented, but deep differences are emerging between them.
After first floating full income tax devolution, Labour's final proposals rejected it, claiming that it would promote cross-border tax competition, allow taxes to be cut and cause too many technical difficulties for pensions, savings and share income.
With the Lib Dems offering a wider range of extra tax powers, Labour has said it would resist giving Scotland full control over income tax to avoid "a race to the bottom" where Scotland could compete with England on tax cuts.
Lord Strathclyde said his commission had recognised the problem with pensions, savings and share income and so had excluded them from his proposals. Holyrood, he said, should simply control income tax on salaries and wages, using the new tax system which would be run by the new tax agency Revenue Scotland.
The new Tory proposals, set out in a report from Lord Strathclyde, former Conservative leader in the House of Lords, would give Holyrood complete control over personal income-tax policy in Scotland, equivalent to about 40% of the devolved parliament's £30bn budget.
Strathclyde and Davidson said these proposals would allow the Treasury's controversial Barnett formula for setting UK government funding of Scottish spending to remain intact, since it would just mean the Treasury grant would be cut in line with the income tax raised in Scotland. Many Labour, Tory and business leaders in England and Wales want the Barnett formula scrapped or wholly reformed.
Strathclyde suggested the Tories could support Labour plans for housing benefit and attendance allowance to be devolved, worth approximately £2.2bn, but only if that did not wreck the new universal credit system being introduced by the work and pensions secretary, Iain Duncan Smith.
Davidson admitted she and the commission had failed to persuade Downing Street to allow Scotland to take control over air passenger duty: she said she wanted it abolished, but that was rejected by her colleagues in Westminster and the Treasury.
The report also proposed allowing Scotland to spend its share of the UK's VAT receipts, but not to devolve them. That would be illegal under EU VAT rules, which require the tax to be set at national member state level. That would be equivalent to about 50% of Holyrood's budget.
Speaking at a Newark byelection rally on Monday, Cameron also insisted an independent Scotland would need to join the back of the EU queue behind western Balkans applicants like Macedonia and Serbia – a claim many EU experts dispute.
"If Scotland votes no in the forthcoming referendum, we believe that the UK and the countries and nations within it need to operate and be at ease with themselves," Strathclyde said. "We therefore need to devolve in tune with the past, [and] make the glue which binds the union stronger."
Cameron told a Scotland-born worker at the electrical goods warehouse it had become "clearer and clearer" since the referendum campaign began that they would need to reapply to join the EU.
"And as such, as an independent country, they would have to queue up as it were behind other countries, for instance those in the western Balkans, that are already on the path towards membership," he said.
