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Scotland set to gain landmark powers over income tax and welfare

27 Nov 2014

The Scottish Parliament is set to gain almost complete control over income tax rates and bands and welfare spending, following the recommendations of the Smith Commission.

However, HM Treasury will retain control of personal allowances and the taxation of savings income and dividends.

The Smith Commission was set up by the UK Government following the ‘No’ vote on Scottish independence. In the words of Lord Smith of Kelvin, the recommendations set out in its report ‘will result in the biggest transfer of power to the Scottish Parliament since its establishment’.

The report recommends that the Scottish Parliament should gain the power to set income tax rates and bands on earned income, and to retain all of the income tax raised in Scotland.

Meanwhile, a share of VAT revenue is also set to be assigned to the Scottish Parliament, while Air Passenger Duty will be fully devolved.

The Scottish Parliament will also be made permanent in UK legislation, and granted new powers over how it is elected and run, including the power to allow 16 and 17-year-olds to vote.

In addition, Scotland will gain the power to create new benefits and make discretionary payments in any area of welfare. A number of benefits, including those affecting the elderly, carers and those who are ill will be fully devolved.

The UK Government will produce draft legislation based on the recommendations of the report. The legislation is set to be published by 25 January 2015.