The Smith Commission report has delivered one of Britain's biggest taxation shake-ups in history (Source: Getty)
It has been labelled as the biggest shake-up to the UK’s taxation system in the modern era, but what exactly does the contents of the Smith Commission report mean for Scotland and the rest of England?
As had been expected
, the Smith Commission has recommended delivering to Scotland an unprecedented number of new powers including control over income tax rates and bands, as well as £3bn worth of welfare powers.
Talks between negotiators from the main parties at Holyrood carried on late into the night yesterday as a deal was finally agreed.
Ahead of the independence referendum in September, the leaders of Westminster’s three main parties came together to make a vow that extensive powers would be delivered to the Scottish Parliament following a “no” vote.
Yet the parties have since been split on the extent of what should be handed over. Meanwhile, the fallout from the report is likely to be felt in England where there have been calls for a similar devolution process.
What new powers have been recommended for devolution to the Scottish parliament?
Power to set income tax rates and bands. The Scottish Parliament will retain all income tax raised in Scotland
Power to give 16 and 17-year-olds the vote in Scottish elections
A number of new welfare powers including:
- Housing elements of universal credit
- Winter fuel payments
- The ability to create new benefits
- Sure start grant
- Disability living allowance
Personal independence payment
More power over the allocation of VAT receipts, but not the power to set VAT rates
Power to be able to nationalise rail franchises
Power over health and safety rules
Power over authorising fracking
New borrowing powers
What next? When will the new powers come into place?
The recommended new powers are expected to be rushed through by the main Westminster parties early next year.
They will form part of a draft legislation due to be published by 25 January.
What about the rest of the UK?
The significant number of powers that have been devolved to Scotland are likely to add fuel to the fire of calls for a similar devolution process in the rest of the UK.
Officials including London mayor Boris Johnson
and six Labour municipal leaders have already written to the UK government to work on a “comparable package of measures of local government in England.”
The Association of Certified Chartered Acountants has issued a warning in response to the Smith Commission that the devolution powers should be evaluated against the impact on the whole of the UK and be fair to both Scotland as well as England, Northern Ireland and Wales.
In Northern Ireland Stormont is expecting to be granted the power to vary corporation tax in order to compete with the Irish Republic.
How have the major parties reacted?
The Scottish National Party has welcomed the new powers coming to Scotland, but believes they don’t go far enough.
Deputy Scottish first minister John Swinney said that the Scotland still had a lack of job-creating powers or the powers needed to tackle poverty.
Swinney that the commission did not fulfill the vow made to the Scottish people by the main Westminster parties ahead of the independence referendum.
Regrettably, the Westminster parties were not prepared to deliver the powerhouse parliament the people of Scotland were promised. Under these proposals, less than 30 per cent of our taxes will be set in Scotland and less than 20 per cent of welfare spending will be devolved to Scotland.
That isn’t home rule - it’s continued Westminster rule.
Prime Minister David Cameron
today said he was “delighted” with the report and proclaimed that: “We are keeping our promise to the Scottish people.”
Annabel Goldie, the former Scottish Conservative leader, said at a press conference that the report marks “the next step in a very exciting future for Scotland.”
Labour had originally opposed the full devolution of income tax powers but has shifted its stance as Scottish support has flocked toward the SNP.
Former Scottish Labour leader Ian Gray welcomed the proposals and said they would make the Scottish parliament one of the most powerful devolved bodies in the world.
On the Today programme this morning former Labour Scottish secretary Jim Murphy said the party had reneged on its opposition to the income tax proposals after reflecting on the wishes of the Scottish people.
Murphy also described the commission as a “best of both worlds deal” as it still included the pooling and sharing of resources within the United Kingdom.
In contrast to Swinney and the SNP, Michael Moore of the Scottish Liberal Democrats argued that it went even further than what had been promised in the vow. He argued that the proposals in the Smith Commission report give “home rule for Scotland”.
Moore described it as a “great day for Scotland”.
In the business world, the Confederation of British Industry (CBI) said in the months ahead "we must remember the core strengths of the Union."
CBI director-general said: "Devolution must not undermine the integrity of the internal market but strengthen the environment for job creation, growth and inward investment across the UK.
"Businesses are pragmatic about plans to devolve income tax but it does raise significant practical questions that need answering. We cannot overlook the implications for firms with employees both sides of the border and issues like how PAYE works must be properly thought through. Attention must also be given to the impact on the administration of pensions tax relief."