Holyrood will never use tax powers, says Darling

NEW powers allowing the Scottish Parliament to set a higher rate of income tax than the rest of the UK will probably never be used, former chancellor Alistair Darling has predicted.

The UK coalition government was today unveiling its package of extra powers for Holyrood, including control of airguns, speed limits and drink-drive limits, as well as stamp duty and the top 10p of each income tax band.

Scottish Secretary Michael Moore hailed the move as "the biggest transfer of fiscal power to Scotland since the creation of the UK". But the Scottish Government claimed the new powers do not go far enough and "short changed" Scotland.

Mr Darling backed the increased tax powers - which will come into effect in 2015 -but argued MSPs were no more likely to put up income tax now than they had been with their more limited powers since the start of devolution in 1999.

He said: "My guess is the Scottish tax rate won't be very far away from the rate in the rest of the UK for obvious reasons. It would be incredibly difficult for businesses if they have to deal with different tax rates and work out who has to pay which rate."

Up until now, Holyrood has had the power to vary the basic rate of income tax up or down by up to 3p in the pound, but it has never done so.

Under the proposals being unveiled today, the UK government will cut 10p from income tax rates north of the border, reducing Scotland's block grant accordingly, and it will then be up to MSPs to vote on whether to reimpose that 10p, set a lower rate or a higher one. They will not, however, be able to vary tax bands or levy a bigger increase on the top band.

Mr Darling said the change was a "worthwhile reform" because it meant the Scottish Parliament would be forced to set a tax rate, even if it was the same as the UK one, thus accepting responsibility for raising money as well as spending it. But he said he had never expected the parliament to use its 3p power and did not expect it to take up the new opportunity to raise taxes either.

"I don't think it will happen," he said. "Scottish people would be reluctant to pay more and it would have repercussions on businesses.

"It's also not a great advert to say 'Come to Scotland and pay more tax'. It's right the powers are there, but any government will think long and hard before using them."

The extension of devolution is based on the recommendations of the cross-party Calman Commission.

The Bill setting out the new powers was being introduced at Westminster today but will be debated in the Scottish Parliament as well as by MPs.