Scottish Parliament could reverse Tory benefit cuts ‘as early as 2017’

David Mundell
David Mundell

The Scottish Government will have the power to reverse cuts to working tax credits in Scotland as early as 2017, according to a senior Whitehall source.

Scottish secretary David Mundell has said that the UK government would like to see the new powers for the Scottish Parliament come into force “as soon as possible”.

However, a senior source has told The Scotsman that changes by the UK government to the Scotland Bill will also allow Scottish ministers to top up any benefit and create new benefits in devolved areas.

According to the source, Scotland could restore Chancellor George Osborne’s planned cuts to working tax credits before full welfare powers in Scotland to come into place in 2018, if the Scottish Government was willing to raise taxes for it.

The government source said: “We will be putting out a written statement confirming that if the Scottish Government wants to restore tax credits it can.

“They will have to pay for it either through using the new tax powers to raise revenue or by making cuts elsewhere and they will have to explain their decisions to Scottish voters.”

The source went on: “We will also be clarifying the language in the bill to make sure that there is no doubt the Scottish Government can create any benefit they want in devolved areas. This will allow them to reshape the welfare system in Scotland if they want to, but, as they are beginning to realise, this takes time to do.

“The limits mean that they will not be able to change the state pension but, for example, if they want to create a benefit to help prisoners after they have been released or help a single parent return to work then they could.”

The clarification will also mean that the UK government will make it clear it has no veto on the new powers.

The source said: “We do not accept that there is a veto but we will change the language to make that clearer.”

Mr Mundell will tell the Conservative Party conference in Manchester that the UK government is keen to see Holyrood’s new income tax powers commence in 2017, earlier than had been expected.

It could make taxation a major issue in next year’s Holyrood election campaign as the Scottish Government elected in May would have to set out its plans for the new powers in its first Budget.

Mr Mundell will say on Wednesday: “Because we know that the new tax powers are at the heart of the devolution package in the Scotland Bill, we want them to come on-stream as soon as possible. I would like that to be in 2017.

“The final date for the transfer will be agreed between both of Scotland’s governments as part of the fiscal framework negotiations, which are on-going. But we think 2017 is an achievable and desirable time for these new powers to take effect.

“It would mean that the Scottish Government elected next year would have to include plans for these new powers in its first budget.

“So when people in Scotland go to the polls next year, the parties will need to present their plans for income tax. And they’ll need to be honest about what they will mean for Scottish taxpayers.”

Dr Eilidh Whiteford MP said the only way that the Scottish Parliament would have the ability to adjust tax credits fairly and simply, and without having to ask the permission of the Department for Work and Pensions, would be through complete control of Universal Credit.

The SNP’s social justice spokesperson has written to Mr Mundell seeking confirmation that the UK government will amend the Scotland Bill to devolve complete control over Universal Credit.

Dr Whiteford said: “The Scotland Bill in its current form limits the ability of the Scottish Government to use the additional powers it proposes and retains vetoes for UK government ministers. Scotland needs more powers over social security to tackle poverty, inequality and help those who need support the most.

“350,000 children in Scotland will be badly hit by the tax credit changes coming in to force, and we want the power in Scotland to pull children and families out of poverty.

“This can only be done if we have full control over Universal Credit.

“Mr Mundell voted against the removal of the Secretary of State veto on changes to the Universal Credit, voted against powers to create new benefits, and voted against the devolution of Housing Benefit which is an element of Universal Credit – but now he says that Scotland should have the power to adjust tax credits.

“Overwhelmingly, civic Scotland has said that social security powers should be in the hands of Scotland to allow us to protect children and low income families. The Secretary of State now needs to put up or shut up and show us the amendments they are planning.”

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