News story

Milestone reached for Scotland Act

This news article was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Landmark in Scottish devolution process welcomed by Alistair Carmichael.

Today marks a major milestone in the continuing road of Scottish devolution the Scottish Secretary Alistair Carmichael has said.

Major financial changes introduced as part the Scotland Act 2012 will begin to take effect in one year from today. They will increase the accountability of the Scottish Parliament to the voters who elected it for raising revenue, as well as making decisions about how it is spent. These changes will mean that the Scottish Parliament will be responsible for funding around a third of devolved spending – roughly double the amount it currently funds.

Mr Carmichael said:

The Scotland Act provides the largest transfer of financial powers to Scotland in over 300 years. The Act received the unanimous support of both the UK and Scottish Parliament building on and strengthening the great success that is devolution.

The Scotland Act devolves significant tax powers including the ability to set a new Scottish rate of income tax and gives the Scottish Government access to substantial borrowing powers. New powers bring new accountability and new responsibilities. To the people of our country, Holyrood will be more responsible and more accountable than ever before for the money it raises and for the money it spends.

Today marks a major milestone in the continuing road of devolution. As part of the United Kingdom, Scotland has got the best of both worlds: a strong Scottish Parliament with financial powers that can take decisions on those things that affect our everyday lives, like our schools and hospitals and we can pool our resources ensuring we benefit from a strong UK economy that is growing and creating jobs.

The powers which come into effect on April 2015 are:

  • The full devolution of stamp duty land tax and landfil tax from April 2015. The Scottish Government has taken forward legislation to replace these taxes in Scotland with the Land and Buildings Transaction Tax and Scottish Landfill Tax. It is also taking forward legislation to establish Revenue Scotland as the tax administration responsible for the collection of the new taxes.

  • Extended current borrowing powers of up to £500m and creation of a new Scottish cash reserve to help manage the new tax receipts.

  • A new £2.2bn capital borrowing power for the Scottish Parliament, with a limited version of the power in place from April 2013 to enable the Scottish Government to fund £100m of pre-payments for the Forth Road Crossing.

The powers which come into effect from April 2016 are:

  • A new Scottish rate of income tax. The basic, higher and additional rates of UK income tax will be reduced by 10 pence in the pound for Scottish taxpayers. The Scottish Parliament will set a new Scottish rate – with no upper or lower limit - which will apply equally to all of the reduced main UK income tax rates.

  • For example, a UK basic rate at 20 pence would be reduced down to 10 pence, and a Scottish rate of 9 pence would see Scottish taxpayers instead paying 19 pence per pound at basic rate.

  • The block grant to Scotland will be reduced by an amount corresponding to the 10 pence in the pound reduction on the UK rate of basic, higher and additional tax. This will mean that a Scottish rate of 9 pence would see a reduction in income for the Scottish Government, while a rate of 11 pence would see an increase as compared with current arrangements.

  • The Act also introduced a power to create new devolved taxes, by a process of agreement between the two governments. This power has been in force since May 2012. The Scottish Government has not yet made any proposals to create new devolved taxes using this power.