By Jonathan Davies

The Scottish Parliament should have the power to set its own income tax rates and band, according to a report on devolution.

The Smith Commission was set up by Prime Minister David Cameron after more powers were promised towards the climax of the Scottish independence referendum campaign.

The report also called for a share of VAT to go to Holyrood. And it suggested that Air Passenger Duty be fully devolved.

Lord Smith of Kelvin, who chaired the commission, identified five key recommendations:

- The Scottish Parliament should be given powers to set income tax rates and tax bands, and should be allowed to retain all revenue from income tax.

- The Scottish Parliament should be given powers to allow all 16 and 17 year olds to vote in Scottish elections.

- The Scottish Parliament should be given powers to create new benefits in devolved areas.

- The Scottish Parliament should be given fully devolved powers on benefits that support elderly or disabled people and their carers.

- The Scottish Parliament should be given a "formal consultative role" in the review of the BBC Charter.

Lord Smith said: "Taken together, these new powers will deliver a stronger parliament, a more accountable parliament and a more autonomous Parliament.

"The recommendations, agreed between the parties, will result in the biggest transfer of powers to the parliament since its establishment."

The recommendations will form the basis of legislation which will be published towards the end of January 2015.

David Cameron welcomed the report, saying "We are keeping our promise to the Scottish people".

Scottish reaction

But the Scottish Parliament was less enthusiastic. Scotland's Deputy First Minister, John Swinney, said: "Regrettably, the Westminster parties were not prepared to deliver the powerhouse parliament the people of Scotland were promised - under these proposals, less than 30% of our taxes will be set in Scotland and less than 20% of welfare spending will be devolved to Scotland.

"That isn't Home Rule - it's continued Westminster rule."

David Lonsdale, Director of the Scottish Retail Consortium, said:

“Lord Smith’s agreement with the political parties heralds a fresh chapter of devolution, with substantial additional powers and economic responsibilities for Holyrood and the Scottish Government.

“The retail industry is the country’s largest private sector employer, and the SRC will work to ensure those powers being devolved which affect the industry are implemented in a sensible and cost effective manner, in order to minimise administrative complexity and cost.

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