Give Scotland more power over welfare, Labour and SNP tell the Tories

Labour is set to join forces with the Scottish National Party by demanding more powers for the Scottish Parliament over welfare than the Conservative Government is proposing.

Only a month after the SNP tide swept away all but one of Labour’s 41 seats in Scotland, Labour and the SNP will both table amendments to the Scotland Bill calling for Holyrood to have more say over state benefits. Both parties agree that the Scotland Bill, which implements the all-party Smith Commission report last November, does not go far enough.

Labour’s proposed changes include giving the Scottish Parliament the final say on benefit rates, with a power to create new state payments and the right to top-up existing ones. It wants full devolution of housing benefit. Ian Murray, the shadow Scottish Secretary and sole Labour MP north of the border, said: "The final say on benefits paid in Scotland should be made in Scotland. The UK-wide welfare state should act as a minimum level of protection that we can top-up from our own resources if that's what Scots want."

The SNP amendment to the Bill, which has its second reading in the Commons, says the measure is an “inadequate response to the election result in Scotland” and calls for more devolved powers on welfare, job creation, taxation and the national minimum wage.

Although the Conservatives could use their Commons majority to defeat demands from opposition parties, they do not have a majority in the House of Lords, where it is possible that Labour could win support for further devolution.

Despite their common ground on welfare, Labour accused the Nationalists of diluting their policy for Scotland to enjoy full tax and spending powers. The SNP amendment says Scotland should be responsible for all revenue raising “in the medium term.”

Labour claimed the Nationalists were “sprinting away” from full fiscal autonomy because it would leave an £8bn “black hole” and spell the end of the Barnett formula, which ensures Scotland enjoys more public spending per head than the UK average. Mr Murray said: “The SNP knows its policy would be a disaster for Scotland, they just won’t admit it. It has barely settled into its Westminster offices before abandoning it.”

The SNP insisted its immediate priority is on welfare, jobs and the economy and accused other parties of misrepresenting its position on tax.

John Swinney, the SNP Deputy First Minister, will urge George Osborne to drop “unnecessary and ideologically driven" spending cuts in talks in London. But the Chancellor is expected to tell the SNP to “put up or shut up”, challenging it to use new powers to raise taxes which take effect next year.

David Mundell, the Scottish Secretary, said: "The fact the Scotland Bill is the first piece of legislation to be debated in this new session sends a clear and strong signal of our intent to get on with the business of delivering significant new powers for Scotland."