CARTER BAR, SCOTLAND - MARCH 12: A vehicle passes the welcome to Scotland sign on the A1 on March 12, 2014 in Scotland. A referendum on whether Scotland should be an independent country will take place on Thursday 18 September 2014. (Photo by Jeff J Mitchell/Getty Images)
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The Conservatives will on Monday offer Scotland control of income tax in a rethink of decades of party policy that it hopes will persuade swing voters to reject independence in September’s referendum.

The main findings of a report commissioned by Lord Strathclyde, the former leader of the House of Lords, for the Scottish Conservative party will call for Holyrood to be given more power to decide Scottish income tax bands and rates, according to a person familiar with the report.

If such powers were devolved, this would make Holyrood responsible for raising much more of the revenue it spends, giving members of the Scottish parliament more power to set higher or lower tax rates than the rest of the UK.

Party officials declined to comment on the commission’s conclusions. But in an opinion piece for the Scotland on Sunday newspaper, Ruth Davidson, Scottish Conservative leader, said the parliament’s current limited powers over tax were destabilising, and that making Scotland more responsible for raising the money it spent would strengthen the UK as a whole.

“We cannot continue with a pocket-money parliament, which gets its allowance from Westminster and then spends it as it pleases,” Ms Davidson said. “We must move to a new system that brings real accountability to Scotland’s politics. In short, the buck must stop at Holyrood.”

The Conservatives are the last of the three main UK parties to reveal detailed plans for more powers to be devolved to Scotland if it rejects independence on September 18.

Endorsement of the Strathclyde report would mean that the Tories have been bolder on devolution than Labour. In March, the opposition party said Scotland should be given greater control over income tax rates, but barred from cutting them only for wealthier individuals.

Full control over bands and rates would in theory allow Scotland to make income tax more or less progressive, with some Labour leaders suggesting the ability to cut rates for the rich could lead to a “race to the bottom” with Scotland competing with the rest of the UK to attract wealthy individuals.

The Labour offer was the result of a successful effort to bridge deep differences in the party over the transfer of powers from Westminster. Being outflanked by the Tories will be highly uncomfortable for Scottish leaders who have sought to portray Labour as the party of Scottish devolution.

The Strathclyde report marks the completion of a Conservative U-turn on devolution. The party fiercely resisted the creation of the Scottish parliament in the 1990s and Ms Davidson won election as Scottish leader in 2011 on a pledge to draw a “line in the sand” against further transfer of powers to Edinburgh.

Scotland already has the power to vary the rates of existing income tax bands by up to 3 percentage points and this will increase to 10 percentage points from 2016 under legislation that also gives Holyrood control of stamp duty and landfill tax. 

But Scotland’s existing control over income tax has never been used and some analysts say it would remain politically difficult to make major changes in policy within the UK, even if greater powers were granted.

“I think it’s unlikely they would be used in a dramatic fashion,” said Nicola McEwen, associate director of the ESRC Scottish Centre on Constitutional Change. “I can see them being used in a small way. There will be pressures for parity.”

Annabelle Ewing, SNP member of the Scottish parliament, said the Conservatives could not be trusted to deliver if Scotland voted ‘No’.

Opinion polls suggest that further devolution enjoys wide support in Scotland and that some undecided voters are more likely to vote ‘No’ if they think this would still lead to strengthening of the Scottish parliament.

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