Osborne Updates MPs On Scotland Tax

The Chancellor will update MPs today on plans to devolve extra powers on tax and spending to Scotland.

George Osborne will appear before the Commons Treasury Select Committee with the Government expected to publish its draft legislation for further devolution later this week.

The cross-party Smith Commission on further devolution, which was established after Scots voted against independence last year, recommended Holyrood should be able to set its own income tax rates, with all of the cash earned staying north of the border.

But while the agreement states there should be ''no restrictions on the thresholds or rates the Scottish Parliament can set'' on income tax, it said all other aspects would remain reserved to Westminster, including the amount people can earn before they start to pay the charge.

The commission also backed the devolution of air passenger duty and suggested a share of cash raised from VAT be assigned to Holyrood.

The Chancellor will be joined at the committee by the Treasury's senior civil servant, permanent secretary Sir Nicholas Macpherson.

It is expected that draft legislation to implement the Smith Commission proposals giving Holyrood the new powers over income tax and welfare will be unveiled by the UK Government on Thursday - ahead of the January 25 deadline.