Holyrood is to be handed new responsibilities over income tax and welfare as part of a deal on devolution drawn up in the aftermath of the Scottish independence referendum.
The Smith Commission, which was set up to examine what further powers could be transferred to Edinburgh, has recommended that the Scottish Parliament should be able to set its own income tax rates, with all of the cash earned staying north of the border.
The commission also backed the devolution of air passenger duty, something the SNP has been campaigning for, and suggested a share of cash raised from VAT be assigned to Holyrood.
The Scottish Parliament should be allowed to create new benefits in areas where it has devolved responsibility, but should also be given the power to make discretionary welfare payments in any other area, while a range of benefits that support older people, carers and the sick and disabled could be fully devolved, the report said.
The commission called for legislation to make Holyrood a permanent feature of the UK’s political set-up, and proposed it be given powers over its own elections, which could pave the way for 16 and 17-year-olds to vote in Scottish Parliament elections after they were allowed to take part in the independence referendum.
Commission chairman Lord Smith of Kelvin said: “Taken together, these new powers will deliver a stronger Parliament, a more accountable Parliament and a more autonomous Parliament.”
Speaking as the commission unveiled its proposals in Edinburgh, he added: “The recommendations, agreed between the parties, will result in the biggest transfer of powers to the Parliament since its establishment.”
Prime Minister David Cameron had announced the establishment of the commission within hours of the result of September’s independence referendum.
The contents are the result of more than a month of cross-party talks with representatives from each of the Scottish Parliament’s five political parties.
While the SNP, Liberal Democrats, Conservatives and Greens all favour the full devolution of income tax, Labour has officially only backed Holyrood having control over some of the tax, with former prime minister Gordon Brown warning that full control would be a ‘’Tory trap’’.
Lord Smith said today the agreement was “an unprecedented achievement” because it had “demanded compromise from all of the parties”.
He said: “In some cases that meant moving to devolve greater powers than they had previously committed to, while for other parties it meant accepting the outcome would fall short of their ultimate ambitions.
“It shows that however difficult, our political leaders can come together, work together and reach agreement with one another. I pay tribute to them for doing just that.”
Lord Smith’s recommendations, known as a Heads of Agreement, will form the basis of draft legislation due to be published by January 25.
The main parties at Westminster have pledged that the legislation will be taken forward regardless of the outcome of the general election in May.