A WAR of words has broken out between Nicola Sturgeon and David Cameron over legislation to hand Holyrood sweeping new powers.

The Prime Minister yesterday unveiled draft legislation to deliver the devolution package agreed by the parties in the Smith Commission process.

He insisted it fulfilled "every dot and comma" of the pro-UK parties' high profile referendum pledge to give Holyrood extensive new powers over tax, welfare and borrowing, and said its publication marked "a great day for Scotland and a great day for our United Kingdom".

However First Minister Ms Sturgeon claimed the proposed measures would limit Holyrood's ability to create new benefits and give UK ministers a veto over moves to alter the new Universal Credit in Scotland, including changes intended to end the so-called bedroom tax.

The charge was rejected by the Prime Minister but Ms Sturgeon said: "In these crucial areas the clauses set out today appear to be a significant watering down of what was promised by the Smith Commission and need an urgent rethink by the UK Government."

She also claimed Holyrood could lose UK funding for major building projects as a result of gaining greater power to borrow money.

Her comments were backed by the STUC, which criticised the Smith proposals when they were announced in November.

General Secretary Grahame Smith said: "This further watering down of the promise that was made to voters in Scotland is unacceptable."

Ms Sturgeon raised her complaints during a brief meeting with the PM at Holyrood.

As the row threatened to overshadow the Prime Minister's first visit to Scotland since the referendum, Mr Cameron told an invited audience at Edinburgh's Our Dynamic Earth attraction: "I want to put it beyond any doubt that Scottish ministers, the Scottish Parliament, have the absolute ability to change that aspect of Universal Credit should it wish to."

Alistair Carmichael, the Scottish Secretary, accused Ms Sturgeon of seeking to undermine the Smith agreement - which was endorsed by the SNP - and of showing a "total lack of respect" for the outcome of the referendum.

He called on the Nationalists to set out how they would use the new powers.

A Government source said, far from having a veto, UK ministers could be sued by their Holyrood counterparts if they blocked requests unreasonably.

The row is set to intensify as the General Election draws closer.

The SNP have already placed greater devolution at the heart of their campaign, saying they will demand "devo max" - control of all policy areas apart from defence, foreign affairs and the currency - if they hold the balance of power after May 7.

The Conservatives, Labour and the Lib Dems, meanwhile, are determined to show they kept their promise to strengthen Holyrood.

The draft legislation was published within a UK Government command paper titled: Scotland in the United Kingdom - an enduring settlement".

As signalled in the Smith agreement, Holyrood will gain almost full control over income tax, receive half the VAT raised in Scotland, assumer greater powers to borrow money and take responsibility for Air Passenger Duty, the tax on flights.

Scottish ministers will become responsible for a number of disability and carers' benefits and gain the power to make their own welfare payments.

The legislation - which has the backing of all the main UK parties - will be passed by January next year at the latest, Mr Carmichael said, though some of the powers could take a number of years to implement.

However, when the measures are in place, Holyrood will be responsible for raising 60 per cent of the money it spends.

Mr Carmichael said the Scottish Parliament would be the "third most devolved parliament in the world" after the provinces of Canada and cantons of Switzerland.

Former Prime Minister Gordon Brown, who devised the tight timetable for producing the draft legislation, said: "It is now clear that the issue is no longer about whether the vow (on more powers) is being delivered - it is being delivered - but how the powers are used."

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