THE Scottish Government will set and keep all the income tax raised in Scotland from as early as 2018, under plans revealed by Scottish Secretary David Mundell.

Holyrood will become responsible for setting income tax rates and bands as part of a wide-ranging package of powers to be devolved as part of the new Scotland Bill.

Mr Mundell said he hoped the government would be able to use the income powers in three years' time.

He said: "We are trying to do this as quickly as possible, so 2018 would not be an unreasonable objective."

Mr Mundell said the Scotland Bill should become law by February.

After appearing before MSPs on Holyrood's devolution committee, he said: "By the next Scottish election everybody should be clear what powers the parliament is going to have in the course of the next parliament.

"There should be a proper debate about tax and welfare issues so people know what the SNP are proposing.

"They are asking lots of process questions about the Scotland Bill but what we don't have is any detail on what the Scottish Government would do differently.

"People need to know, for example, if benefits are going to be topped up, how is that to be paid for?"

Holyrood will take control over taxes worth £11billion, in addition to receiving a £4billion share of VAT raised in Scotland.

The parliament will also take on a £2.5billion welfare budget.

MSPs will be responsible for disability and work-related benefits and will gain the power to top-up UK benefits.

Mr Mundell yesterday dismissed claims from SNP MSPs that UK ministers would retain a veto over decisions.

But the SNP's Linda Fabiani, a member of the devolution commission and one of her party's negotiators in last year's Smith Commission process, said: "Even by David Mundell's standards, his appearance before the Committee was embarrassing, as the Secretary of State blundered his way through the meeting while his government's watering down of the Smith agreement was completely exposed.

"From failing to include some key powers over social security to seeming to maintain a veto for the UK Government on some areas, the Tories' weakening of the Scotland Bill is clear for all to see."