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MSP claims income tax deal could lead to 'independence by default'

SCOTTISH Labour's former finance spokesman Ken Macintosh has issued a stark warning against his own party's proposal to hand Holyrood full control of income tax.

In a move that threatens to reopen deep internal divisions, Mr Macintosh has urged colleagues to step back from plans to devolve income tax entirely to the Scottish Parliament if Scots reject independence in September's referendum. Writing in today's Herald, the Eastwood MSP warns the policy would reduce Scotland's revenues over the long term and edge the country towards "independence by default".

He made his views clear to senior party figures in a detailed submission to Scottish Labour's devolution commission - the group of MSPs and MPs, chaired by leader Johann Lamont, that is considering how to enhance Holyrood's powers if Scots vote to stay in the UK.

The plan to devolve income tax fully was unveiled in an interim report by the commission last spring. It caused a major rift within the party, which now threatens to resurface when final policy recommendations are presented at Scottish Labour's conference in Perth next month.

In a scathing assessment, Mr Macintosh questioned the idea that giving Holyrood more tax powers would make Scottish governments more accountable for the money they spend.

He also argued Scotland would lose out on the "redistributive effect" of sharing income tax throughout the UK.

He warned: "What really worries me about this proposal is that it would radically reduce our tax base and put us in grave danger of devolving so many powers that we effectively become independent by default."

Describing the present devolution settlement as an "equilibrium" agreed by the different nations of the UK, he added: "The welfare state, our NHS, provision for pensions and much more depend on a sense of shared national interest. Going too far in devolving tax or benefits risks fragmenting the system and breaking down that shared sense of our common future.

"For reasons of economic as well as political and social cohesion, we should continue to exercise joint decision-making on income tax."

In his submission to the party's ­devolution commission, Mr Macintosh backs some further devolution of powers, including control over the Crown Estate. But his attack on fully devolving income tax will rally devo-sceptics within Labour.

Most MSPs backed the proposal last year but a number of senior MPs, including Ian Davidson and Jim Sheridan, spoke out against it. The rift threatened to overshadow the party conference.

Some MPs approached Ed Miliband to try to block the plan. Ms Lamont later made it clear Scottish Labour was "minded" to back devolution of full control over income tax; which was interpreted by some as a backtrack.

One MP pointed out full devolution of tax powers would need Westminster's consent and said: "So, it will never happen."

Labour, along with the LibDems and Conservatives, is under SNP pressure to say what, if any, extra powers would be devolved in the event of a No vote in September. The three parties have promised to put their proposals to voters in the 2015 General Election, prompting Nationalist claims plans for further powers will be sidelined.

With surveys suggesting a beefed-up Holyrood would be more popular than either the status quo or independence, some pro-UK campaigners believe a joint "more powers" policy, agreed between the parties, could boost the No vote in the referendum.

But Mr Macintosh said: "There is pressure on us to have a devolution offer. But my belief is that if there is a No vote people will not want to talk about the constitution for a very long time."

Mr Macintosh became finance spokesman after losing the leadership contest to Ms Lamont in 2011, but was axed last year.

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