THE Coalition Government is considering giving Holyrood the power to abolish the so-called bedroom tax if Scots vote to remain in the UK, it has emerged.

It is understood transferring control over the unpopular benefit cut is being examined at Westminster as part of a package to extend the powers of the Scottish Parliament in the event of a No vote in next year's independence referendum.

The bedroom tax reduces the amount of housing benefit people can claim if they are deemed to have a spare bedroom in their council or housing association home.

Discussing what powers could be given to Holyrood if Scots voted against independence, a senior government insider is reported to have said that devolving housing benefit was a real possibility.

"I think there is a feeling that as far as non-financial matters are concerned, there is not much more that can be devolved and the balance is about right," he said.

"That leaves taxation and welfare, and we have to look at where we can feasibly devolve more. There is an argument for devolving income tax further because the principle of devolving is in place with the most recent reforms.

"It is difficult to see how welfare could be devolved, but housing benefit is a possibility given the issues that have been raised about it recently."

Ministers in David Cameron's Government are believed to be increasingly concerned about how the bedroom tax has become a toxic issue for the Coalition.

Labour has pledged to abolish the tax if it wins the next UK general election, and the SNP has committed to ending it if Scotland becomes independent.

Last week Jackie Baillie, Scottish Labour's social justice spokeswoman, launched a Private Member's Bill to ban councils and housing associations from evicting those who cannot pay their rent because their housing benefit has been cut by the Westminster policy.