English taxpayers will pay less of a subsidy to Scotland under proposals laid out in a government report. The Calman Commission has concluded that a proportion of the £30bn annual block grant currently flowing from the Treasury to Holyrood should be substituted by giving Edinburgh the power to raise revenue through devolved taxes.

Recommendations for increased control over income tax and new powers over other taxes such as stamp duty and air passenger duty appear likely to be approved at Westminster.

The reforms would allow Holyrood to raise or cut income tax in Scotland with no upper limit on what could be charged. The aim is to make Holyrood more accountable with the Scottish Government expected to take major decisions on the balance between tax and spending.

Had the formula been in place for this year it would have meant a £5bn reduction in the block grant.

The Commission, in its long-awaited report Serving Scotland Better, says: “This new model of funding is within the tax system, is consistent with economic union and is suited for devolution.”

The report says that Holyrood should take control of a third of all tax raised in Scotland, including stamp duty, aggregates tax, air passenger duty and landfill tax.

Under the proposals in the report, UK income tax rates in Scotland would be set 10p lower at present, making them 10p for the standard rate and 30p for the higher rate, and the money raised would go to Westminster, sources said.

The Scottish Government would then levy a “Scottish income tax”, the proceeds of which would go to Scotland.

This would be an additional 10p if present overall rates were to remain unchanged, but there would be no upper limit beyond what was politically possible.

The catch is that the same variable rate would apply across all tax bands — so 11p on the basic rate, taking the present total to 21p, would mean 11p on the higher rate, taking it to 41p. This is intended to make it difficult for Holyrood to impose a disproportionate burden by hitting higher-rate taxpayers alone.

The Commission was set up by Labour, the Conservatives and the Liberal Democrats and is led by Sir Kenneth Calman, the former Chief Medical Officer for England.

It rejected the idea of devolving tax revenues from North Sea oil on the grounds that it would mean the Scottish budget being dependent on a resource which is volatile in price.

Times Recommends

• Should Knox’s trial even have reached the courtroom?
• All that glitters is not sold in Wright’s world
• Believe it or not, Big Brother is your friend