A SCOTTISH parliament which used its powers to cut income tax would get less funding from Westminster, the Government admitted .

Lord MacKay said: "We saw last week in The Scotsman that the Government is in some disarray about this part of their proposals. That may well explain why they are so reluctant to give a date for publication of the white paper. I have little doubt that in order to run this Scottish parliament another 1p on the standard rate of tax will be needed."

However, Lord Sewel, a Scottish Office minister, stated a Scottish parliament would have tax-varying powers linked to income tax.

Lord Sewel added: "If the Scottish parliament decided to increase tax, the Inland Revenue will collect the extra tax and it will be paid over to the Scottish parliament by the United Kingdom Government. If the Scottish parliament decreases tax, the Inland Revenue's overall total will be reduced and to reflect this the overall level of resources passed to the Scottish parliament by way of block grant will be reduced."