The Scottish government will be granted powers to be able to “top up” welfare payments including for tax credits and child benefit, David Mundell has said.
The Scottish secretary insisted that the Scotland Bill – currently completing its passage through the Commons – would usher in a “new era of devolution”.
Under the Bill, MSPs will be granted powers to set income tax rates and Mundell said the Bill would also allow Scotland to top up existing benefits and introduce new benefits in devolved areas.
Ahead of talks between the Scottish and UK governments today, Mundell said:
"Scottish government ministers will be able to design a significant part of Scotland's welfare system and control income tax to pay for it.
"If they want to top up existing benefits, they will be able to. If they want to introduce payments to those in short-term need or design new benefits in those welfare areas being devolved that will also be an option available to them.
"Powers in the Scotland Bill ensure Scottish parliament will have the means to pay for any changes, but it will have to justify them to the public, as under the new arrangements, income tax raised in Scotland will stay in Scotland and be spent in Scotland."
However, Scotland's deputy first minister John Swinnry said there was a "significant amount of doubt" over Holyrood's ability to reverse the cuts to tax credits unveiled by chancellor George Osborne in the summer budget.
He told the Herald: "We'll do everything in our power and the resources available to us to tackle the issues... but the cumulative effect of the reductions in benefits in Scotland will be of the order of £6 billion by the end of this decade."
Last week former Labour prime minister Gordon Brown accused the government of risking “blowing the union apart” after failing to devolve power to increase welfare payments to Holyrood.
Westminster must also withdraw any threat to block the extra payments, Brown said in a speech at Glasgow University.
The Labour grandee argued that failure to meet those demands would be a "double betrayal" of the cross-party Smith Commission, which proposed substantial new powers for the Scottish parliament.