Scotland would be able to mitigate Conservative cuts to tax credits or other welfare under Labour and SNP plans to give Holyrood the power to create new benefits and top up existing payments, the shadow Scottish secretary has said.

Ian Murray said Labour amendments to the Scotland Bill, some of which are backed by the SNP, would effectively give the Scottish Parliament the power to design its own welfare system.

If MPs pass the proposals in the Commons, Scotland would be able to therefore create additional benefits to lessen the effect of welfare cuts by the UK Government, for example reported Tory plans to cut tax credits, Mr Murray said.

Moving a series of amendments, the Labour frontbencher said: "New clause 31 (one of the amendments) is a provision that allows the Scottish Parliament to top up any reserved benefit in the United Kingdom and create any benefit in devolved areas.

"So there would be an ability to create a system that allowed you to mitigate the reduction in tax credits.

"Tax credits in terms of the system as I understand it isn't a benefit, they are done through the income tax system.

"So in terms of topping up tax credits would be out of the scope of this particular arrangement but there's no reason why an additional benefit couldn't be put in place for people who are in work and have children as an example in terms of our new clause 31."

Mr Murray said that Labour's amendments would implement the recommendations of the cross-party Smith Commission in spirit and in substance while ensuring the welfare state remains UK-wide and allows the pooling and sharing of resources across the union.

He said: "I want to be clear that fundamentally our amendments will ensure that the Scottish Parliament has the unrestricted power to create any new benefits in areas that are devolved, in addition to the guarantees of the UK benefits and pensions system and the power to top up any benefits that remain reserved to this Parliament.

"This wide-ranging power effectively gives the Scottish Parliament the power to design their own welfare system in its entirety.

"However unlike others we are determined to ensure the welfare state remains an integrated UK-wide system of social security to allow for the continued pooling and sharing of risks and pooling and sharing of resources."

Labour's Graham Allen (Nottingham North) spoke in favour of his amendment to allow the Scottish Parliament to provide discretionary housing payments in cases which might be regarded as arising from non-payability of a reserved benefit.

He said: "But if your claim had been wrongly suspended... you would be put in a worse position as you would also lose discretionary housing payments. If the rhetoric about trying to get people back into work, about making work pay is meant, then clearly making people suffer a sort of double dis-benefit goes in the face of trying to help individuals back into work.

"It is a catch all, it is a broad brush, it is insensitive."

Dr Eilidh Whiteford, SNP Westminster spokesperson on social justice, said her party's series of amendments would "ultimately improve our social security system by making sure that the provisions are tailored to our needs and circumstances and fit with our policy objectives".

The Smith Agreement she said recommended that powers should be devolved over benefits for carers, disabled people and those who are sick.

On the last day of the last Parliament she added the work and pensions select committee called for a root and branch review of the sanctions regime.

She said: "Now the reason they did that should be self-evident to every single member of this House because we've seen repeatedly how people, the most vulnerable people in our communities are falling foul of that sanctions regime.

"People with mental health problems are being disproportionately sanctioned, single parents are being disproportionately sanctioned, and members in this House who can turn up five minutes late to meetings all over this place don't lose their pay because of that.

"So why should the most vulnerable, the disabled people in our communities be subject to that?"

Dr Whiteford added: "I absolutely think that in Scotland we could do so much better."