David Cameron and Nick Clegg have announced plans for a referendum on devolving greater responsibility for some finance raising powers to the Welsh government.

On a visit to Cardiff, the coalition leaders said there should be an opportunity for the people in Wales to decide whether some of their income tax should be devolved, in the same way as it is in Scotland. They also announced that the Welsh government will be given control of stamp duty (SDLT) revenues and landfill tax, as well as borrowing powers.

Under the Scottish system, due to come into force in April 2016, the UK Treasury will deduct 10p from income tax and give MSPs the power to decide how to raise the shortfall, opening up the possibility of lower or higher rates in different parts of the UK.

The two leaders claimed that Wales has 'suffered' because key decisions have been made by 'bureaucrats hundreds of miles away in Westminster'. They said: 'Wales could benefit hugely if the government at Cardiff Bay was responsible for raising more of the money it spends.'

At present Wales' devolved administration cannot vary taxes or borrow money, and gets its budget in a grant from the Treasury.

Cameron and Clegg said the move to devolve responsibility for raising finance would allow the Welsh government to invest in transport infrastructure, such as an upgrade of the M4, while giving the government control over stamp duty would allow it to finance key Welsh priorities like more affordable homes.

The coalition leaders said their aim was to address lower living standards, higher unemployment and greater child poverty in Wales, saying: 'We're determined to tackle this head on. We want this to be the government that finally sorts this out.'

No date has been set for the referendum on devolving income tax.