Nicola Sturgeon has called draft legislation on new powers for the Scottish parliament a “significant watering down” of the Smith commission’s promises.

The Scottish first minister said she was concerned that the draft bill gave the UK government a veto on key Scottish welfare policies – such as abolishing the bedroom tax.

Danny Alexander, chief secretary to the treasury, announced the draft clauses in Edinburgh and described them as “the faithful fulfilment of the Smith commission” – the all-party group set up in the aftermath of September’s independence referendum to fast-track further powers to Scotland.

But Sturgeon hit back that the draft bill did not show any progress on devolution. “For example, the proposals on welfare do not allow us to vary universal credit without the permission of the UK government,” she said. “That means – under the current proposals – we will not have the independence to take action to abolish the bedroom tax. This cannot, under any interpretation, represent the meaningful progress on the devolution of the powers we need to design a social security system that meets Scotland’s needs.”

Alexander and Alistair Carmichael, the Scottish secretary, denied that the proposed legislation included a veto, insisting that devolution always required “mature conversations” between governments. In terms of welfare powers specifically, Carmichael said: “It’s a consultation process because universal credit is reserved, but it’s not a veto.”

“There is no veto,” he repeated. “It’s a mature conversation between governments. Federal systems across the world manage it all the time.

“In terms of the changes to housing benefit, the aim is quite clear in these clauses that they would give Scottish ministers the right to make any changes that they choose to.”

He added: “It’s more important than ever that the Scottish and UK governments are able to work together in a mature, cooperative, collaborative way. That is what the people of Scotland told us they wanted to do on 18 September.”

Asked whether there was a danger that the SNP could press for an extension of the powers within the bill if the party had more MPs in Westminster after the general election, Carmichael said that the proposals had already been agreed by all five parties in Scotland and would not be altered.

Carmichael said he expected the bill to be in the first Queen’s speech of the next parliament. “I don’t see any reason why we couldn’t have this on the statute book by the end of December or early January,” he said. “There is a clear appetite that we get on and we do this as quickly and as smoothly as possible.”