Further financial powers for Wales unveiled

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Some tax and borrowing powers are being transferred to Wales Photo: ITV Wales

The UK and Welsh Governments are expected to give further details on the transfer of tax and borrowing powers from London to Cardiff. A statement in the Commons will be preceded by a joint announcement by ministers from London and Cardiff this morning.

It follows an announcement at the beginning of November by David Cameron and Nick Clegg setting out plans to devolve control of Landfill Tax and Stamp Duty Land Tax and to pave the way for a referendum on transferring part control of income tax. They also said the Welsh Government will be given power to borrow money for major projects such as improving the M4.

The moves were recommended by the Silk Commission which looked at the financial powers of the Assembly and Welsh Government.

However the Commission made further recommendations which the UK Government said it would respond to in full.

Given that two governments and three political parties are involved, everything to do with these changes is highly-charged politically. Today is likely to be no exception.

Senior Conservative sources are already expressing disappointment at the behaviour of the Liberal Democrats in pushing to make the announcement this morning before the Welsh Secretary makes a parliamentary statement this afternoon.

So what should you look out for when the full response comes?

  • BUSINESS RATES Partly devolved to Wales already, the Silk Commission recommended they should be fully devolved. I understand the UK Government is set to accept that recommendation.
  • POWER TO INTRODUCE NEW WALES-ONLY TAXES. The Commission said the Assembly should be able to introduce new taxes and tax credits related to them, with the agreement of the UK Government. It's this power that Plaid Cymru pointed to when it came up with the idea of a sugary drinks tax.
  • DETAILS OF POWER OVER INCOME TAX. The Silk Commission recommends giving the Welsh Government power to alter each of the three rates of income tax by up to 10p in the pound. But that would go significantly further than what's proposed for Scotland. More likely is parity with Scotland with Welsh Ministers only able to alter ALL income tax by up to 3p either way, what's known in the jargon as a 'lockstep.' Sources tell me the provision may allow for the lockstep to be removed in the future.
  • INCOME TAX REFERENDUM. The UK Government has accepted the recommendation that there should be a referendum before income tax powers are devolved. There had been plans to introduce a 'sunset clause' in the legislation which would have set a use-it-or-lose-it deadline. I understand that won't now happen.
  • DETAILS OF BORROWING POWERS. How much will the Welsh Government be able to borrow? I gather the limit may be linked only to tax revenues which will be less than the Welsh Government wants and may make having control of income tax a more appealing prospect to Labour.

What's already been announced?

David Cameron and Nick Clegg's announcement on November 1st accepted that Stamp Duty Land Tax and Landfill tax should be devolved. In principle Aggregates Levy will be included in the package but is subject to an EU review. The UK Government ruled out devolving Air Passenger Duty.

The principle that the Welsh Government should have borrowing powers was accepted but lacked some details. Early access to another form of borrowing was agreed.

The recommendation on income tax and a referendum was accepted.

Other recommendations are easier for the UK Government to accept. The Silk Commission said it shouldn't devolve fuel duty, alcohol and excise duty, vehicle excise duty, capital gains tax, insurance premium, stamp duty on shares, inheritance tax, betting and gaming, VAT, climate change levy and National Insurance Contributions.

The Commission said corporation tax shouldn't be devolved unless other moves result in it being devolved to Scotland and Northern Ireland.