In the Commons, the Welsh Secretary has been accused of committing his party to a tax cut costing £200m. Shadow Welsh Secretary Owen Smith seized on comments made by David Jones following the news that some control of income tax could be transferred to Wales.
Plaid Cymru MP Jonathan Edwards says he welcomes the 'step forward' in today's announcement but regrets that not all recommendations of the Silk Commission were accepted and acted upon.
Shadow Welsh Secretary Owen Smith has sounded a note of caution about the transfer of control over part of income tax to Wales. He told our Political Editor Adrian Masters that politicians need to be certain Wales would be better off under the change.
The income tax powers on offer to the Welsh Government will put it on equal terms with Scotland, according to the Welsh Secretary. David Jones says the Welsh Conservatives will campaign for a Yes vote in a referendum on transferring the power.
The UK Government has described the package of financial powers transferred to Wales as 'unprecedented.' It says the changes could put the Welsh Government in control of £3bn of tax revenue. The new details announced today are:
- Business rates (or non-domestic rates) which are already partly-devolved will be fully devolved.
- Power to create new Wales-only taxes with the UK Government's agreement.
- The creation of a 'cash reserve' for the Welsh Government to manage tax revenues
There's also more detail of the income tax powers on offer. Subject to a referendum, the Welsh Government would be given control of 10p in every pound collected but could only raise or lower the three rates together.
These changes follow the earlier headline announcements made by the Prime Minister and Deputy Prime Minister at the beginning of November:
- Stamp Duty Land Tax and Landfill tax
- Borrowing powers
- Limited early borrowing powers to begin work improving the M4
- Income tax referendum
The Federation of Small Businesses has 'warmly welcomed' the announcement that business rates (or 'non-domestic rates') will be fully devolved to Wales:
The full devolution of powers over non-domestic rates to Cardiff Bay now opens the way for the reform of the current Welsh business rates regime, which is the most onerous for small businesses in any constituent nation of the UK.
There is now no barrier to the Welsh Government reforming the business rates system to support small firms on high streets across Wales. Some work has already been done in this area and we would call for the rapid adoption of the recommendations of Professor Brian Morgan’s report into business rates, particularly his call for rates to be locally retained.
The Welsh Conservatives have welcomed today's announcement on further changes to the financial powers of the Assembly and the Welsh Government. Shadow Finance Minister Paul Davies said:
We welcome the detail of the Silk Commission Part 1 being announced today. The move towards the implementation of taxation levers in Wales is hugely significant and allows for the first time real accountability and responsibility over decisions made by governments in Wales. We welcome the announcements with regard to business rates, a long standing policy of the Welsh Conservatives helping our businesses to become more competitive with increased flexibility. We also welcome too, the details of borrowing for infrastructure, especially with an M4 Relief Road which has already been announced.
The UK Government's decision to allow a referendum on income tax is very significant.The Welsh Conservatives are committed to being the low tax party of Wales, keeping more of people's money in their pockets and allowing us to grow the Welsh economy.
And the leader of the Welsh Conservatives, Andrew RT Davies added:
This shows the commitment of the UK Government to Wales and I hope all parties will welcome the spirit of the announcements.We will continue to work towards the full implementation of Silk 1 and these initial steps provide a positive platform for future Welsh Governments to take responsibility and have real accountability.
Sources have been suggesting that a draft Wales Bill to usher in the tax and borrowing powers announced by the Prime Minister last week could contain a 'sunset clause' which would set a deadline for holding a referendum on transferring the power to vary income tax.
The Conservatives, Plaid Cymru and the Liberal Democrats are all keen to see such a referendum held within the next few years, but senior Labour figures such as the First Minister, Finance Minister and Shadow Welsh Secretary have refused to back a vote without the promise of fair funding.
The Silk Commission report said 2017 was the 'earliest' date for holding a referendum but it's now being touted as a likely one. A sunset clause would mean that Assembly politicians would have to agree to trigger a vote by whatever deadline was set or lose the right to do so altogether.
The Welsh Liberal Democrat leader says she expects further details about transferring tax and borrowing powers for the Welsh Government to be set out at 'an event' later this month. Kirsty Williams says it will involve Chief Secretary to the Treasury, Danny Alexander and Finance Minister Jane Hutt.
The changes were announced by the Prime Minister during his visit to Wales last week. Click here for further details of what was announced and what it means.
She also says she understands that the key financial changes including a referendum on income tax are likely to be added to a previously-announced draft Wales Bill which overturns the so-called 'dual candidacy' ban in Assembly elections.