Power to vary income tax 'should be devolved'

The Silk Commission has recommended devolving more powers to Cardiff Credit: ITV News Wales

The Welsh Government should be able to vary income tax rates here in Wales.

That's one of the main conclusions in the Silk Report which has been published today after spending a year looking into the way the Welsh Government is funded.

But you're unlikely to see a Welsh income tax bill before at least 2020 because it would require agreement between Cardiff and London about the amount of money Wales gets, votes in the Assembly and Parliament and a referendum.

The Silk Report says sharing responsibility for setting and raising income tax with the UK Government would make Welsh Ministers more accountable to voters for the money they spend because they would have to explain their reasons if they raise or lower the rate.

It recommends that, if voters and Assembly Members agree, control of 10p of each tax band should pass to the Welsh Government along with a corresponding cut in the amount of money it receives from London.

So if ministers want to keep their budget at the same level, they would simply keep income tax rates the same as in England. But if they cut or raise tax levels, they would have to justify it in a vote in the Assembly.

The report also recommends that responsibility for smaller taxes should be devolved sooner: These would be:

  • landfill tax

  • stamp duty land tax

  • aggregates levy

  • Air passenger duty - for long-haul flights at first with a view to the rest of it following a separate review into British airports

  • business rates which are already partly devolved, should be fully transferred

There have been calls for corporation tax to be devolved. The Silk Commission doesn't recommend this because it believes it would cause problems for other parts of the UK. But it says that it should be devolved if Scotland and Northern Ireland succeed in their determination to win control over it.

However it does say that the Welsh Government should be allowed to set capital allowances in enterprise zones, effectively cutting corporation tax for businesses in those zones by paying it itself.

The report also says the Welsh Government should be able to borrow money to fund major construction projects, within limits agreed with the UK Treasury.

The Commission's Chair, Paul Silk said:

Our proposals would provide the Welsh Government with an important set of fiscal levers and would enable political parties in Wales to offer people real fiscal choices. What we are recommending is significant and historic. It will give Wales its own tax and borrowing system for the first time. The Commission is delighted to present our agreed report to the UK Government and we hope for speedy implementation

Welsh Secretary David Jones welcome the report and said he would consider its 33 recommendations.

I am grateful to Paul Silk and all the commissioners for their hard work in bringing together this report. I know that the Commission have sought opinions from across Wales, so that this report is reflective of a very wide range of views on the future fiscal responsibilities that the Welsh Assembly and the Welsh Government should hold. The Commission is supported by all four political parties in the Assembly and the publication of the report today demonstrates the importance of cross-party working.