Cameron's drops strongest hint yet over Welsh income tax during Royal Welsh visit

Prime Minister David Cameron with show director Harry Fetherstonhaugh. Credit: Joe Giddens/PA Wire

David Cameron has given his strongest hint yet that a future Welsh Government could share control of income tax in Wales without the need for a referendum.

Until now both governments in London and Cardiff have insisted that the transfer of power over raising and spending income tax would require the backing of a majority of voters here.

Speaking at the Royal Welsh Show, the Prime Minister told me:

That new phrase - 'it's the outcome that matters' - is, I think, a significant shift. It suggests that the Prime Minister and others at the top of government and the Conservative party are looking for a way to drop formally their insistence on a referendum.

When I asked him if there was about to be a u-turn, Welsh Secretary Stephen Crabb told me:

His and the Prime Minister's latest comments chime with a growing consensus among the main political parties that any such vote is unlikely or unnecessary.

Income tax devolution comes in proposals expected to be included in a Wales Bill which is due to be published in the autumn.

The change would see ministers in Cardiff given responsibility for setting and collecting half of each income tax rate.

They'd also get the power to raise or lower each of those rates by different amounts.

Supporters of the move say it would make future Welsh Governments more accountable for the money they spend. Labour opponents fear it's a politically-motivated 'trap' aimed at reducing the amount of money Wales gets from London.

The principle of Welsh taxes has already been established: the Welsh Government will take on responsibility for setting and collecting replacements for landfill tax and stamp duty land tax from April 2018.

But income tax devolution is much more controversial.

A recent poll for ITV Cymru Wales shows that a referendum would be extremely difficult for supporters of it to win. You can read more details by clicking here.

The poll found that Conservative voters were overwhelmingly likely to vote 'no' to income tax powers which may be at least partly behind a possible change of heart by that party's leaders.

Plaid Cymru and the Liberal Democrats have long argued that a referendum isn't needed, particularly given the scale of devolution proposed for Scotland without any sign of a referendum being required.

If David Cameron's comments suggest that the Conservatives, too, will drop their demand how could such a u-turn be managed?

The Prime Minister was given a tour of the sheep pens. Credit: Joe Giddens/PA Wire

The UK Government has been promising to deal with concerns about funding for Wales by introducing a mechanism known as a 'funding floor,' a promise that's been made 'in the expectation' that the Welsh Government will agree to an income tax referendum.

The hope is for there to be a cast-iron guarantee of that funding floor in the Chancellor's Spending Review announcement in November or his Autumn Statement in December.

If that were to be accompanied by acknowledgement by Carwyn Jones that such a guarantee answered his long-standing call for fair funding and an agreement to set out a timetable for the devolution of income tax powers then perhaps the UK Government could end the stalemate by dropping its own insistence.

That's a lot of ifs and buts and a lot riding on acquiescence from a Labour government with no affection for David Cameron and his administration and an extremely difficult election looming.

What the Prime Minister said at a sunny Royal Welsh Show didn't represent a full u-turn. Yet. But it could have been a gentle turn of the steering wheel.

Watch David Cameron talking to Adrian Masters below: