Part of the debate – in the Senedd at 3:12 pm on 5 July 2016.
Cabinet Secretary, I’m pleased to see that you’re carrying on with your predecessor’s enthusiasm for the first Welsh taxes in 800 years. I suppose it’s a bit too much to expect the public to be enthusiastic about paying taxes, but at least the enthusiasm is with you with a mind on history and the thirteenth century indeed.
This does, indeed, represent a fundamental change in the devolved settlement. Firstly, I support your desire for Welsh taxes to be as simple as possible. I’m pleased that you are carrying on with the policy that taxes here should only differ from those across the border and other parts of the UK if absolutely necessary. How are you going to ensure this simplicity and what have you done to reassure stakeholders that the tax regime that develops in Wales will be as simple and straightforward as possible?
I appreciate the legislation process for taxes such as LTT will be complex; I’m sure you agree that it’s important that we get this right. You did touch on this, but what are you doing to draw on experience of tax devolution in Scotland? As you said earlier, they have made some mistakes there, such as developing the legislation for Revenue Scotland way after they started the process of developing individual taxes. They learnt a number of lessons; have you learnt those lessons—well, you clearly have, because you’ve done it the other way around—but what other lessons has the Welsh Government learnt, and, indeed, what can we teach Scotland in this area, Secretary? I’m sure that there are things there—this is a two-way process.
I’m pleased you intend to maintain a constructive relationship with HMRC. How confident are you at this early stage that HMRC will be fit for purpose in the Welsh context? Scotland, initially, were going to rely very heavily on HMRC, but as things transpired and developed, they relied on them less, and I think they gave Revenue Scotland a lot more of the role that HMRC were originally going to take because of cost reasons and efficiency reasons. Do you envisage the Welsh Revenue Authority having a similar wider responsibility in future in taking on some of that responsibility itself?
You’ve mentioned, towards the end of your statement, the fiscal framework. As you know, and as I’ve told you in the past, you have cross-party support on the development of a proper fiscal framework. I think there’s general agreement that we cannot go on as we are, particularly with the imminent devolution of these taxes to Wales.
I’ve spoken repeatedly and asked you questions about my concerns over block grant reductions in the wake of tax devolution, including income tax devolution. Can you update us, as Adam Price asked you, on any discussions with the Treasury on mechanisms of calculating the block grant reduction in the first year and, also, the options for indexing future reductions? These clearly aren’t discussions that are the talk of pubs across Wales, but these are very important to getting tax devolution right.
In terms of future reductions, firstly, how will inflation be taken into account? With the decision to leave the European Union and costlier imports, there is general consensus that there’s a risk of higher inflation over the medium term. So, the indexing for inflation becomes increasingly important, even more so than it was before. Secondly, you already mentioned the issue of population change. The Scottish Government has dealt with this and there is an agreement with Westminster that any detrimental change in population will not be borne by the Scottish proportion of income tax, but by the UK as a whole. Are you seeking similar assurances from the Treasury? I’m more than happy to make that case with you. This is a good example of where we do need to see equity across the UK. Yes, we all agree with the need for fiscal accountability and the need for Welsh Government to bear the risk associated with the fiscal decisions that you take, but you should not have to bear the risk associated with UK decisions as a whole. We need to entangle those two.
Finally, Presiding Officer, you mention the need for some kind of future mediation if the amount of money we get through the Barnett formula and fiscal framework is not what the Welsh Government feels that we should be getting. I’m casting my mind back to some of the Finance Committee evidence sessions from the last Assembly. There was a suggestion that we could develop a UK body that would deal with mediating problems like this, so that it wouldn’t be simply a case of a bilateral discussion between you and the Westminster Government. What are your thoughts, in the future, on some kind of body that could provide that mediation? Would you like to see a return to the quadrilateral discussions that your predecessor had a number of years ago, before they were replaced by bilateral discussions? I think the quadrilateral discussions, from my discussions with Jane Hutt, were very useful in moving forward.