5. 3. Statement: The Fiscal Framework

Part of the debate – in the Senedd at 3:31 pm on 17 January 2017.

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Photo of Mike Hedges Mike Hedges Labour 3:31, 17 January 2017

First of all, can I welcome the clarity of the Cabinet Secretary’s statement? Can I very much welcome the independent body for dealing with disagreement? As people have heard me say many times in here, I think we had a very bad deal out of the London Olympics. I think that we should have probably had nearer 20 times as much as we got, rather than the amount that we got, and, hopefully, this will deal with those sorts of problems.

Talking of behaviour, there has been no behavioural change due to the huge differences in council tax between local authorities. There hasn’t been a rush from Abergavenny to Allt yr Yn and there hasn’t been a rush across the Carmarthenshire border to Pembrokeshire because the council taxes were substantially less.

I have three questions. First, the two major taxes being devolved are highly cyclical taxes. And we know the ability to vary income tax rates has been devolved to Scotland since 1999. We also know it hasn’t been used. Varying tax rates is incredibly difficult. Increase it compared to England: public resentment. Decrease it: reduction in revenue and cuts to services. It’s hardly surprising that Scotland has not varied their rate out of line with the rest of the United Kingdom, and as the rest of the United Kingdom have varied their rates, Scotland has followed.

There will also be huge difficulty in identifying Welsh, as opposed to English, taxpayers. And there’s been a problem in Scotland with a much less porous border, with much less movement over the border than there is between England and Wales. Does the Cabinet Secretary believe that the safeguards in place regarding looking at each band individually, and protecting the overall Welsh budget as a percentage of the English budget, gives sufficient protection?

The second question is: we voted to leave the European Union, so, does that mean that the aggregate levy can now be devolved to Wales when we leave the European Union, and that other taxes excluded by European Union rules can now be considered to be devolved? On capital limits, does the Cabinet Secretary, like me, find the limit arbitrary? And does he share my concerns that the limit will be seen as a target, rather than a limit, and that the debate that ought to be taking place about the affordability and revenue consequences of capital expenditure will not take place in the same way if, instead of having an arbitrary limit set by the Treasury, we have to engage in prudential borrowing and we actually have to make the case for and show the financial capacity in the future to engage in that borrowing, rather than having a target and aiming for it?