3. 3. Statement: The Tax Policy Framework

Part of the debate – in the Senedd at 3:08 pm on 13 June 2017.

Alert me about debates like this

Photo of Mike Hedges Mike Hedges Labour 3:08, 13 June 2017

Can I very much welcome the statement, as everybody else has done? Certainly, the framework, I think, is very helpful. Can I just say, I agree entirely that taxes are the admission price that each one of us has to pay to live in a civilised society? It’s taxation that provides the key public services that we all rely on. We cannot live in a country with Scandinavian-type services based on American tax rates, especially as corporation tax for multinationals is, basically, optional, as they can use internal transfer rates to move money and profit around the world, so that they can make their profits in the British Virgin Islands on money raised in Britain, because they’re paying internal transfer costs and they’re paying the costs of intellectual property rights. That is a serious problem, and although corporation tax is not likely to be devolved in the near future, I’d prefer to see a tax on turnover, rather than on profits, because the ability to move profits abroad or to low-tax or zero-tax places is having a very serious effect on the amount of money coming in, and we know that the amount of money coming in in terms of business taxes has reduced as a proportion of the taxation raised within this country.

Whilst taxation rates in some areas are being devolved, of course you can’t deal with them in isolation, can you, because whatever tax rate you set on anything, somebody is going to say—people sitting next to me or people sitting opposite—they’re paying less in, or more in; please name the neighbouring or nearby country or place? So, I think that that itself does put constraints. And we know what happened in Scotland, don’t we? Scotland has the power to vary tax rates. They varied it in exactly the same way as the Westminster Chancellor varied it. The Westminster Chancellor moved it up, they moved it up; the Westminster Chancellor moved it down, they moved it down—in complete synchronisation. So, you have powers, but sometimes powers are things that exist in theory but don’t necessarily exist as a practical means of doing things.

I actually have three questions. The first one is: as you know, Cabinet Secretary, a large number of taxes could not be devolved to Wales due to membership of the European Union and European rules. One of the things that seemed to be included was one that was meant to be devolved, which hasn’t, which was aggregate levy. What additional taxes does the Cabinet Secretary think should be considered for devolution, apart from the aggregate levy—not necessarily to be devolved but actually to be considered as part of the devolution settlement?

The second question I’ve got is: at what stage do we have a Welsh budget covering revenue raised via tax rates as well as expenditure agreed by the Assembly as one overall budget? Must we reach some stage where that has to happen, like it does at other Parliaments where they raise all their money, or nearly all their money? At what stage do we actually do the two at the same time?

And can I talk about local council tax? I think I might get agreement with this. Can we have increased upper bands put into the council tax bands? I think that the upper band covers far too large an area. I’d like to see some narrowing of the bands as well. I think that the proportion of the value of our property, paid by somebody who has a £30,000 house, as opposed to somebody who pays for a £2 million house, is substantially less for the person with the £2 million house. I think that’s fundamentally wrong, and the council tax system does have people in lower-cost properties paying a higher proportion of the value of that property in council tax than the very affluent. So, will you look at bringing in more bands and try and pick up—maybe not very many properties? I mean, the number of £1 million houses in Wales may well be well under 1,000, but there’s no reason why those people should not be paying their fair share.