The following amendments have been selected: amendments 1 and 2 in the name of Paul Davies.

The next item on our agenda is the debate considering the case for new taxes in Wales, and I call on the Cabinet Secretary for finance to move the motion—Mark Drakeford.

Motion NDM6352 Jane Hutt

To propose that the National Assembly for Wales:

1. Notes that the Wales Act 2014 allows for the creation of new Welsh taxes.

2. Recognises that it will be necessary to test this new aspect of the devolution machinery.

3. Welcomes a wide range of potential ideas for use of this new fiscal possibility in Wales.

Motion moved.

Diolch yn fawr, Llywydd. It’s always seemed to me that each Assembly term has its own character and particular contribution to make to the journey that has been devolution. Amongst the defining characteristics of the fifth Assembly, I believe, will be the assumption of our new fiscal responsibilities. A great deal of time has been taken in this first year—and, I believe, profitably taken—on the floor of the Assembly and in committee, in securing a fiscal framework for Wales, scrutinising and agreeing two new tax Bills, establishing the Welsh Revenue Authority, and putting in place the first set of arrangements for the independent oversight of these new responsibilities. This afternoon’s debate draws attention to a further strand in these new possibilities for Wales, because when we published our tax policy framework and work plan in June, the plan included a commitment to test the Wales Act 2014 power, which enables Wales to make the case and propose new devolved taxes.

Now, Llywydd, the process for introducing a new tax in Wales is quite certainly not a straightforward one. The Government of Wales Act 2006, as amended by the Wales Act 2014, has a new Part 4A introduced to it. This Part allows additional devolved taxes to be specified, but that requires an Order in Council to be made. And for an Order in Council to be made, a draft of it has to be approved by the National Assembly and by each House of Parliament. The road on which we are embarked today, then, is inevitably a long one, but once a new devolved tax is specified, the National Assembly will have competence to then legislate in that field in the usual way.

The command paper published alongside the Wales Act 2014 sets out the criteria that the UK Government would use to assess any new tax and the information that would need to be supplied in support of any proposal. As far as the tests are concerned, they include the extent to which any new tax affects UK macro-economic or fiscal policy, the extent to which it increases the risk of tax avoidance, and the extent to which it creates additional compliance burdens for businesses and individuals. As far as the information that would have to be provided is concerned, the Welsh Government would need to include full details of the taxable activity; the estimated revenue and economic impact; the estimated income on UK revenue or interaction with UK-wide taxes; expected impacts on businesses and individuals; assessment against all relevant legislation and directives; and compliance and collection plans.

Now, despite that rather daunting list, I continue to believe that it is important for us, as part of the work of this Assembly term, to test this new possibility and to see how the machinery that the Wales Act 2014 puts in place would work in practice.

Will the Minister give way?

Of course.

I wonder, as the Minister laid out that range of criteria that have to be run past both the House of Commons and the House of Lords—and quite right that they would want to scrutinise this, or as he put it, that we would want to test the machinery—the worry is that it sounds similar to the old legislative competence Order process in some ways, in that it’s enormously creaky, and our interpretation of what might be a suitable and proportionate tax that was within the devolved competencies, that didn’t risk non-compliance, that didn’t put undue burdens on business, might be interpreted very, very differently by either House of Parliament.

Well, Llywydd, I tend to agree with what the Member has said. I might well prefer that our hands were less constrained and that this Assembly was able to make decisions about the future of tax policy in Wales without some of these constraints. But, just as in the LCO process, sometimes you have to begin with the machinery that you have and, pretty soon, in its operation, some of its deficits may become apparent, and a less cumbersome set of mechanisms emerges. We won’t know that unless we put the machinery to the test, and that’s what I am proposing we begin to work on this afternoon.

Ideas for new taxes in Wales have been put forward by a number of individuals and organisations since the Wales Act 2014 achieved Royal Assent. The Bevan Foundation’s 2016 report ‘Tax for Good’ outlined eight possible Welsh taxes—from public health taxes such as a sunbed tax and a takeaway packaging tax to a land value tax and a water tax. I am very grateful to the Bevan Foundation for making this first contribution to an emerging debate. I don’t think that they would expect that the scope of our consideration would be limited to the ideas that they outlined, and I want to look beyond that research for other ideas that support our commitment to fairness, well-being and growth. So, there have been suggestions already for new taxes to support Welsh services, such as a tax to fund social care—ideas put forward by Gerry Holtham and Eluned Morgan, which I am keen to consider as part of this debate. Other tax proposals begin from an ambition to use fiscal levers to decrease detrimental practices such as targeting land banking through a levy on unused land, and I do intend to take a particular interest in the vacant land levy that has recently been introduced in the Republic of Ireland.

New taxes also present us, Llywydd, with an opportunity to build on Wales’s strengths. We could consider taxes that aim to increase our levels of recycling, or look at the tourism tax that has been proposed in Scotland. As part of this process, I am very keen to hear ideas from all Members in this Chamber, both today and over the summer months, and I will be asking other stakeholders for their ideas too. I want to start a conversation around these new taxes with political parties, with the public, businesses and organisations across Wales. I want to hear how new taxes could operate alongside other policy tools to deliver improvements for our communities. Maybe unusually, Llywydd, sitting here in the Chamber this afternoon, I have received e-mails from members of the public setting out other new ideas that we could think about in this field. That is very important to me because I want to make viewing taxes through the eyes of the taxpayer central to the way that we develop Welsh tax policy.

Would the Minister give way?

Of course.

I’m grateful to the Minister. I just want to understand—because he said at the outset that he would like to test this system in this Assembly. Given that there is quite a complicated process, as we have heard, in the Houses of Parliament, and given that, at the moment, with all these various tax ideas, there isn’t one obvious, salient tax that is commanding a great deal of public discussion or support—though I’m going to mention one that I think might have something to do with it—how does he think it is practical to test this thoroughly during this Assembly?

Well, Llywydd, the route that I am proposing this afternoon is that we begin the debate here today; that we collect ideas further over the summer; that in the autumn I will test those ideas against the criteria set out in our tax policy statement published last month; and then that we propose a shortlist from that longer list of ideas, on which we will then carry out more detailed work over the months that follow. At the same time, it would be my intention to alert the Chief Secretary to the Treasury to that work and to let her know that, some months later, it will be my intention to have identified a particular candidate that we will use to send around the circuit that has been created. So, it is ambitious. This is not an immediate set of actions that we can embark upon. But, I do think it’s possible within this Assembly term to have identified an idea, to have sent it round that track and, hopefully, to have arrived successfully with a new idea that we can put into practice in Wales. But even if we don’t succeed to that extent, we will have learned a lot from testing the machinery itself.

So, Llywydd, let me conclude by saying that proposing new taxes brings with it a new set of responsibilities. The Government will support the two amendments from the Conservative Party this afternoon, and I'm happy to reaffirm that I'm not intending to use powers simply because we have those powers, but saying I'm not in favour of change for change’s sake is not the same thing as saying that there cannot be a case for change, and that's the proposition we are testing in this debate. We will use the criteria set out in the tax policy framework. We will identify a candidate tax to test the new machinery, and in doing so, I think we will add to the repertoire of policies that are available to Wales in this new area of responsibility.

I have selected the two amendments to the motion. I call on Nick Ramsay to move amendments 1 and 2 tabled in the name of Paul Davies. Nick Ramsay.

Amendment 1—Paul Davies

Add as new point at end of motion:

Believes that any new taxes should adhere to the views expressed by the Cabinet Secretary for Finance and Local Government, in his written statement issued on 5 July 2016, that ‘there should be no change for change's sake’.

Amendment 2—Paul Davies

Add as new point at end of motion:

Calls on the Welsh Government to make arrangements for an independent review of any new taxes to be completed within 6 years of their introduction.

Amendments 1 and 2 moved.

Diolch yn fawr. I'm pleased to contribute to today's thought-provoking debate, Cabinet Secretary, and to move the amendments in the name of Paul Davies. As the Cabinet Secretary has himself said, these are times of change for this institution and for Wales. We're about to see the introduction of the first new Welsh taxes in 800 years—how many times have we heard that in this Chamber over the last few months—when UK stamp duty and landfill tax are switched off and their Welsh replacements kick in in April next year. And the Welsh Revenue Authority will hopefully be fully operational by then and in place to collect those taxes.

As we know, the tax landscape will change again the following April with the introduction of the WRIT, the Welsh rate of income tax, and the significant revenue that will bring directly to the Welsh Government, although, of course, still being collected, in that case, by HMRC.

Of course, these taxes will replace existing UK taxes and will mirror them to a certain extent. So, today's debate is welcome, because, as the Cabinet Secretary has indicated, it does move us on from the arguments hitherto and initiates the discussion about potential new taxes over and above replacement taxes, what those taxes may look like and how they may be developed.

Now, critically, the public must be involved in this process, and I'm pleased that the Cabinet Secretary has recognised this. The public must have confidence in it and, more than this, they must feel a sense of ownership. After all, as we know, Government money is, at the end of the day, taxpayers’ money, and we should always remember that important fact.

Now, Cabinet Secretary, you've set out the enormous complexity of getting a new tax established. I was going to ask you exactly what you meant by ‘testing the machinery’, but I think you've given us a very clear indication of how complicated this process is, not just in us playing our role at this end of the M4, but also then looking at the other end of the M4 in the House of Commons and the House of Lords—and Huw Irranca-Davies referred to the previous LCO system; he knew how difficult that was. I think, at this early stage, it's probably understandable that there is the complexity, but I fully appreciate the fact that you feel there is a need to test all this to see how we can move forward.

Turning to the amendments, and amendment 1, the maxim that there should be no change change’s sake, which you yourself mentioned and which is lifted from your own written statement issued on 5 July, to which there was a link on the Assembly website, it also appears in many other documents and has been referred to numerous times, both by yourself and by your predecessor, Jane Hutt, when she has given evidence to Finance Committee over recent years. I think, listening to—. I couldn't quite work out whether you're supporting our amendment or not. I think you were, but I think you were interpreting it in a particular way, which is fair enough. I agree that it's a good maxim. I agreed with it when you said it to committee. I think it is important that, where possible, and for smoothness and for ease of transition, the structure of new taxes should not deviate from that of their counterparts across the border where it is beneficial for there to be a similarity.

As you recognised, this has moved on slightly, in that I’m suggesting it should also apply to new taxes—I suppose what might be called stand-alone taxes; the formation of creating those stand-alone taxes. And I think it is important that, as you yourself alluded to, we shouldn't just be looking to create taxes for taxes' sake and merely to test the system, but we should be looking to create taxes that have potential to really improve the lives of people in Wales and to add to the tax system, and I think that is your intention. You’ve clearly got an appetite to test this new aspect of the devolution machinery. That does, of course, need to be done cautiously and, as I said, any new taxes should be introduced for the right reasons.

If we’re looking for examples of taxes, then I suppose the plastic bag levy, as it was called—although it was not a tax, obviously, it was a levy, for the reasons of the day and the way that the Assembly worked in those days—I think would have met those criteria that you are now setting forward. I think, in fact, environmental taxes are probably the most obvious candidates for the testing of this machinery and the Welsh Government would certainly be right to focus on these and certainly having them in the mix in terms of testing the tax machinery.

It’s clear that the Welsh Government has the experience of legislating in this area in the past and, by and large, it seems to have worked—well, not fallen apart, at any rate, so that certainly would qualify as working.

Turing to the second amendment, Presiding Officer, I know I’m short of time, but, briefly—this is calling on the Welsh Government to make arrangements for an independent review of any new taxes to be completed within six years of their introduction. The importance of a review of the new Welsh replacement taxes, LTT and LDT, was discussed during Stages 2 and 3 of the legislating process. I think, although we didn’t get an amendment, for various reasons, on the books at that point in time, I know that you agreed with the principle of a broad review, after a period of around six years, into the way that new taxes are working. I think that this was a good principle and I think it would also be very wise for us to introduce this into the new stand-alone taxes—I can’t think of a better thing to call them. So, that’s why that amendment’s there. I hope that you will support the amendments and, as I say, we are more than happy to support the broad thrust of this motion.

I welcome this debate and I welcome, in general terms, the Government’s desire to test this provision. In reference to one of the amendments, I’ve never quite understood this phrase, ‘We’re not in favour of change for change’s sake’. I mean, in the very basic sense, I don’t think anyone would be in favour of that, but, actually, change for social change’s sake, change in the taxation regime for a purpose, I would hope we would all subscribe to as well. There is just a hint of a kind of sense of inertia, sometimes—an innate conservatism in the argument against change for change’s sake. [Interruption.] Look, even in the taxation field, changes are constant. When VAT was first introduced—was it 8 per cent? It’s now risen, of course, to 20 per cent. Corporation tax was 52 per cent some decades ago and, of course, it’s going to fall even further to 17 per cent. So, look, change is constant, even in the taxation field. I’m an experimentalist. In a world that is changing, in every sense, we always have to be searching for new levers, for new policy responses, and taxation has to be part of that. So, I welcome this positive approach to exploring new opportunities.

In terms of the potential candidates for that first test, then we will all have our preferences. I think Gerry Holtham and Tegid Roberts and others have made a very, very good case—even based on the exacting criteria that the Cabinet Secretary set out, actually. We have a huge hole in our public finances, as we realise, because of the demographic change et cetera, and the rise in non-residential care costs that are coming our way. We need to find a way of addressing those, and we’re not going to be able to do it within the strictures of the current Barnett block. So, I think Gerry Holtham has—[Interruption.] I’m certainly happy to give way.

Thanks for giving way. I suppose you shouldn’t be surprised that a Conservative would appear slightly conservative. I wouldn’t have said that I was talking about an argument of inertia; I would have preferred the word ‘caution’. I’m not going to put words into the Cabinet Secretary’s mouth, but in terms of that maxim, ‘Not having change for change’s sake’, I think that applies particularly at a transitional phase. I think we would all agree that, when you are testing machinery and bringing in a new system like this, we should be very mindful that there’s a very robust and reasoned and clear and transparent rationale behind, certainly, the introduction of those initial new taxes. That was my point.

But to turn that argument on its head, if the figures that Gerry Holtham has produced to support his case—you know, the 67 per cent rise that’s coming our way in the short term in non-residential care costs—it would in incautious, of course, not to find a means of funding the quality of care that we, in a decent society, would want to provide. I think that it’s a very, very interesting proposal. Of course, it’s based in a European tradition of social insurance; it adapts that to this particular case, and some innovative examples of inter-generational equity in terms of a sliding scale, in terms of the level of funding, and even a suggestion of a lottery prize once a year, maybe, to sweeten the pill. It’s certainly the kind of example, I think, of—yes, a creative and innovative proposal, but it really goes to the heart of one of the key problems that we’re facing—there are others—I think, in economic development. I think the Bevan Foundation suggested looking at innovation tax credits. The Irish have responded to the OECD’s proposals in terms of differentiating business taxation to encourage investment in tangible assets like research and development—having a different corporation tax rate, a so-called knowledge development box of 6.25 per cent, I think, for R&D activity, exclusively, by companies. So, there are interesting proposals out there. The Cabinet Secretary has already referred to a wide-ranging review of property-related taxes, and that’s both in the personal field in terms of council tax, and in terms of business rates—that opens up a whole other debate about land value taxation that has been around for over 120 years, and I’m sure that other Members will look forward to joining that debate in due course.

Well, the Cabinet Secretary for finance is always beguilingly reasonable in what he says. I’m, perhaps, going to take a rather different tack in my speech from others who have participated in this debate, because, generally speaking, I’m not in favour of introducing new taxes, although I’m strongly in favour of having the maximum sensible devolution of taxes. We have a problem in Wales, of course, because our average income is so much lower than the average of the rest of the United Kingdom, so the tax base is more difficult to exploit, if I can use that word in a neutral sense. But, broadly speaking, I’m in favour of maintaining the link between Government decisions and accountability for them through the system of raising taxes. I do think that the devolution of taxation does give us opportunities, as Adam Smith—Adam Price has just pointed out. [Laughter.] Freudian slip there, I think.

As long as you don’t call me Arthur Laffer. [Laughter.]

I’m sure he’s coming my way. [Laughter.] But as pointed out in relation to corporation tax, certainly, the Irish example is a very interesting one. I’m sorry that my attempts to move the Cabinet Secretary in that direction in the past have met with rebuff. When we had the tax policy framework statement just a few weeks ago, I’m afraid he didn’t prove to be very susceptible to those blandishments, but I do think that Ireland has made very effective use of differential rates of corporate taxation, and within the corporation tax itself, as Adam Price pointed out, to have differential rates, which has enabled the Irish Government to prioritise certain important areas of high-value-added activity, and that is what we need most of all, I think, in Wales: to increase the tax base. And I think that tax system can be used in this way—[Interruption.] I give way to Mike Hedges.

But, surely, with corporation tax, it’s almost like a voluntary donation by major companies when they can decide where they’re going to repatriate their profits to, where they decide to pay for intellectual property rights et cetera. So, it’s a voluntary contribution—the rate doesn’t matter, it’s the size of how much they actually want to pay.

Well, that is, perhaps, true, within the European Union, and this is the position that Luxembourg finds itself in, of course, presided over so successfully by Mr Juncker for so many years. It’s rather, perhaps, paradoxical that the EU Commission wants to wipe out the opportunities of that kind for the rest of Europe. But outside the EU, we do have the opportunity to be internationally competitive in terms of corporate taxes, and I hope that the opportunity will come to us to enable us to do that in due course. Edmund Burke famously said that:

‘To tax and to please, no more than to love and to be wise, is not given to men.’

And, if you make a proposal to tax Peter to pay Paul, that will always be very popular with Paul and not popular with Peter. So, these are not easy equations to sum, but I’m not generally in favour of using taxes for reasons of social engineering, and I’ve made this point in relation to the sugar tax proposed only recently, and to which we’ll no doubt return at length in due course. But what I do think we should do is use the tax system to encourage wealth creation. Whilst taxes in themselves don’t encourage wealth creation—by definition, almost—nevertheless, the difference between taxes in one jurisdiction and another can certainly do that.

Our problem in Wales in many respects was pointed out by the Bevan Foundation in their publication on devolved taxes in Wales just two years ago, that 48 per cent of the population of Wales live within 25 miles of the border with England, and 2.7 million people—that’s 90 per cent of the total population of Wales—live within 50 miles of the border. Taking England and Wales as a whole, 16 million people in Wales and England live within 50 miles of the border between the two countries, compared with only 3 million living within 50 miles of the England-Scotland border. So, it is, in many ways, more difficult for us to take decisions that make us less competitive through the tax system, but actually more beneficial for us to use the tax system in the way that I started off by describing. So, we have greater opportunity to take advantage of a differential tax regime compared with England, and I do believe that that can make a significant contribution towards raising the level of income and therefore the standard of living of ordinary people in Wales. In the United Kingdom generally, it is interesting that, over the last generation, the proportion of revenue derived from higher earners has increased as tax rates generally have fallen. And I think there is a lesson for us in all that.

I see I’ve reached the end of the road for my speech, Llywydd, but will leave this as work in progress for the future. But I welcome today’s debate and I’ll certainly support the Government motion, as well as the Conservative amendments.

I welcome the opportunity to start engaging in this debate today, and I welcome the Cabinet Secretary’s opportunity to start thinking. It’s not so much of an opportunity for thinking, but thinking aloud, which I intend to do.

Any proposal to introduce a new tax in Wales will be assessed against a range of criteria, including the extent to which a tax affects UK macroeconomic or fiscal policies or the single market—well, that will only last for the next two years, perhaps, depending on whether we’re in the single market or not—may be non-compliant with the European Union for the next two—that, again, only lasts for the next two years, and an awful lot of these rules, such as the Azores judgment, et cetera, will themselves no longer apply to us. Increased tax avoidance risks—I think the border is always something we need to give serious thought to. Creates an additional compliance burden for business or individuals—almost any tax is bound to bring additional burdens, because somebody will have to do something—and is aligned with devolved responsibilities. I think also the key, perhaps more than that, is: is a tax fair or perceived to be fair by the public? The general view on tax, certainly by those of us on the political left, is the richer you are, the more you should pay. Taxes that protect health and the environment get a favourable response, but the public need to be involved. This is us starting off the debate, but it’s a debate where 3 million other people may well have a view, and should be engaged in having that view.

Taxes that I’m suggesting to be considered include those suggested by other people and those looked at by other legislatures. It’s neither a definitive list nor a shopping list. What it is is some thoughts on what could be considered in the future. None are fully thought through, and, again, many have been suggested by others, both here and in other places. Taxes not considered are those that would generate cross-border movement at the extreme end, e.g. an additional tax on alcohol that would lead to booze cruises to Chester, Shrewsbury and Bristol.

I have broken the taxes to be considered into four different types of taxes: environmental, health, additional tax on items currently taxed, and new taxes to raise money to support public services. Taxes pay for public services. I think perhaps sometimes people talk about cutting taxes and doing all these things with taxes—if we don’t have the taxes in we can’t have the public services we all want. Far too often, people seem to think we can have North American-style taxes, and Scandinavian-style public services. That’s not feasible.

There are effectively two types of taxes: new, and supplements on current taxes. Environment taxes I want to throw out for consideration, many have come out before—. Plastic bottles—charge per bottle to pay for its collection and disposal. Also, this may lead to the return of glass as opposed to plastic bottles, which are obviously reusable and some of us are old enough to remember Corona bottles and getting 5p and 10p back on them. A polystyrene tax, to reduce use of these trays, and also a chewing gum tax to pay for its removal from a whole range of places, including people’s clothes, when it’s been attached to the bottom of desks.

Health taxes: sugary drinks and food—. I know it’s been raised before by others here and elsewhere, but it’s still worth considering. Should it be a tax on all sugar, or should it be a tax on added sugar? Salt—a tax on salt in food, either charged above a certain amount, or charged per percentage of the product that is salt. Fat—a charge on the percentage of the product containing fat, or a fat supplement above a certain percentage of fat in a product.

How about supplementary taxes? Diesel—produce a supplementary charge on diesel. We know the damage diesel does to the environment. Supermarkets and large stores above a certain size—a rates supplement. Add higher council tax bands, so that more is raised on the very large and expensive properties—and I would urge the Cabinet Secretary to give serious consideration to that, because he can actually do that without any need to go through the long process he described earlier.

Car parking spaces—charging for the car park area and the number of parking spaces associated with a retail outlet. Development land tax—a tax on the land that has been given permission for development or is in a local development plan for development. It gets taxed a certain number of years after permission has been given, even if developers have not started, and subsequently for another period of time if development is not finished. This would make a charge on land banking—[Interruption.] Sorry, Nick.

Thank you for giving way. You just mentioned a diesel tax. Is that diesel tax a typical example of a type of tax that would encourage tourism near the border? So, you would end up with a load of flows across the border of people in their diesel cars to go and get it cheaper elsewhere, so that would be a very difficult one to implement.

I wouldn’t think so, because you can’t get that much diesel into most cars, and therefore the cost of traveling to get the diesel—[Interruption.] The cost of travelling to get the diesel will actually be more than the savings possible.

Each tax needs to be considered against unintended consequences so that they would affect behaviour in a positive manner. What are the dangers of it being misrepresented as Labour’s land value tax was, being described as a tax on gardens—the only punch the Tories have landed on us in the last election?

Finally, perception, is a tax fair or perceived to be fair: let’s look at these taxes, let’s see what can be done, and let’s end up with a fair tax and let’s get some money in for public services.

Gosh, that was a lot of new taxes from Mike Hedges. I’m not sure whether the diesel tax would operate quite in Swansea as it might in Newport or Monmouth. But I first looked at today’s motion and read

‘it will be necessary to test this new aspect of the devolution machinery.’

My first reaction was: ‘Why?’ Surely a prerequisite is wanting to impose a new tax, and many people in Wales feel they’re paying quite enough tax already.

When the Cabinet Secretary told the Finance Committee in Newport on 23 March he wanted to test the machinery during this term, I asked him, ‘What does that mean?’ The Cabinet Secretary told us:

‘We have to propose things and those propositions will have to be tested in front of two Houses of Parliament.’

But why do we have to? The Wales Act provides us with a power, not a duty. Yet the Cabinet Secretary told the Finance Committee

‘the job of this Assembly…is to flesh out the machinery that is currently there for us to test this possibility…. We would learn how that proposition would be then tested at the other end of the M4, and we would learn a lot by doing it.’

So, is the Welsh Government keen to impose a new tax because it potentially can, or is it keen to practice, to pull some levers, and press some buttons and see what happens—a bit like my three year old when I let him in the front of our car? And how does the Cabinet Secretary—? [Interruption.] When it’s stationary, I hasten to add. And how does the Cabinet Secretary expect Westminster to respond to this approach for testing in front of two Houses of Parliament? Won’t Westminster expect us to be seeking, actually, to impose a new tax, not just experimenting to test this new aspect of the devolution machinery, as our motion says?

The Cabinet Secretary said he wants

‘a subsequent Assembly to have the legacy of the learning’, so, can he clarify: will this be an academic learning exercise or does he expect the Welsh people to pay a new tax in consequence?

In Newport, the Cabinet Secretary referred approvingly to the Bevan commission report, talking about a tourism tax, a sunbed tax and the takeaway packaging tax. Just now, he didn’t mention quite as many as Mike Hedges, but he did say also a land or garden tax and a water tax. But aren’t we trying to encourage tourism and aren’t we in danger of forgetting the purpose of tax? Surely it is to raise money when necessary, not to experiment or punish people for using sunbeds or eating takeaways.

As Mark Reckless has just reminded us, this discussion was started at a Finance Committee meeting in Newport, when the Minister first mooted the Government’s desire to look into the possibility of novel taxes and to take a new tax around the route. I interpreted that as two things: (1), yes, using the powers transferred to this place, but also that the Cabinet Secretary was eager to see which areas were most appropriate for use of taxation in order to generate change in that area.

I disagree to a certain extent with Mark Reckless, who’s just concluded by saying that the purpose of taxation is to raise funds for public services. There is another purpose for taxation, and that is behavioural change—changing the way we behave either socially or, an issue that I’m going to address specifically, environmentally. Because generation of funds isn’t always the aim. Take, for example, the plastic bag levy, or the landfill tax that we’ve just passed. The purpose of those—they do raise some funds, but their main purpose is behavioural change, and to change our attitude towards scarce natural resources.

So, I just want to endorse some of the things that have already been said, specifically by Mike Hedges, if truth be told.

Os trown at rai o'r ffyrdd gwastraffus yr ydym yn defnyddio ein hadnoddau naturiol, rwy’n meddwl y dylem ystyried ein pwerau newydd ar drethiant fel ffordd o ffrwyno'r rheini a defnyddio’r adnoddau naturiol hynny’n well. Felly, os edrychwn ar boteli plastig, mae 400 o boteli plastig yn cael eu gwerthu bob eiliad yn y Deyrnas Unedig ar hyn o bryd, mae miliwn o boteli plastig yn cael eu prynu ledled y byd bob munud, ac mae'r nifer hwnnw’n mynd i fyny 20 y cant erbyn 2021. Felly, gallem atal 4 miliwn o boteli plastig bob wythnos rhag bod yn sbwriel ar ein strydoedd ac yn amgylchedd y môr drwy fabwysiadu rhyw fath o system seiliedig ar drethi. Gallai hynny fod yn gynllun dychwelyd blaendal, gallai fod yn dreth wirioneddol, fel sydd gan y Ffindir, er enghraifft, a, drwy ymestyn yr egwyddor honno o boteli hefyd at fathau eraill o blastig sy'n seiliedig ar betrolewm, fel polystyren, bydd gennym y potensial, rwy'n meddwl, am dreth yng Nghymru a allai wneud gwahaniaeth go iawn.

Nawr, yn yr Alban, mae Llywodraeth Plaid Genedlaethol yr Alban wedi lansio astudiaeth fanwl ar gynllun dychwelyd blaendal yno. Rydym yn gwybod bod gennym fwy o waith i'w wneud. Rydym, yn gwbl briodol, yn ein canmol ein hunain am ein cyfraddau ailgylchu yng Nghymru, ond, pan fyddwch yn edrych ar bethau penodol ynghylch plastig, mae ailgylchu poteli plastig ym Mhrydain, er enghraifft, ar 59 y cant. Yn y cynlluniau hynny â chynlluniau dychwelyd blaendal—gwledydd, ddylwn i ddweud, â chynlluniau dychwelyd blaendal—neu drethiant, yr Almaen, Norwy a Sweden, rydym yn edrych ar ailgylchu dros 90 y cant o boteli plastig.

Mae gennym hefyd swyddogaeth ryngwladol go iawn i'w chwarae yma. Rydym wedi sôn am drethi domestig, ond mae hwn yn faes penodol lle y gallwn ddefnyddio ein trethi i gyflawni swyddogaeth ryngwladol. Felly, mae rhwng 5 miliwn a 13 miliwn o dunelli o blastig yn cyrraedd cefnforoedd y byd bob blwyddyn, ac, yn anhygoel, erbyn 2050, mae rhai pobl wedi amcangyfrif y bydd y cefnforoedd yn cynnwys mwy o blastig yn ôl pwysau na physgod. Rwy'n meddwl bod unrhyw beth y gallwn ei wneud yma gyda'n trethi domestig sy'n ein helpu i ymdrin â’r argyfwng rhyngwladol hwn o blastig yn llygru ein hamgylchedd yn rhywbeth y gallem yn sicr ei ystyried.

Byddwn yn ychwanegu fy mod yn meddwl y byddai treth plastig neu dreth tecawê, neu ba bynnag gyfuniad yr hoffech ei roi at ei gilydd, yn cael llawer o gefnogaeth gan y cyhoedd. Byddwn yn synnu'n fawr pe na bai Gweinidogion Cabinet wedi cael negeseuon e-bost gan aelodau'r cyhoedd am hyn. Rwyf i’n sicr wedi eu cael, ac rwy’n meddwl bod pobl yn barod ac yn fodlon i edrych ar hyn, oherwydd rydym wedi arloesi—fel y dywedodd Nick Ramsay—rydym wedi arloesi gyda'r dreth ar fagiau plastig, a fabwysiadwyd gan weddill y DU ar ein holau, ac mae wedi llwyddo i leihau bagiau plastig 70 y cant yng Nghymru. Byddwn yn hoffi—. Dyna fy mhwynt, rwy’n meddwl, o fy safbwynt i, am dreth a fyddai'n cael cefnogaeth gyhoeddus eang, sy'n ymdrin â gwir angen o ran adnoddau naturiol. Ni fyddai'n codi swm enfawr o arian, mae'n rhaid dweud, ond efallai y byddai, fel treth arloesol gyntaf, yn fwy derbyniol i lawer o bobl oherwydd hynny, oherwydd byddent yn gweld ei bod yn creu budd cyhoeddus heb fod yn ymgais, fel taliadau parcio neu bethau eraill sy'n cael eu hystyried fel ffordd o godi arian at ryw ddiben ysgeler yn y Llywodraeth; byddent yn gweld bod hyn er lles yr amgylchedd.

Rwy'n meddwl bod hon yn ddadl dda iawn yr ydym wedi ei chychwyn yma, ac rwy’n edrych ymlaen at weld y gwaith yn mynd rhagddo. Byddwn yn ychwanegu un peth at y cymhlethdod enfawr y mae’r Gweinidog Cabinet wedi’i ddisgrifio, sef y Pwyllgor Cyllid, oherwydd mae gennym ninnau swyddogaeth yn hyn hefyd, beth bynnag sy'n digwydd, rwy’n meddwl. Dydw i ddim yn siarad allan o dro wrth ddweud y bydd y Pwyllgor Cyllid, beth bynnag fydd barn Aelodau unigol am y dreth arfaethedig, y byddwn ni’n craffu ar y dreth yn drylwyr, ac yn gwneud hynny ar ran holl bobl Cymru, a byddwn yn sicrhau bod unrhyw dreth a gynigir gan Lywodraeth Cymru yn addas i'r diben a bod y pwrpas iawn y tu ôl iddi.

Like many others, I thoroughly welcome this debate. I welcome the debate because it’s given us freedom, as an Assembly, to free-range a little bit and to say, ‘Well, we’re not afraid of throwing some of these things out into the open,’ in a way, I have to say, that presaged this with the tax for good. There’s the answer, Mark, that you were looking for. It isn’t a tax just for testing it to see if the circuits run properly and the lights come on; it’s actually the tax is for good, and I think part of this debate is to throw some of those ideas forward as to what it might be, and it could well be the model that Simon has just said there now.

We know what good the plastic bag tax in Wales did, and the massive impact it had on recycling rates and reducing the amount of plastic bags that were going into the waste in the natural environment and so on. So, it might well be a logical extension of that, but there might be other ones to do with social care. That tax is for good is the issue, but it’s right that we do test the machinery. I think the Minister is absolutely right, and this is part of our stepping up to the mark here, to encourage the Minister, in some ways, to say, ‘Do do this, but pick the right one.’ I think he’s right to do it with care, to take this forward with consultation, in order that we do test some of the ideas of what would be the best service to the public good.

I would say in doing that, however, we do need to guard against certain things. One is unintended consequences, and within that, by the way, even though I’m an advocate of environmental taxes and levies, we have to be cautious in the way that we design them, to make sure that there aren’t unintended consequences. So, if, for example, Simon’s idea there, and one that’s been advocated by many environmental groups, were one that came into play in a few months’ time and it was the one that was taken forward to test the machinery, let’s also make sure it doesn’t have any unintended consequences.

Secondly, I would say, let’s make sure—not least in times when we know, as always, people are finding it tough—that there is nothing regressive about any of the proposals we bring forward, and ideally they would be progressive rather than regressive. And not only on individuals but also on businesses, that that cost of complying with any new taxation is not unduly onerous. It will have an impact; you can’t avoid that with a tax, if it impacts on a business, but that it’s not unduly onerous—that it is within what we would consider proportionate.

Finally, of course, as has been laid out not only today, but also in the Bevan Foundation paper, all those aspects of: is it within our devolved competence; does it deal with cross-border issues; does it deal with issues of tax avoidance, and so on? And I would say, in addition to the proposals that are within here, let’s throw some in the mix as some suggestions. Within here it talks about a tourism levy. I have personally some concerns about that and the unintended consequences to do with the reputation of the country and so on. It was looked at some time for the south-west of England. A huge, huge dump of tourists into that area of the country through the summer months and so on, of course you could put a tourism levy, but if it was the only place in the country that had a tourism levy within the UK, well the impact there on reputation and profile of that as a tourism sector is quite interesting, but there are some advantages to it. Innovation—[Interruption.] Sorry.

Member of the Senedd:

Will you take an intervention?

No, there’s no intervention.

No, no. Innovation tax credits taking over from where we are with the research and development tax credits, to make good the shortfall we have in Wales in terms of innovation and R&D; a workforce development levy, which would, in effect, take over from the apprenticeship levy—and we know some of the difficulties with that, and we would take control; and the other ones laid out, but let’s throw a couple of other ones in here.

The social care one has already been mentioned. I think that is worthy of looking at, but it is a hefty one to actually test the machinery on. The vacant land levy, I think, is fascinating because we all know the amount of not only land backed by investor communities, but derelict properties on that land that are left as an eyesore. What about tax relief for democratic engagement? The point that was made in actually getting more people to engage in the democratic process: maybe we should be incentivising them to do it by some sort of tax relief for democratic engagement if they participate in elections. What about a windfarm windfall? Because some of the windfarms that were set up 20 or 25 years ago give, frankly, diddly-squat to the communities that they’re in. Maybe you should be looking at those for those older historic windfarms that are reaping the dividends now. What about an out-of-town development levy to promote high-street regeneration and subsidise free parking? What about a minerals and opencast levy to fund the remediation of those opencast and quarries? What about a flood alleviation or climate change adaptation levy on larger land owners to promote investment in water catchment management schemes and flood prevention? Now, I have to say, those are not all—. I said about unintended consequences, I talked about avoiding regressive taxes, avoiding non-devolved issues; I say that none of those—. Mark, just in case you’re going to put them out in a press release, none of those are firm proposals. I’d want them all checked through, first of all. But we should be looking for the right one to test this, so that we end up with a tax for the common good. There is a reason to do taxes, and if they change behaviour or they actually make better the environment we live in—or the standard of living that we have—then that’s a good reason for a tax.

I, too, would like to add my support for the plastics tax, and perhaps some of it could be used to invest in water fountains so people would be able to fill up with water rather than having to buy yet another water bottle. Also, I think it’s perfectly right, in response to Neil Hamilton, that we should impose a tax on those who choose to adulterate our food with sugar, salt and fat in order to pay for the health consequences and the costs of looking after them. Why should we put up with fast-food packaging littering our landscape and expect someone else to pick it up? A takeaway packaging tax could be given to local authorities to pay for the extra road sweeping required.

But I want to use most of my time to discuss the idea of a modest carbon tax. We simply aren’t grasping the nettle of change required to avert the environmental disaster that experts warn will be with us within 15 years, never mind that of our children and grandchildren, unless we change radically. The climate change committee last week exposed Wales as an outlier in efforts to reduce carbon emissions. So, this is a proposal that I think encourages wealth creation, as well as tackling the scandal of air pollution, which DEFRA admits is killing a population the size of Maesteg every year in the UK. Levels of nitrogen dioxide emitted mostly by diesel vehicles are above legal limits in nearly 90 per cent of urban areas.

Would you give way?

Okay.

I find it astonishing to sit here and listen to you discuss air pollution when your party is responsible for what will be an explosion of air pollution, due to Cardiff’s local development plan. Would you now condemn that plan and the air pollution it will bring?

If you listen on, I will tell you why my proposal will help sort out some of this air pollution.

We can’t rely on the UK Government to sort this out. They’ve already suffered two humiliating defeats in the High Court, and the latest plan is even weaker and wobblier than their earlier ones. It requires local authorities to exhaust all other options before introducing clean air zones, enabling them to charge for polluting vehicles entering a polluting zone when that, in fact, is the only effective option for changing things. Instead, the Tories are saying we should just breathe in toxic air until 2050, when nearly every car and van will be zero emissions, by which time many of us will be dead. So, I think we could pilot a carbon tax in areas that already have illegal levels of air pollution, like the centre of Cardiff around Westgate Street and Newport Road. We urgently need a clean air zone. Cardiff is one of the most car-bound capitals in Europe, and we absolutely need to re-engineer the investment that we need to make in a public transport system to enable people to switch to other modes of less damaging transport. At the moment, the Cardiff underground map is little more than a piece of artwork, rather than being a plan with enough capital identified to make it really happen. So, the quickest, fairest way of making clean technology competitive with fossil fuels is simply for carbon to start paying its true costs. A fee starting at £10 per tonne of carbon dioxide emitted, increasing by £7 a tonne each year, could quickly make clean energy the cheapest go-to choice. A revenue stream rebated equally to all households would fuel demand for new carbon neutral technologies and cushion lower income households during the transition. Those who already tread lightly on the world’s resources, particularly those who don’t have a car, would actually gain a dividend from this carbon tax. It would be socially just that those without a car would be rewarded rather than penalised as they are at the moment. As both the fee and the household dividend rise steadily each year, a clear economy-wide price signal is sent to all investors, generating even more capital to finance new, low-carbon alternatives. The clean technology needed to power our economy already exists. A levy on carbon will provide the economic incentive for investors to deliver those technologies to scale. So, let’s deliver on the well-being of future generations Act and make it a reality with a carbon tax.

We’ve spent much time considering how our law-making powers can reshape our society and now we can consider how our fiscal powers can contribute too. This is exactly the kind of ambitious and open debate that this place was created for—an opportunity for us to challenge the status quo and truly set Wales apart. But, as well as considering what we could do with new taxes, we should also be thinking about how we can harness existing tax-varying powers too. We should do this within an agreed, coherent set of principles, against which we can test our revenue-making approach. So, today I would like to suggest three such principles for us to consider—transparency, fairness and resilience—with some specific examples of steps we could take to ensure that our tax system meets them.

First, to transparency. I am supportive of many of the ideas that have been spoken about today, including the sugar tax, the sunbed tax and the take-away packaging tax, suggested by the Bevan Commission: taxes that try to nudge behaviours. But, I am also a strong believer that revenues from taxes aimed at achieving behaviour change should be used to incentivise the positive behaviour we are trying to encourage. So, petrol duty, for example, should be invested in sustainable forms of transport, to give people a viable alternative to driving. Similarly, the sugar tax could be used to subsidise the cost of locally grown decent food, and revenue raised through the take-away packaging tax ploughed into community regeneration schemes. In this way, we can ensure that the pockets hit hardest by the taxes also benefit the most. If we sign up to any of these taxes, we need to have a clear idea of the behaviour change we are trying to incentivise. We need to work with communities across Wales to decide how best to do this—democratising our tax system and making our aims transparent in the process. But, before we become too distracted by the shiny new taxes we could bring in, I think we should examine the taxes already under our control and exercising duties coming our way.

This leads me to the second principle I would like to speak to: that of fairness. In a few months, we will adopt responsibility for land transaction tax and landfill disposals tax. In 2019, we will have the additional income tax powers. Clearly, these are important steps in our evolution into a proper Parliament for Wales. But, we should not lose focus on powers already under our control, namely business rates and council tax. We have done little to differentiate ourselves from how these taxes operate in England. Business rates could be a powerful tool in addressing concerns on town-centre regeneration. Yet, in Llanelli town centre, for example, some shops have seen their business rates skyrocket. Shops around Station Road, a deprived part of town, have seen the average value per square metre rise from £80 to £200, while some shop rates in Parc Trostre out-of-town retail park have fallen, and whilst purpose-built town centre car parks have to pay business rates, Trostre’s vast car park is free of such charges, and this works directly against two policies we want to encourage: the promotion of sustainable transport and town-centre regeneration. Imagine what we could achieve if we restructured rates to more accurately reflect the challenges our town centres are facing, and if we re-examined the case for charging rates on out-of-town car parking, just as they’re taxed in town centres, whilst ring-fencing any revenues raised for local regeneration projects.

Now, there are similar issues with council tax, which remains one of the most regressive taxes there is, whilst also being one of the taxes most difficult to dodge. In his Senedd paper written for the IWA on the issue, Gerry Holtham pointed out that, for homes worth less than £44,000, council tax amounted to almost 2 per cent of the property value, whilst for homes worth over £424,000, that amount dropped to 0.5 per cent. Now, there are clear opportunities for making the council tax fairer. Adding additional council tax bands, which I notice Plaid Cymru included in their manifesto, would shift—[Interruption.]

To be fair, I was involved in drafting the paper some time before your manifesto was written, so give me some credit.

They would shift a greater burden of contribution on to people with large, expensive houses—money that could be used to boost social care budgets or to remove people altogether with less money or smaller homes from council tax. But, as Gerry Holtham has pointed out in the celebrated commission that bears his name, there aren't many wealthy people in Wales, and the few there are are highly mobile. So, if we put—[Interruption.]

I'm sorry, Nick; I'd like to, but time’s against me.

If we put extra burdens on the richest, they could easily hop across the long, porous border with England. So, if we are to increase their property taxes, we should look to balance that out by reducing their income tax with new powers—that's the bit Plaid Cymru didn't mention. It would smooth the move to a more progressive tax system that focuses on land and property and may well have the effect of attracting into Wales more people in the high income bracket to shore up our weak tax base.

And that brings me on to my final principle, Llywydd, if I might: the need for our tax system to be resilient. Over the next 20 years, we're estimating that 700,000 jobs in Wales are at risk from automation, and the implications of this from a tax revenue and social security perspective are clear: tax receipts will drop at a time when some people will need help most. We must ensure the safety net is fit for purpose, and we need a national debate about how such proposals as universal basic income in Wales would work. Clearly, much of this is some way off. We have hurdles to overcome. We may need a profound rethink of our taxation system. But it's important we start the debate now, so we're prepared for the challenge to come. Diolch.

I call on the Cabinet Secretary for finance to reply to the debate.

Diolch yn fawr, Llywydd. Well, Nick Ramsay opened the debate by hoping that he would be thought-provoking, and I don't think he will have been disappointed. I want to thank all those Members who’ve taken part.

Let me say to Nick as well that if I didn't think we had an idea that merited consideration on its own terms, then I wouldn't send it out to test the new machinery, but I don't think we will be in that position at all. Nick Ramsay himself referred to environmental taxes, and if anybody thought that we weren't capable of coming up with an idea that was sufficiently robust in its own terms, then they should have listened to Simon Thomas and his exposition of environmental taxes in relation to the use of plastic bottles here in Wales. I'm sure we will, at the end of this process, have an idea that stands up to examination and is worth testing, too.

Llywydd, the debate, as often happens here, exposes a fault line through the Assembly. On one side of the debate, you have those Members who are instinctively hostile to taxation. So, Neil Hamilton, I thought, was very open in saying that that was indeed his position, and Mark Reckless, with his description of taxation as a punishment and a burden, exposed his position on that fault line, too. On the other side of the fault line, you have Adam Price, when he described the need for change with a purpose, and Huw Irranca-Davies when he talked about the common good. For me, taxation is not a burden on people. It is the way in which we come together collectively to make our individual contributions so that we are able to do together what not any one of us would be able to achieve by ourselves. That’s why, because we have that basic belief that taxation is the way we act together to promote our common goals, we are interested in testing this new machinery, cumbersome and difficult as it may be.

And I wanted to thank all those Members who contributed potential ideas to that expanding list of possibilities. Mike Hedges went through a long list of possibilities. He reminded us of taking Corona bottles. I used to take Tovali Special bottles back in Carmarthen in order to make sure that my grandmother gave me the change that came from returning bottles on deposit. Who would have thought that the chewing gum removal tax would have made its way back onto the floor of the Assembly? [Interruption.] Thank you very much. Or, indeed, that a diesel tax could have been turned into a debate on diesel tourism? But, there we are—it’s been the nature of the debate, and, in doing so, it has added to the richness of the possibilities that we have here to test. And Jenny and Simon Thomas and others have all added other ideas to the new set of possibilities.

Let me just end by saying that Huw Irranca-Davies, I thought, reminded us of why sometimes having a procedure that is testing is important, too. We will need to test any ideas that we develop against their unintended consequences to make sure that they are progressive both in purpose and in impact. That’s why I intend to use the summer and into the autumn, as I explained earlier on in opening the debate, to get as wide a range of ideas as we can to begin with, to bring them down to a shortlist of the most promising ideas, and then to have to come down to one candidate to test the machinery. In doing so, I hope we will end up with a tax that is fit for the purpose we would intend, that does good things for us here in Wales, and, even if we didn’t, I return to the point I made, which is that, in testing the machinery, we will learn a great deal, maybe about the defects of the machinery itself, and, in that way, we will be able to go on developing the way in which our fiscal responsibilities, new in this Assembly term, can go on being a valuable part of the way that we do business here in Wales in the future.

The proposal is to agree amendment 1. Does any Member object? [Objection.] I will defer voting under this item until voting time.

Voting deferred until voting time.