So, we'll do item 8 first. Can I call on the Cabinet Secretary to move the motion under item 8, please?

Motion NDM6640 Julie James

To propose that the National Assembly for Wales, in accordance with Standing Order 27.5:

1.  Approves that the draft Landfill Disposals Tax (Tax Rates) (Wales) Regulations 2018 are made in accordance with the draft laid in the Table Office on 8 January 2018.

Motion moved.

Diolch yn fawr, Dirprwy Lywydd. I will move the motion under item 8, which relates to landfill disposals tax. This first set of regulations sets the standard, lower and unauthorised disposals rates for landfill disposals tax, which, subject to today’s debate, will apply to taxable disposals made on or after 1 April here in Wales.

The second set of regulations specify the tax bands and percentage tax rates for land transaction tax. In relation to landfill disposals tax, and in accordance with my announcement in October, the standard and lower rates of LDT will remain consistent with the UK tax for the next two years, providing the stability that businesses have so clearly told us they need.

The regulations also establish the unauthorised disposals rate, set at 150 per cent of the standard rate. Wales will be the first country in the United Kingdom to set a higher rate for unauthorised landfill disposals, reflecting the additional cost associated in tackling illegal disposals and the fact that the costs of running a legitimate landfill site are not incurred by those people who dispose of landfill illegally. It will also create a financial deterrent to avoiding environmental obligations and disposing of waste illegally.

I laid out these proposed bands earlier in the budget-making process. They are unaltered in front of the Assembly this afternoon, and I hope that Members will feel willing to support them.

Thank you. Can I call on the Chair of the Finance Committee, Simon Thomas?

Thank you very much, Deputy Presiding Officer. Of course, I respect the fact that the Assembly can decide for itself how to deal with various regulations here, but I only intend to contribute once in discussing the issues at hand.

May I, first of all, note the fact that the Welsh Revenue Authority has been in attendance, as has already been mentioned? They've been at the Assembly, and I hope that Members have taken the opportunity to meet the authority—to meet its members. We, as the Finance Committee, look forward to working with the WRA on these new taxes and their implementation in Wales.

I was pleased to hear today, under the regulations that we're discussing, that the first official record has been made by the WRA of the first person who is to pay tax under the Landfill Disposals Tax (Wales) Act 2017. So, that's an individual who has made history—a footnote in history, at least, whoever that company may be. It's a footnote in the history of taxation in Wales.

As the Cabinet Secretary said, in opening the previous debate, we today are dealing with taxes for the first time in the history of this Assembly, and the first time for many centuries. I think that's what the Cabinet Secretary said. The history of taxation in Wales is very complex. It's not as clear as to say that we've not had any tax powers for 800 years. Certainly, some of the taxes of the Welsh princes remained after the days of Llywelyn the Last, and certainly up until the Acts of union, taxes were levied locally under the old Welsh system. So, it's not entirely new for us to be levying taxes in Wales, but taxes have changed, certainly—there's no doubt about that.

We are talking about the landfill disposals tax, and we will be discussing land transaction tax—it's not quite the taxes on cattle that Llywelyn had, or taxes in lieu of military service, or the gwestfa tax, which is collection of food for the king. It was Lord Rhys, not the princes of north Wales, but Lord Rhys, that turned gwestfa into a financial payment rather than a payment of food, and he described it as twnc. So, if you want to introduce a new tax, then that's the name for your new tax: twnc. That's paying tribute, but it's a good name for a tax, in my view.

So, there is some history of taxation in Wales; a history that was done away with, of course, with the two Acts of union. But, in the period after we lost our princes—well, they were kings to all intents and purposes; they were called princes by the English kings to mark that difference. Once we lost our direct rulers, we were reliant on the Westminster Parliament to levy taxes in Wales. It wasn't possible, for a long period of time, for Westminster to levy taxes in Wales, because there were no Members of Parliament elected from Wales to go to Westminster in order to provide that authority. It was only after the second Act of union that we saw real taxes in Wales for the very first time, and they were set by the king, of course, and that was the king’s subsidy. At that time, of course, the king had a right to levy a subsidy in Wales. Ever since then, we have been under a tax system that emerges from Westminster, rather than this place, and here we are, starting to draw those powers back and to take back control over some of the taxation powers in Wales.

Of course, there are only two taxes being considered this afternoon. Income tax is to come, and there may be more disagreement when we start to deal with income tax, but it is important to note, I think, that history is being made this afternoon in this Chamber, as we are setting tax rates for the first time. It’s not 3p per head, as it was for cattle in the past, but something far more substantial, according to the land transaction tax and the landfill disposals tax.

I’d like to turn to the work of the Finance Committee and remind Members that we are setting a tax and voting this afternoon in way that is different to what the approach will be in future. The two taxes that we’re dealing with today give Government the opportunity, next time, to introduce taxes on that day, if required, and the taxes will be introduced overnight, and the Assembly will have up to 28 days to cast a vote on those taxes. If the Assembly disagrees with the Cabinet Secretary, the Government and the WRA will have to repay those taxes, because the Assembly has not agreed with the Government. So, I note that the voting is different today to what it will be in future, perhaps, depending on what the Government intends to do. So, the voting procedure is to change in future.

As my colleague Adam Price, who is the Plaid Cymru spokesperson, has been detained elsewhere by the Hywel Dda business during proceedings, for some reason, I would just like to place on record that Plaid Cymru will support the tax rates today. We’ll certainly have more of a debate around income tax, and there may be some more disagreement across the Chamber on income tax. But, one thing is certain: we are making history today, and we are setting a new tone to the accountability of any Government to the people, because we are now discussing not only spending money in Wales, but raising money in Wales.   

I call on the Chair of the Constitutional and Legislative Affairs Committee, Mick Antoniw.

Thank you. Unfortunately, the remit of the Constitutional and Legislative Affairs Committee provides less scope for such an elegant historical narrative, but I will do my best.

The Constitutional and Legislative Affairs Committee, with regard to the Land Transaction Tax (Tax Bands and Tax Rates) (Wales) Regulations 2018, considered these instruments at our meeting on 22 January. We reported three merit points identified under Standing Order 21.3. For the purpose of this debate I'm going to focus on the third point reported by the committee, which relates to the accessibility and transparency of these regulations.

These regulations set out the first tax bands and percentage tax rates for land transaction tax as introduced by the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017. These tax bands are new to Wales. They are particularly important to the public as these regulations have effect in relation to chargeable transactions such as residential property transactions and chargeable considerations including rent from 1 April 2018. The term 'NRL zero rate band' is not defined in the Schedule. The committee believes that if something small can be done to help readers understand legislation—including something as simple as including a footnote in these regulations to provide clarification of a term used—then that should always be done.

We acknowledge that an explanation of the term is provided in the parent Act. However, the Cabinet Secretary may be surprised at the range of queries the committee receives from members of the public who have misunderstood the meaning and application of legislation that passes through the Assembly. But then again, he may not. This is equally true for lawyers providing services to clients who come across difficulties relating to definitions as not everyone is a tax expert. We expect that the issues of clarity will come up regularly as the committee continues to scrutinise tax-related instruments. Given their importance to Welsh citizens, the committee will continue to report where it thinks that legislation could be made more accessible and easier to read.

I've asked that the Cabinet Secretary ensures that the Counsel General is also aware of our concerns and that we would expect this issue to be considered as part of the development of any future interpretation Bill for Wales. Cabinet Secretary, I told you I would not disappoint.

You didn't disappoint, Mick, no. Can I thank the Cabinet Secretary for bringing this motion here today and these regulations? I'm pleased that Jane Hutt mentioned the charter for the Welsh Revenue Authority. It seems a while back now that I first proposed one of the amendments that has led to the creation of the charter. First there was the dream, now there is the reality. It's good to see that that is suited to the Welsh context as well; it's not just simply been a carbon copy of the HMRC charter, which, whilst it serves them okay, we didn't feel in the committee was suitable for the Welsh context.

This is, in many ways, the final chapter of this long process that Government and the Finance Committee have been involved in. It seems like forever, probably a couple of years now—and longer, going back into the last Assembly. I'm pleased that we've finally got to the setting of the rates and bands. The Cabinet Secretary will recall that there were calls from some quarters during the finance process—well, mainly from me and Mark Reckless—for the rates and the bands to be clearer on the face of the Bill. Well, the Welsh Government didn't agree with that, and that's the past now. We did come to the compromise of having those rates and bands revealed towards the end of the process, and we do now have these regulations before us, so that's to be welcomed.

Many of the points that I was going to ask have been covered, but can I just ask the Cabinet Secretary, in terms of the process now, running up to the switching on of the Welsh taxes on 1 April—? I believe you met with the Chief Secretary to the Treasury last week, and, as I understand it, the new Welsh taxes cannot be finally switched on until the UK taxes are switched off, for obvious reasons. I believe that requires an Order in Westminster. Can you clarify as to how that process is going to work?

And, from your discussions with the Chief Secretary to the Treasury, are you confident—? Well, first of all, are you getting sufficient co-operation from the officials in Westminster, and are you confident that the process is going to be smooth enough so that, overnight, or whenever it is—I think it's overnight, running into 1 April—the new landfill disposals tax and land transaction tax in Wales, the first taxes in 800 years or however long it is, will come into being as originally envisaged?

Broadly speaking, I welcome what the Finance Secretary is doing in these regulations. I support the devolution of taxes to Wales because I see it as one way in which we can make Wales more competitive and attractive for people to come and live and work here. If the taxes are used in a sensible way, then they can help to boost the size of the Welsh economy and the tax base that that brings about.

When we look at the rates and bands that the Finance Secretary has chosen, broadly speaking, I think this is an improvement. Ninety per cent of people will either pay the same or less under the Welsh rates and bands compared with what they would do under the UK bands, which is a very good thing. But stamp duties themselves on property are a very bad tax, generally speaking, because, fundamentally, it's a tax upon moving house. It reduces labour mobility and it ends up with, particularly older people, in effect, being imprisoned in their own houses because they don't want to pay the costs of moving, which is a bad thing because we need more houses and we need to occupy the properties that we have more intensively. The evidence from England is that stamp duty rates at their current levels will probably reduce people moving around by as much as a third. Of course, Welsh property prices are far less than in England, so it may be that this competitive advantage will disguise some of these features. We're expecting a bit of a property boom in south-east Wales as a result of the abolition of tolls on the Severn bridge. Property here, on this side of the Severn, is, of course, a lot less than on the other side. So, it probably will produce a windfall for the Welsh Treasury, and I therefore fully understand why the Finance Secretary has introduced the higher rate bands. But, broadly speaking, I'm in favour of taxes that are lower than in England in Wales, both in absolute terms as well as in relative terms.

It's a pity, I think, that the stamp duty rates at these high levels are likely to act as an inhibitor of the economy in future. It may be to a very small extent, because we don't have that many properties in the very high levels of these bands. The average house price in Wales is, I believe, £150,000, and, for the average buyer, they'll be paying £500 less, I believe, under these rates, than they would have been otherwise. So, that is a good thing. But I would make a plea for the future that, where we do have devolved taxes, we should use them as levers of improvements in the economy to encourage people to come to Wales, because it is the poorest part of the United Kingdom and we need every bit of assistance that we can from the tax system to try to correct the problems that have been inherited from the past.

I should say that, although we have called for a division on this, that is only so that we can abstain, so that—. Because I'm in favour of the reductions in the imposition, but we're against the increases. But we don't see, on balance, that this is a bad thing and, therefore, we're going to abstain rather than vote against the motions.

Thank you. Can I now call on the Cabinet Secretary for Finance to reply to the debate?

Diolch, Dirprwy Lywydd. As we are debating the three sets of regulations separately, with your permission, I'll reply to the general points that have been raised in the debate and then I'll say something specifically on this set of regulations.

So, may I start by saying a word of thanks to Simon Thomas? When we're doing something for the first time, it's great to have the historical context for that, and I'm grateful for what he said about Plaid Cymru's support in the vote this afternoon.

Mick Antoniw raised the reporting point that the Constitutional and Legislative Affairs Committee has raised. Dirprwy Lywydd, can I say that I absolutely understand and share the committee's desire to make our legislation as clear and accessible as possible? But I didn't feel I could simply depart from the established approach of the Welsh Government on a one-off occasion. What we are doing, however, is to follow up the recent consultation on the possibility of developing an interpretation Act for Wales, and the Counsel General has heard the comments made here this afternoon and I know that, when he is considering how the 1978 Act operates and the steps that can be taken to improve accessibility of Welsh law, he will directly take into account the point that the committee has made in relation to these regulations.

Can I thank Nick Ramsay for his further points, for the work that he did on the charter? His neighbour to his left will be pleased to know that Jocelyn Davies very specifically told me that the charter was based on the principles of co-production, that it was providing for a relationship not of a provider and a user, but trying to see the Welsh Revenue Authority as an organisation that would be jointly involved with the people who use it in the business of providing the services on which they will rely.

Can I answer the points that were made as well in relation to the switch off? When I met the Chief Secretary on Friday, our discussion of this matter was the result of a very significant piece of work done by senior officials of the Welsh Government and of the Treasury, who tested the system that we are proposing and the readiness of HMRC against 24 different criteria to satisfy themselves that they could recommend to us that the current system could be switched off in order to allow our new taxes to take effect. It will require the Chief Secretary to lay an Order in Parliament in order to switch off the current system. She told me on Friday that she was happy now to do that, and I'm happy to say that the co-operation we've had at official level, and indeed with the Chief Secretary, on this matter has been very productive.

Can I turn then, Dirprwy Lywydd, to the specifics of this set of regulations? I said in relation to the previous ones on landfill disposals tax that I was able to sustain the proposals made back in October right through to today; that isn't the case in relation to land transaction tax. Again, Nick Ramsay said that, during the passage of the Bill, there were those who argued strongly that rates and bands should have been set out on the face of the Bill. One of the reasons why I was reluctant to accede to those arguments was an anxiety that, with a major fiscal event at the UK level during the time that these regulations would be discussed in Wales, we may have to undo the work of the Act by bringing new regulations forward.

As a result of the budget, the UK Government's autumn budget, I have indeed announced revised LTT residential rates, altering the ones that were published at the start of October. What we're now able to do, and what is reflected in the regulations in front of you, is to increase the starting threshold for residential main rates to £180,000, and in doing so that makes possible a reduction in tax for over 24,000 home buyers in Wales compared to what they would have been paying under SDLT, and without the additional complexity of a new relief as in England.

This is by far the highest starting threshold anywhere in the United Kingdom, and fully £55,000 higher than stamp duty land tax. This means, as Neil Hamilton said, that the average home buyer in Wales will have a tax cut of over £500. Furthermore, around 80 per cent of first-time buyers in Wales will pay no tax. This is the same proportion as will pay no tax under the first-time buyer relief in England, but the changes here also benefit equally hard-pressed citizens seeking to buy an affordable home.

For commercial transactions, Wales will have the lowest starting rate of tax for businesses anywhere in the United Kingdom. This means businesses will either pay no tax or less tax than under SDLT for all property purchases up to £1.1 million. This will benefit small and medium-sized businesses right across Wales.

For both residential and non-residential rates, I have increased the progressivity of the tax. This does mean that those buying the most expensive property in Wales will pay more, but it is right that those who can afford to pay more. Nevertheless, nine out of 10 transactions in Wales will pay less or the same tax than under LTT, and we will have acted to make this tax suit the needs of Wales and to make it fairer for people who live here. Once again, I hope that Members will be willing to support those regulations. 

Thank you very much. The proposal is to agree the motion under item 8. Does any Member object? [Objection.] Object. Therefore, we'll vote on item 8 in voting time.

Voting deferred until voting time.