The following amendments have been selected: amendment 1 in the name of Julie James, and amendments 2 and 3 in the name of Rhun ap Iorwerth.

The next item is the Welsh Conservatives' debate on land transaction tax on commercial land. I call on Mark Reckless to move the motion—Mark Reckless.

Motion NDM6719 Paul Davies

To propose that the National Assembly for Wales:

1. Notes that the new six per cent rate of land transaction tax (LTT) on commercial land transactions above £1 million is significantly higher than the equivalent rates for such transactions in England (five per cent) and Scotland (4.5 per cent).

2. Notes the Welsh Government’s completion on its circa £12 million purchase of the Cardiff bus station site on 29 March 2018, thus avoiding its own LTT regime by three days and ensuring the transaction took place under the UK Government’s stamp duty land tax.

3. Calls on the Welsh Government, in light of sector representation, to reconsider the new six per cent LTT rate on commercial land transactions above £1 million which will have a detrimental impact on economic development in Wales.

Motion moved.

Diolch, Dirprwy Lywydd. I move the motion in the name of Paul Davies AM. I will address the amendments first.

We're happy to support Plaid's amendment 2, reflecting the devolution of powers agreed between the Assembly and the Conservative-led Government at Westminster. We also support Plaid's amendment 3. With our new tax powers, we need good scrutiny over how they are used and any impact on the economy. A review of property taxation is appropriate, given the number of taxes that we now have affecting property. This should now be expedited, because we want to give urgent consideration to Labour's 6 per cent supertax on significant commercial transactions. We'll be able to compare the impact of their 6 per cent supertax—a fifth higher than the 5 per cent under stamp duty land tax—and the lower 4.5 per cent rate set in Scotland. This, industry leaders say, has made Scottish commercial property more competitive, which is evident in the increasing demand the market has experienced. Devolution allows us to assess evidence from across the UK and to reconsider mistaken policy. We must take that opportunity.

Turning to the Government amendment, which we'll be opposing in light of its dismissive 'delete all', I will address its two parts. The Welsh Government is correct to say that no Assembly Member voted against the setting of these tax bands, but as the Minister is well aware and will recall from our debates on the Finance Committee and attempts from myself and Nick Ramsay to put those rates onto the face of the Bill, the reason is because, against our entreaties, those tax bands were introduced by regulation, which we have no power to amend. It was a take-it-or-leave-it decision and our concern relates to this 6 per cent supertax on significant commercial transactions, not to the land transaction tax regime as a whole.

The second half of the Government's amendment relates to the purchase of the Cardiff bus station site just a few days before the switch from SDLT to LTT. I'm glad that the Welsh Government is now clearer about its position, however it's still not clear why it made no announcement about its end-of-March purchase of the bus station site until 18 April, or why Ken Skates gave me such an opaque answer in writing on 11 April. Perhaps I shouldn't give Ken too hard a time about his written answers at the beginning of April—he was, after all, representing us at the Commonwealth Games on the Gold Coast and our athletes were very successful under his encouraging eye. The one consistency through the Government's response to our questions is that it has not gained any tax advantage. Can it then clarify what was the motivation for rushing the Cardiff bus station deal through before the end of March? Was it so that the capital spend counted against the 2017-18 budget rather than this year's?

Of course, the reality is that Welsh Government does enjoy a tax advantage when dealing in property. It benefits from Crown exemption. So, it doesn't pay SDLT or LTT, unlike the private sector. As a property investor, it is unaffected by whether the rate is 5 per cent or 6 per cent—[Interruption.] Was that an intervention over there?

No, no. Carry on.

Jenny Rathbone rose—

Ah, excellent.

I think we're fully aware of the Crown exemption, but I can't understand, therefore, why you aren't happily accepting the Government's amendment, seeing as, clearly, as they have Crown exemption, they would never be needing to pay the land transaction tax. It's a complete non sequitur.

Well, the reason we're opposing the amendment is that it starts with 'delete all' with reference to our motion. We also have some concerns about how Welsh Government is treated compared to local authorities and potentially some other bodies, and the potential differences between LTT and SDLT and the centralising effects we think that may unhelpfully have on partnerships.

I previously criticised Welsh Government for its lack of joined-up approach to office development and employment growth, particularly in the constituency of the AM who's just spoken, Cardiff Central. One Cabinet Secretary, Ken Skates, promotes an enterprise zone, yet another, Mark Drakeford, subjects it to punitive taxes. Industry leaders say they're already seeing reducing asset valuations and investors who will no longer consider Wales as a direct consequence of this policy decision. How are we to reconcile what Ken Skates describes as his business-friendly approach with the Cabinet Secretary for Finance's new supertax? The property industry tells us that private investor interest will significantly subside with the LTT increase and will result in Welsh property being less competitive than the other UK nations and regions. Investors will be concerned that, having raised tax once, this could happen again. Having the Corbyn-backing Minister who raised the tax move to the top job may not mollify such fears. The BBC reported on 28 March how Welsh Government may sidestep private investors being unwilling to pay its rising tax burden. According to the BBC, for Central Square, the Welsh Government will buy the offices on the site, so punitive taxation then begets nationalisation. Jeremy Corbyn will be delighted.

While Welsh Government has a Crown exemption from both SDLT and LTT, my advice from the Assembly legal team via the Research Service is that local authorities may be less generously treated by LTT. If they jointly purchase property with Welsh Government, LTT may be payable, while some purchases that HMRC may have exempted from SDLT could be liable for LTT. The safer option for local authorities on regeneration may now be to defer to a Welsh Government lead, relying on Welsh Government's Crown exemption to assemble land for what should be locally driven schemes. I've spoken about the Cardiff bus station, but the implications may be wider, as Suzy Davies will address for the Swansea region.

Finally, I'm extremely concerned that the Cabinet Secretary may have made a serious error in January in his Welsh tax policy report at paragraphs 60 to 61. He admits that higher LTT

'will reduce both prices and the number of non-residential transactions', but then says,

'The size of these effects is estimated using the OBR’s behavioural effects', applying SDLT elasticities. Basing his forecast on such UK-wide calculations wholly ignores the likely substitution effect away from the relatively small Welsh economy. While it is hard for UK investors to escape higher SDLT, they can avoid LTT much more easily, simply by investing in Bristol or Birmingham or Reading, instead of in Cardiff or Swansea. I fear the Cabinet Secretary's decision making and budget have failed to take account of that.

Today, we debate LTT and the punitive 6 per cent rate that Welsh Government has set for higher-value commercial property. Cabinet Secretary, is this how it will be with income tax too?

I have selected the three amendments to the motion, and I call on the Cabinet Secretary for Finance to move formally amendment 1.

Amendment 1. Julie James

Delete all and replace with:

To propose that the National Assembly for Wales:

Notes that:

a) The rates and bands for land transaction tax were approved by the National Assembly on 30 January 2018, with no Assembly Members voting against, and that the rates and bands came into effect on 1 April 2018.

b) The purchase of Cardiff bus station was not liable for any stamp duty land tax and would have been exempt from land transaction tax if the sale was completed under that regime.

Amendment 1 moved.

Formally.

Thank you. I call on Simon Thomas to move amendments 2 and 3.

Amendment 2. Rhun ap Iorwerth

Add as new point at end of motion:

Welcomes the Assembly's new powers to vary tax rates according to Wales's economic, social and environmental needs.

Amendment 3. Rhun ap Iorwerth

Add as new point at end of motion:

Calls on the Welsh Government to expedite its work to review all property-related taxes.

Amendments 2 and 3 moved.

Thank you very much, Deputy Presiding Officer. I move amendments 2 and 3 in the name of Plaid Cymru. And, just for the sake of clarity, although I am Chair of the Finance Committee, I’m speaking today on behalf of Plaid Cymru in the absence of another Plaid Cymru member of the committee, namely Steffan Lewis.

I’m pleased to contribute on this issue, and I’m pleased that we are having a discussion on the first devolved tax. This is the first debate on the first tax—we are doing things anew. And we have a Member speaking on behalf of the Conservative Party for the first time who is not a member of the Conservative Party, so that’s a first, too. I’m not quite sure how comfortable that is for his fellow members, looking at their faces, however, he has opened the debate.

Plaid Cymru doesn’t agree—. Well let’s put it in these terms: we’re not of the same view as Mark Reckless on this motion. I think it’s important that we see whether the differentials in taxation between Wales and England—which have been outlined and have been approved, as the Labour Party’s amendment states, with unanimous support in this Parliament—is going to work. Because, although there is a higher rate for properties over £1 million, there is a lower rate, or no rate at all, in fact, for some categories of commercial property in Wales. We must at least see if this policy will work over a period of 12 months, whether it will encourage development in the foundational economy—which is something that Plaid Cymru has been seeking—and, indeed, whether it is going to lead to interesting developments, particularly in our town centres.

I see that another member of the Finance Committee wants to intervene.

Diolch, Simon. Would you not agree that if all we do is copy everything that's done in England in terms of rates, we might as well not have taxation devolved?

Well, yes, that’s an entirely valid point, and that is why we asked for the devolution of some of these taxes, and that is why Plaid Cymru’s amendment specifically mentions tax rates going hand in hand with economic, environmental and social impacts, because there is more to taxation policy than the rate for specific properties. It’s the impact that you want these taxes to drive. That’s what the important thing is, and our amendment encapsulate the aims of the well-being of future generations Act in the way that we have set it out.

So, although we don’t support what the Conservatives have to say today, and we want everybody to support our amendments, of course, I also recognise that it is appropriate that we discuss even the purpose of taxation policy and how it will impact in terms of the economy and trade. In that sense, Plaid Cymru has tabled an amendment that specifically mentions the broader work in terms of taxation policy and properties in Wales. We have introduced a land transaction tax, but business rates is the main tax paid by people year on year. That is the main tax that has an impact on trade and industry in Wales, and that is where the Government’s taxation policy has stated that they want to look at this area, to see whether there are possibilities in terms of improving business rates in Wales. Our amendment asks for this process to be hastened, because I do believe, and Plaid Cymru is of the view, that there are examples here where we could make improvements for the benefit of our local economies.

I will just select a single area as an example of this—and I declare an interest here, because I am chair of the cross-party group on pubs and beer. But pubs, if you look at the impact of business rates on pubs—how that has happened in the reform that happened last year, which led to a number of pubs and hotels seeing great increases in business rates—at the moment, pubs pay almost 3 per cent of all business rates in Wales, but they are only 0.5 per cent of the number of businesses in Wales. So, there is a total mismatch between the number of businesses in this sector and how much rates they pay. They pay some £0.5 billion more than they would do if they were taxed in the same way as other businesses. It’s also anticipated that business rates on pubs in Wales will increase by some 18 per cent by 2021-22.

Now, I’m not asking for that to be entirely changed, but for us to start to move to a system of business rates that acknowledges—as the amendment does—the social and economic value of any tax policy and the possibilities here of ensuring that either pubs or town centre businesses do see that their taxes are based on turnover and profit, rather than on the location and the land only. I think all of these issues are worthy of discussion, so I welcome the fact that we are having such a discussion today, and I look forward to hearing the views of many other Members on this issue. Because one thing that’s certain with the onset of the devolution of income tax is that this will become more of a contentious issue over the months and years to come.

I welcome the opportunity to engage in the debate today, and I commend the opener for the comments that he made in setting the scene as to the way Wales faces the new environment, the new era of tax rates, and the competitive edge—or not, as the case may be—that Wales finds itself in with the rates that the Government sets. It is quite right and proper that the Government does set the rates. We live in a democracy, and based on the evidence that they have, and the demands on their public services and protecting the public revenues, that’s obviously what the Finance Minister's role is all about, as he highlighted in his letter to me on 21 March. We don’t dispute that whatsoever. The point we are making in today’s debate is that, actually, the level of taxation that the Minister's chosen to set has put Wales at a competitive disadvantage, and that’s not the Conservatives who are making that point, that is the industry itself making that point from virtually every leading commercial surveyor who, I know, have obviously lobbied the finance Secretary on this particular issue.

It is an important consideration, when you look at the economic benefits that Wales has benefited from over the last 10 years, for projects in the superleague of projects that have been in excess of £50 million, such as the Swansea University bay campus, Cardiff Waterside development, 2 Central Square, Government property units at Central Square, Friars Walk in Newport, the Aston Martin development, and Bridgend designer outlet village. All, I would suggest, are key projects that have helped stimulate and develop economic opportunities here in Wales, and all with tags of £50 million and above in investment. When you go to the commercial sector and you seek that level investment, it’s not unreasonable that the sector looks at the yield that they will get from the money it is investing. We, in Wales, face a very competitive environment to try and bring those developers over this side of the water to make those key decisions and key investments. And especially now, with the development of local democracy in England, such as the mayor in Bristol, the mayors in Birmingham, Liverpool and Manchester, there is a particular focus in their mayoral mandates to develop an exciting and dynamic environment for investment and investment opportunities. Because, obviously, when they come before the electorate in their four-yearly cycle, that is one of the areas that they will be marked against as to whether they've given their particular area a competitive edge. What we’re seeing here in Wales is the sector clearly highlighting that they do believe that the rate of tax that the Minister has set, via the Welsh Government’s tax-raising powers, will put Wales—. And that’s not politicians saying that, that’s the sector themselves saying that, and it's important to listen to the experts in the field who ultimately are dealing with the big investment funds and the pension funds when they’re looking to attract that level of investment into Wales.

Again, what is really concerning is that, when the finance Secretary focuses on the evidence from the Bangor University report, 'Independent Scrutiny and Assurance of Devolved Tax Forecasts for Wales', which he commissioned, the sector indicate quite clearly—and I read from the letter that they sent to the Minister—that they had no consultation with the sector whatsoever when it came to the formation of this report. Now, again, I appreciate, in the letter that the Minister sent to me in March, that he says that the Bangor Business School's report was about the level of forecast of tax revenues—it wasn’t exactly about the policy. But, surely, you need to be linking the policy with the forecast, because if you get the policy wrong, then whatever you're forecasting potentially could go wrong as well, and the revenues you expect could deplete the public purse. As we've seen in Scotland, where they’ve gone for a lower rate of tax, there’s been a considerable uplift in the level of taxation that’s come into Scottish public services—I think in the region of £13.5 million—because they chose to set their land transaction tax rate at 4.5 per cent to give themselves that competitive advantage over other parts of the United Kingdom.

Would the Member give way?

Yes.

I understand the point he’s making, but does he accept that all that's been described here is exactly the same as what happens with the UK Government producing its policy, which then is worked on by the Office for Budget Responsibility in terms of forecasting, and therefore that is the way that policy drives the forecast? That doesn’t say that either Bangor or the OBR is responsible for the policy in turn. So, we really need to understand—because Scotland is ahead of us—whether this actually drives change in Wales. His remarks are premature, to say the least.

Well, what I would say is: the evidence that's emerging from the Scottish situation shows that the lower the rate of tax—and I believe this, as a Conservative, anyway: that a low-rate tax economy actually generates more revenue overall because you stimulate individuals to go out, work hard and generate more wealth. [Interruption.] I’ll take another intervention if you can point to a high-tax economy that contradicts that argument.

I wasn’t going to get completely diverted down that track. I was merely going to point out that he’s asking for a low-tax economy. This tax rate we've talked about in Wales, which we all approved, has no tax for a higher band of commercial properties. So, maybe we'll see the growth there.

From the evidence that is emerging—and I appreciate we need to see that evidence emerge, but it wouldn’t be right if we, as politicians, weren't responding to the concerns that have been flagged to us—the professionals in the field that are trying to attract this investment in are already pointing to a downturn in the commercial sector. They are pointing to making it more difficult to bring investment—[Interruption.] Well, it's not four weeks, because the notes that were sent out to the investment funds were already asking for write-downs on investments, Minister, as you well know from the representations you've received. This Act was coming in, so investment funds were having to write down their investments above 1 per cent. If you've invested in a £50 million project, that's £0.5 million hit straight away. If you're in competition with Bristol, Birmingham, Manchester or Liverpool, which are right on the border with us, and you're that investment fund manager, you will put that money into any one of those four other destinations, because when you're looking at your yield, when you're looking at your return, that is a higher rate of return for the money you're investing. So, I do call on the Minister to reflect on the representations he's received to date, reflect on the debate this afternoon, and actually make Wales that competitive economy we want to see, which creates quality jobs and lifts take-home pay, which successive Labour Governments in this institution have failed to achieve in the first 20 years of devolution.     

Well, I'm sympathetic to what the Conservatives are proposing here in the first part of their motion, but I'm also sympathetic with the Government, except for the 'delete all', and we are going to support the Plaid Cymru amendments as well. I supported the devolution of tax-raising powers to Wales because I believe in tax competition between the various parts of the United Kingdom. I think this will be healthy for the whole United Kingdom economy, as Mark Reckless pointed out in his speech at the beginning of this debate.

Property taxes, as they've developed in the UK over hundreds of years, are very bad taxes indeed because the overall effect of them is to gum up the works of the economy—to make the use of capital more and more inflexible. We've seen this to a growingly dramatic extent in the domestic housing market. I reflect that when I first bought a house back in 1984, the rate of stamp duty then was 1 per cent, so it didn't matter. Nobody was deterred from buying houses at that sort of rate, even when it was doubled to 2 per cent shortly after that. But now that the rates of stamp duty are dramatically higher, this has had a most unfortunate effect, I believe, upon the whole of the property market in the United Kingdom—less so in Wales, of course, because as the poorest part of the United Kingdom, property prices here are so much lower.

I did support, and do support, the Government over the land transaction rates generally. I think that what the finance Secretary has produced is a better overall system than what we have across the border in England, which is a good thing. But I do think that if we want to grow the Welsh economy, it is absolutely essential that, if we are to fund improvements in public services, we must make Wales a magnet for business. We don't do that by having higher taxes on business in Wales than in the rest of the United Kingdom. Even though the difference may be very small—. You, know, 1 per cent is not the end of the world by any means, and certainly, if you're thinking of locating here, the effect of the tax is likely to be replicated in a reduction in the price of the land or the buildings to start with. But the problem with these land taxes is that they freeze the ownership or occupation of property because the tax is borne on those who move. Taxes on movement are very bad things for the economy generally. So, UKIP's view is that Wales should position itself within the United Kingdom as a kind of tax haven, and I hope that—. I had hoped that when these powers—and I hope new tax powers—are devolved to Wales, we would be able to use them to lower tax rates rather than to increase them, because to have a high tax rate in Wales is likely to be wholly counterproductive.

Our property taxes are a complete mess in the United Kingdom: council tax, business rates, stamp duty, the land transaction tax here in Wales, the restrictions that were introduced by George Osborne on buy to let. All these things have had dramatic impacts upon the housing system, gumming it up, at a time when we need more houses. The whole quantitative easing exercise has trickled into values of shares and real property. One of the main reasons why there's been such a boom in house and land prices in the south-east of England is the vast quantitative easing programme that the Conservative Government embarked upon. That has made the local economy in the south-east of England that much more difficult—not that we're too worried about that here, but there is a kind of trickle-down effect from there, out into the other reaches of the United Kingdom as well.

So, it's a principle upon which I want to make my speech today, rather than the arcana of the Cardiff bus station and the other elements of the Conservative motion: it is to encourage the Welsh Government to use the freedoms that it has as a result of devolution to show an example to the rest of the United Kingdom—in fact, to steal a march on the rest of the United Kingdom, to make Wales into a more attractive place for businesses to locate and to operate, and to attract also high-rate taxpayers from England into Wales to help increase our tax base, and hence the tax take, as in the 1980s the Lawson tax reforms were able both to see a reduction in tax rates but also a dramatic rise in tax revenue.

Cabinet Secretary, I wanted to speak in this debate primarily because of my concerns regarding the Swansea bay city deal, but I think I would like to start with an observation, if I may. We're quite used now to Welsh Government using framework legislation to cover the fact that it hasn't quite got some of the evidence to support a particular policy objective. There are certain decisions on processes that need to be observed to meet compliance, or particular figures that get referred to regulation, for example. Even though they are not framework pieces of legislation, I think both this Act and the minimum alcohol unit price Bill, actually, are affected by the same problem, and that is that original legislative impetus comes from an academic study that extrapolates results from a UK-wide study base, then they receive a sort of general policy wave-off by the interested parties, but in terms of detail, the views of those with the real-life experience of what might and might not work don't seem to count for an awful lot.

Just to address Simon Thomas's point, I think it's a good example, this one: adjusting rates to benefit buyers at the cheaper end of the residential market, which I'm sure we all supported—I haven't seen that Government has really considered that by creating disadvantage at the job-creating higher end of commercial rates, there will be a drop in new job opportunities for those buyers of the houses who need the work to sustain their mortgages on their new homes.

So, Cabinet Secretary, I think maybe we might have been a little overwhelmed to be swayed by your reassurances at the time we supported this Act, and I think I'd like you to look again at those points—Andrew Davies referred to a lot of them—referred to in the property agents' submission of 16 February. I suppose the cynical would say that they're worried about their own turnovers, to a certain degree, but I think you should be worried about why they're worried about that. Because if, as they say, they've had no consultation with or understanding with the Government, and there's been no understanding of the commercial property industry, then I think that's why the policy aims of this Act are running into trouble pretty quickly.

The direct effects of the 6 per cent rate are calculable. They're not just academically forecastable. They can be looked at as real-time maths, and these companies that Andrew referred to are already seeing reported reductions in capital values on commercial property in Wales. As we heard, investor sentiment is being affected to the advantage of the big regional centres in England and Scotland, but at the very point, that 2015, 2017 mark, when Cardiff in particular was starting to break through the perception that Wales was a less attractive place to invest—. And, of course, you already threw a cowpat onto Wales's path to prosperity by introducing the highest business rate multiplier in Britain at this crucial time. So, I don't really know why you thought this tax hike at the same time would help.

Now, £1 million is not a huge sum of money for commercial purchase. About 80 per cent of commercial land sales, even here in Wales where it tends to be cheaper, are over that, and presumably that's why you thought that this would be a profitable area to levy a super tax, although I understand actually the tax take isn't going to be particularly higher. Of course, I draw attention to Swansea University bay campus. The land there cost over £87 million and I'm sure there would have been some pretty fierce negotiation over that purchase figure had there been, at that point, an exposure to an additional, effectively, 20 per cent hike in the tax that they were paying. So, you can see why I am keen to understand from you what consultation you undertook directly with the Swansea bay city deal shadow board and with any of the industry representatives who have expressed an interest in being one of the necessary private sector partners.

Firstly, there’s that question, which Mark Reckless mentioned, of whether local authorities have the HMRC exemption from this purchase tax that Governments do. The city deal executive board is of course all about local authorities. Then, secondly, there’s a question for me about whether the Tatas and the GSKs of this world, who don’t have to come to Swansea bay, after all, might not just be attracted to invest in other UK city deal areas where they would pay less.

These are big figures we're talking about: the Swansea waterfront digital district is worth £168.2 million, and that's including 100,000 square feet of office space; the homes as power stations project is £517.1 million; and the life science and well-being village is just under £200 million. The £1 million threshold is of very little significance here, but investors will be paying 20 per cent more tax than they would be in England and over 30 per cent more than they would in Scotland, and boy will they notice the difference on figures of that magnitude. The price per hectare or per square foot may be cheaper than central London, but you misunderstand the commercial property sector if you think that’s the only factor it takes into account.

So, just to go back to evidence for a second, did you discuss the effects of the 6 per cent with the city deal interested parties, specifically the economy Secretary, who was interested? And how did you take that into account before throwing this second cowpat onto the path to prosperity in my region? Thank you.

Perhaps I will start by making a defence of taxation. Taxation exists to pay for public services. Too many people seem to believe that we can have the same quality of public services as Scandinavia but have a taxation system that is more like that of the USA. When you look at the cost of private education and private healthcare, it puts into perspective the value for money we get from our taxation system. It is not by random chance or serendipity that those countries with the highest tax levels have the best public services and those with the lowest tax levels the poorest. It is because taxation is necessary to raise the money to pay for the public services we all need—things like roads, the safety of food and the health service, which we talk about a lot here.

Quality public services, be they health, education or infrastructure, come at a substantial cost to the public purse and the only way of paying for them is via taxation. Taxation can be on income, profit, consumption, expenditure, or value of land and property, or a combination of all of them. But, you need the taxation to get the money in.

Will the Member give way?

Certainly, I was waiting for it.

Can he explain how he will get this taxation by raising this rate from 5 per cent to 6 per cent when the people investing have the opportunity to not pay it at all by going to Reading or Bristol or Birmingham instead?

I wish you'd waited for the next page. What I'll say is this: taxation is our membership fee for belonging to a civilised society. I think perhaps you need to remember that.

For multinational corporations, corporation tax is an optional payment whose value can be reduced by things such as intra-company charges, paying for intellectual property rights, transferring charges for goods and services, or making the point of sale outside Britain. 

What people don't like about land transaction tax and what people don't like about property taxes is that you've got to pay them. You cannot avoid it. These are the difficult-to-avoid taxes. The difficult-to-avoid taxes are the ones that are always under attack and criticism because you can't get out of them. 

Taxation can be either progressive or regressive. You either get those with the most money to pay a higher amount, or you get those with the least money to pay proportionally the most.

Turning to land transaction tax, making land transaction tax more progressive is something I very much welcome. Can I give a worked example on a different value? If a parcel of land is worth a £1 million with zero tax then a tax rate of 100 per cent, its cost will not be £2 million; its cost will still be £1 million, but 50 per cent will be tax and 50 per cent will go to the owner. So, the owner of the land is the only person to lose out, not the purchaser. One of the problems we have is the belief that there is an absolute value of land. So, taxation will be on top of that value—[Interruption.] Can I just finish this bit, Andrew? I'm going to call you in because I've mentioned you.

So, taxation will be on top of that value, rather than part of it. Just see how the price of agricultural land increases when it has planning permission for housing. There is no absolute value. What are you paying in the Vale of Glamorgan for agricultural land? Is it £20,000 or £30,000—

I'll sell you some now.

—for good planning permission land? Is it £1 million an acre in Cowbridge and the Vale? That's the difference—I'm coming to the end of this sentence—that's the difference. So, if that land had absolute value, you'd never put it out to auction, because you'd know what its value was and people would have to pay that. Thank you.

I am grateful, Mike, that you've taken the intervention, and you've thrown several figures out there. But, you have to have a market to create those figures, and if you put punitive measures in place as a Government, you kill the market, so you kill the value, so you lose the tax revenue. Don't you recognise that? People don't have to come to Wales to invest. They've got other opportunities if other environments are more favourable to those investments, as the Scottish model shows.

I think the point I was making was the land. The land price will not increase. The money people will pay for the land will not increase. What will happen to that share of that market price is that more of it will go into taxation, and less of it will go into large profits for the owner. I think that's the difference. I believe that people shouldn't have this bit of serendipity or, 'I'm very lucky, I've got this bit of land, it's worth £1 million, if nobody collects tax on it, I get £1 million in my back pocket.' I think that we should get higher taxation on it, and I agree entirely with what the Cabinet Secretary has done.

If land transaction tax above £1 million is reduced—from listening to others earlier, they'd abolish it altogether—who pays to make up this shortfall? Do we wish to raise it from those—? [Interruption.] Or do the Welsh Conservatives want to reduce public expenditure? I congratulate the finance Minister and Government on making land transaction tax more progressive. You don't know what people—. The rate is a very minor part when land is exchanged; it's who wants to buy it, why they want to buy it and what's available. With planning permission on 10 acres of land in the Vale of Glamorgan, it wouldn't matter if you were paying 50 or 100 per cent taxation, people would want to sell it and people would want to buy it.  

Thank you. David Melding. 

Thank you, Deputy Presiding Officer, it's always a pleasure to follow Mike Hedges, and how brave he was to approach this issue from a philosophical point of view. He seemed to be arguing that land tax was both essential and imaginary at one stage, but perhaps I didn't really follow his logic terribly well. The rest of his peroration was on the purpose and wonder of tax, and I've read the motion carefully, and I can't see anything in it that says we should be in a no-tax environment. Obviously, tax is an important part of establishing any civic form of life, and as Conservatives we recognise that. But it's getting the best value and ensuring that the tax regime does not inhibit optimum enterprise, and that's what this debate is about this afternoon. And it's quite proper that we scrutinise the Cabinet Secretary for the choices he has made and where the tax burden should fall. 

I think it's best to look at the big picture. We now have, with a fairly radical form of devolution in the United Kingdom, which I do support, the potential to introduce a level of economic competition that we can, to some extent, control. Until now, we've really been dominated very much by the economic pattern of London and the south-east of England, which sets some pretty firm norms in terms of taxation and broader economic policy, but with devolution we can now make more of these choices ourselves. And we should look at how we compare with the other jurisdictions in the United Kingdom; that is the rational thing to do. By looking at the big picture, isn't it better for us to say, 'Come to Wales, we're the most business-friendly location in the United Kingdom'?

My colleague Suzy Davies talked about rental markets in London, and no-one disputes that commercial properties are a lot more expensive in London, but our competitor for the economic activity that is being pushed out of London and the south-east is Manchester, it's Newcastle, it's Liverpool, and those are the areas that we will now see some of the investors fleeing to, where they may have come to Wales. And I do think this point has to be addressed very seriously. It's not a good message to say, 'Come to Wales and you'll certainly pay more in terms of land transaction tax than you would in Scotland or England'.

My economic vision for Wales is that we use the resources that are in the other parts of the United Kingdom as well. I'm a firm believer that it will work to the benefit of London and the south-east if more economic activity comes to the other parts of the United Kingdom, and this was a big part of the shift we saw in public policy after 2010 and the election of a Conservative-led Government. We do need to rebalance the economy of the United Kingdom as a whole. We should see London as a resource. I think we should have a bigger presence in London. I was always rather critical of my own party's view of our commercial embassy, or whatever we call it now, in London. It seemed to me that it should have been rather grander and more conspicuous and more ambitious in going out there and using London as a way of attracting business, not only that which is being pushed out of London, but also the investors that come to London to make an investment from abroad into the British economy.

Can I just offer the Minister, because I see him shaking under the assault of our criticism—? [Laughter.] I greatly admire the Cabinet Secretary, and I wish him well in his future ambitions as—. I want to offer him—[Interruption.] I want to offer him—[Interruption.] I want to offer him—[Interruption.] I want to offer him a bit of a way out—

Your future ambition is to move on. So, that's your future ambition. 

I think that perhaps one thing we should look at is reducing the tax burden on commercial investment by rewarding environmentally sensitive building techniques and practices and how they're going to use the building and other facilities they may have there that will be environmentally sustainable. Perhaps you could offer a few incentives there to mitigate the unfortunate decision you've made in this case.

It's very fortunate, is it not, that the Tories are not in charge of Welsh Government finances? I just wanted to pick up on this fundamental mistake that the Conservatives have made in the second part of their motion, because it indicates that they have simply no grasp of the status of the Welsh Government or the purposes of the taxes that they are now so deriding. It's just lamentable really that you've been unable to check the accuracy of your own assertions before you submitted the motion.

There can be no sensible suggestion of the Welsh Government seeking to avoid land transaction tax because the tax implications of both the stamp duty land tax and land transaction tax are exactly the same: nil. There is no tax liable where a purchase is made by the Crown, and that includes Welsh Ministers. So, I think to suggest that Welsh Ministers were trying to engage in the deliberate act of tax avoidance only months after we, the Assembly, considered legislation in which anti-avoidance rules formed a prominent part of the debate is pretty desperate.

The exemption is clear on the face of the legislation. In Schedule 3 to the Act, entitled 'Transactions Exempt From Charge', under 'Acquisitions by the Crown', it states that paragraph 2 lists Government bodies that are exempt. This is consistent with the exact same rules of the stamp duty tax that preceded the land transaction tax.

Will the Member give way?

Not at the moment. 

It's really disappointing that, after the passage of the Act, we are still having to clarify the purpose of the legislation in this way, particularly in response to a motion that proposes that this Government would engage in tax avoidance. As Mike Hedges has already made abundantly clear, that's absolutely not what is being spoken about, and instead we are looking at ways in which we can fund the ongoing wealth of our country. So—

Will the Member give way?

I'll give way now, yes.

But is it not the case that, by stepping in and buying this site, the Welsh Government, which doesn't pay tax because of its Crown exemption, is avoiding tax that would be paid potentially by another of its partners? The guidance on the LTT says that if it's bought jointly with another public authority not so exempt, e.g. a local authority, the exemption won't apply, and then later the Welsh Government says it's going to be buying the offices. So, instead of the private sector, who may not want to pay the 6 per cent, Welsh Government, it says here, will buy the offices on the site, stepping in to avoid the tax.

I've spent 10 years waiting to get a new bus station for Cardiff, and I'm absolutely delighted that the Welsh Government has stepped in to build the bus station, because, for reasons that I have yet to fully understand, the money that we should have been receiving from section 106 from all the other commercial transactions that have been taking place on Central Square, which, by the way, was where the old bus station was—. I don't understand completely why there wasn't sufficient money from all these commercial transactions to pay for the bus station, but, clearly, that was not sufficient and that is why the Welsh Government has stepped in.

I think that the fact that they bought the land on 29 March is for a completely different reason, which seems to have passed you by, which is that it was the end of the financial year, and it is well known that Governments, like local authorities, like many other organisations, wish to get money out of the door at the end of the financial year in order to account for it in that year rather than possibly seeing the money going on to something else.

So, I'm absolutely delighted that the Welsh Government has bought this piece of land, and, in due course, I have no doubt the buildings above the bus station, once they've got planning permission, will no doubt reap rewards back into the Welsh economy as soon we've got purchasers for it. This is a temporary measure to ensure that we get on with the bus station that's so crucial to having the integrated transport system our capital city needs.

So, I think the message from this section of your motion is deplorable and is completely contrary to what we are trying to achieve. My message would be, picking up on what David Melding says, that I think it's clear that we do not want people to come to Wales if they simply want to speculate on the value of land, nor do we want people to come to Wales if they want to clean up dirty money, which, sadly, London is awash with. I think that the land transaction tax is a very fair way of raising money on what is a restricted resource, which is, namely, land.

Thank you.

I call on the Cabinet Secretary for Finance, Mark Drakeford. 

Diolch yn fawr, Dirprwy Lywydd. Last month was an important milestone in our devolution journey, with devolved taxes successfully going live on 1 April and now in operation fully for five weeks. The WRA have now received the first returns and have begun to collect important tax revenue, marking the culmination of work to bring about the devolution of these taxes.

Dirprwy Lywydd, I listened carefully to the speech that introduced today's motion. The mover comes to us from the darker side of planet Thatcher, relying on his nineteenth century copy of the Encyclopaedia Britannica, upon which all his contributions rely: 'For Wales, see England'. It is his only contribution to the debate: 'if we don't do what is done across the border, it must be worse in Wales.'

Let me directly address the second part of the motion and, to take up the points that Jenny Rathbone was making, I have the motion in front of me: it unambiguously accuses the Welsh Government of tax avoidance. That is a very serious accusation, and no amount of—[Interruption.] No. I've heard enough. [Interruption.] I beg your pardon. It very directly suggests that the Welsh Government acted to avoid its own LTT regime, and no amount of obfuscation by the Member who introduced the debate will take away the strength of that accusation, and that is a very serious accusation, which he ought not to have made. The experiment that Simon Thomas pointed to, in having your motions introduced by someone who's not a Member of your own party in this case, is not one that I imagine you will be quick to repeat.

Let me be clear, Llywydd: as Jenny Rathbone said, under both SDLT and LTT, there is no tax liability where a purchase is made by the Crown, including Welsh Ministers. That's there on the face of the legislation. Someone who would purport to come amongst us with a grasp of detail would have done better to have made sure that he had grasped that point before he persuaded others to put down the motion in that way.

Will the Minister give way? The purchase of this site, I understand, on 28 March, and then the granting of the 999-year lease on 29 March, took place under the SDLT regime. If it had taken place three days later, Ministers would not have avoided their own regime. I have raised very serious points about what happens to local authorities, what happens to other public sector bodies, why the Government is then coming in to look to buy the offices on this site, avoiding tax that the private sector would have to pay. Is it because of this 6 per cent rate, which means fewer private sector people will want to buy offices in Wales?

Had those been the points that the Member wished to concentrate on in this debate, he could have put them in the motion; he didn't. Instead, he put something else in on which he has been found out, and no amount of standing up here and spraying a set of other accusations around the room will detract from the point that his motion is defective; he knows it is, he's been found out in doing so. And the accusation is a serious one. Let's be clear about this: if it were true that a Welsh Government had deliberately set out to avoid tax, that is not—

I didn't say that. We didn't say that.

Well, you should read your own motion. You should read your own motion and you should be more careful next time you put it down so that you don't suggest things that, if they were true, would be very serious—but you now spend the whole of the debate trying to persuade us that that isn't what you meant in the first place. It clearly is; you've been found out and we will vote against the motion for that and many other reasons.

Let me turn to the issue of LTT rates. Llywydd, we only debated them in January of this year. In the context of UK Government austerity, my approach to setting tax rates was guided by the principle that there should be no less funding available for Welsh public services as a result of tax devolution.

Wales now has the lowest starting rate of tax for businesses anywhere in the UK, as Simon Thomas pointed out. Six thousand non-residential transactions in Wales will now pay either no tax or less tax than they would have before these changes were introduced. Fewer than 300 will pay the 6 per cent rate. Neil Hamilton said that the purpose of our tax regime should be to grow the economy, and I agree with him there. I don't probably agree with his strategy for doing so, but he made an important point about the general state of property taxation and the need for us to take a more rational view of it all. Within that rational view, the fact that 90 per cent of businesses in Wales will now be advantaged by our tax regime seems to me, as it seemed to the Bangor Business School, to be a course of action that will lead to more activity in the non-residential property market than would otherwise have been the case.

Non-residential transactions incur a range of costs and LTT will be one of them. The tax change for the highest-priced transactions represents a less than 1 per cent increase in the overall cost of the transaction, and that 6 per cent rate is a marginal rate, in any case, so it only applies to the price paid over £1 million.

The rates were the result of careful consideration of Welsh priorities and circumstances, with analysis of the potential effects taken by the Welsh Government and independently assured by the Bangor Business School.

Would you take an intervention?

Of course.

I'm grateful to the Cabinet Secretary for taking an intervention. Do you recognise, though, that whilst the percentage terms of number of deals is relatively small, this is the most mobile sector of the market, which can invest that money elsewhere, and, in the letter that you received from the industry itself, it says:

'As industry experts, we are already seeing reducing asset valuations and investors who no longer consider Wales as a direct consequence of this policy.'

Do you recognise those concerns, Cabinet Secretary?

Well, Dirprwy Lywydd, of course I have heard the representations made by some in the development sector. Both I and my officials separately have met with those who have concerns, and that engagement will continue. Andrew R.T. Davies, in his original contribution, set out their concerns very fairly and of course I will listen and continue to listen to them. No doubt the UK Government, his Government, in 2016, in its budget, when it raised the top rate of tax for non-domestic transactions by 25 per cent—not the 20 per cent horror that Mark Reckless mentioned in opening, but by 25 per cent—a Conservative Chancellor doing that, then he relied on what his budget document said to him, that these changes ensure that businesses purchasing the highest value freeholds and leases make a larger contribution while delivering a tax cut for those purchasers, often smaller businesses, who purchase less expensive properties; exactly the analysis that we carried out here in Wales.

The Conservative Chancellor's budget document, when he raised the top rate of property taxation by 25 per cent in that budget, said that this measure was not expected to have any significant macroeconomic impacts. When these things are done by a Conservative Chancellor, it is a matter of standing up and cheering. When they're done by a Welsh Government here in Wales, the whole of the world is about to fall in on their shoulders.

I also heard, Dirprwy Lywydd, from the business sector, that, in developing LTT, businesses stressed the importance of stability and certainty. To consider changing the rates after only one month of operation, with no further evidence about the effect of these rates, would be premature and would create instability and uncertainty, which, itself, would be potentially damaging to the economy in Wales. So, what I will do is what I have said repeatedly in this Chamber: we will now look at the actual evidence, not the speculative evidence, not the things that are said in advance about what the effect might be; we will see the actual evidence from transactions and give that evidence very careful consideration. As a result of amendments promoted by our colleague Steffan Lewis during the passage of the Bill, there is a legislative requirement to secure an independent review of LTT in the future. In the meantime, consideration of the emerging evidence will be part of every budget cycle, and, for a newly commenced tax, that is particularly important.

The Llywydd took the Chair.

Llywydd, the Government will oppose the Conservative motion today. We're pleased to support the Plaid Cymru amendments. We are already committed to keeping under review all of the taxes for which we have responsibility. We will seek to do that at the earliest practical opportunity and, most importantly of all, we will do it on the basis of the actual evidence, which only experience itself can provide.

I call on Nick Ramsay to reply to the debate.

Diolch, Llywydd. Well, we may well have emerged, on this side, from the dark side of planet Thatcher, but this afternoon we've well and truly landed on planet Corbyn, haven't we? Can I thank everyone who contributed to this afternoon's debate? There are many of you; I'll try and mention as many of you as I can, but it may be difficult to include everyone.

As the Cabinet Secretary has reminded us in the past and again reminded us today, phase 1 of tax devolution is over; the next stage is implementation and the all-important monitoring. Mark Reckless, in opening, highlighted the need to listen to the sector, to listen to businesses and their concerns and to then respond to those. And we are concerned, on this side of the Chamber at least, that the higher 6 per cent rate on commercial transactions over £1 million will harm businesses. It's not only us who're saying that; it's also the sector. Businesses are telling us that, our post bags are telling us that; I'm sure that AMs in other parties are also getting the same concerns. Maybe it's not in their interest to listen—[Interruption.]—one minute—to those in the same way, but, certainly, it is disingenuous to say that those concerns are not being made. Mike Hedges.

Can you give me an example of a sector asking to pay more tax?

Well, that's a typical Mike Hedges comment, isn't it? So, basically, you're not denying that you've also had concerns from the sector about a higher rate.

But all sectors ask to pay less tax.

Yes, okay. I'll touch on it when I come to your comments later. I've lost my place now.

And, yes, my former colleague on the Finance Committee will remember his drive and our drive to get the rates on the face of the Bill, because even back then—. I understand that there were concerns from some of the civil servants to do that, and from the Government to do that, but, at that time, we thought that that was a way to provide clarity to the sector, to reassure the sector, that this difficult time of a change in—I hate to use the word—regime, which has caused so much unpleasantness here this afternoon, but in that change from the UK tax regime to the new Welsh tax regime, we thought that there was a merit in having a certain sort of stability at that point. That was the point that we were trying to make.

Simon Thomas—well, I was more than happy, actually, to let my former colleague on the Finance Committee shine by opening this debate. I'm happy to encourage and support other Assembly Members—[Interruption.] I'm always more than happy to have the last word, as well, which I've got today. [Laughter.] I agree wholeheartedly with the concerns, actually, that you raised about pubs, and you're right that they don't pay traditional business rates. I think we're all aware of that, and that should certainly be looked at. I know they're looking at that in England, and it's probably been long overlooked across the United Kingdom as a whole, and we're now seeing the problems that are happening to pubs because of that. So, that was a good point that you made.

Andrew R.T. Davies, you reeled off—I didn't have time to write them down—a long list of projects in Wales and Cardiff that, let's face it, have received considerable investment and are receiving considerable investment. And Andrew said that small variations in tax policy compared with across the border could have a disproportionate effect—a perfectly reasonable point to make. Yes, there may be cases where, because of the changes in this policy and other tax policies, there are people who are paying less tax—that is to be welcomed—but you also have to look at those people and those businesses that will end up paying more. They might be a small number, but if it's a disproportionately high amount that they are paying and if they are the investors in the economy at that level of economic development, then that is a concern.

But I do understand—and we discussed this at length in committee—the Welsh Government's position that this is still early days. Of course it is. Nonetheless, Cabinet Secretary, warning signs should always be heeded. As Neil Hamilton said—well, Neil Hamilton supported the motion. You supported the Government amendment, which deletes the motion. You didn't support the 'delete' bit, to be fair. You support Plaid Cymru's amendments as well. I think you're generally happy with this debate today, so I don't think you really mind which way this debate goes, and I think you've won anyway there, Neil. I think you found considerable amusement as well at different points today. But I agree with you that tax competition is not necessarily a bad thing. As a former Conservative, of course, you would say that, and, of course, as a Welsh Conservative myself, I agree with that as well. However, as a Welsh Assembly Member, I think it is a bad thing if that tax competition happens to be detrimental to Wales and positive for England. Of course, that was always the danger that we were facing. Yes, tax devolution is very good for increasing accountability, and it's very good for us here having the levers of power that are necessary to improve our economy. But the flipside of that, which has to be watched, has to be monitored, is to make sure that that doesn't end up with our economy being on a poorer footing.

You mentioned quantitative easing. It wasn't just the UK Conservative Government, of course; it was the UK Labour Government that initially introduced the concept of quantitative easing into the British economy. I do think, actually, if you say you don't want quantitative easing, then the cuts would probably have been deeper. So, I think, at that time, it was a tool that was a valuable one for a Government to look at using. Of course, there was the feared effect of higher inflation that hasn't fed through, certainly yet, into the system, but I think that, at that point in time, clearly, we did go through difficult times. But I think you have to recognise it was the Labour Government that introduced that concept. So, something clearly had gone wrong with the economy to require that.

Now, as economists are well known for saying, predictions are normally always wrong. We took that evidence on Finance Committee. That doesn't mean that they're not useful. In fact, they are very useful, so long as you recognise that there can be inaccuracy in them and that you're prepared to revise those predictions.

I've got to mention Mike Hedges before I close, who quoted—I was looking for the quote—Oliver Wendell Holmes Jr, 1904:

'Taxes are the price we pay for a civilized society.'

Of course, I think we all agree with that. Nobody here would say that we don't want to pay tax. I would, however, say that, of course, it's not just the raising of the tax that is important; it's the way that that tax is spent that is all important, as well. As the Welsh Government has more powers, more tax powers at its disposal, then it becomes increasingly important that the Welsh Government does prove that it can spend that money as efficiently as possible.

David Melding, you spoke about the rebalancing of the UK economy, using London as a resource but making sure we strike out on our own and develop the Welsh economy as best as possible—and that is what tax devolution is all about. You said, Cabinet Secretary, that you were prepared to monitor, to evaluate, and to make changes if you think that the policies that are in place relating to tax rises are wrong. Well, we're receiving a lot of concerns from businesses that they feel they are wrong. I would urge you to keep this situation under review and to make sure that the Welsh Government does act to change any tax policies that do prove to be uncompetitive to our economy in the future.

The proposal is to agree the motion without amendment. Does any Member object? [Objection.] I will therefore defer voting under this item until voting time.

Voting deferred until voting time.