3. Statement by the Cabinet Secretary for Finance: The Draft Budget 2019-20

Part of the debate – in the Senedd at 3:00 pm on 2 October 2018.

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Photo of Nick Ramsay Nick Ramsay Conservative 3:00, 2 October 2018

Can I also thank the finance Secretary and his staff, actually, for the briefing earlier today? It's always helpful in the budget-setting process, when time is limited. I should also thank you, of course, Cabinet Secretary, for the usual clamour of austerity. Where would we be without it, particularly on these benches? [Assembly Members: 'Oh.'] And to set—[Interruption.] And to set—[Interruption.] And to set the record straight—[Interruption.] And to set the record straight—[Interruption.] And to set the record straight, recent data on the shares of gross value added by the Office for National Statistics have shown that England is actually the only nation in the UK that has substantially reduced its deficit per capita, equivalent to £158 per person. Meanwhile, Wales has 27 times more borrowing per person, with a deficit of £4,251 per person. The UK Government is set to deliver a surplus budget for the first time since 2001, a £112 billion drop in borrowing since the financial crisis, but the Welsh deficit fell by just £2 billion in the same time. Doesn't that mean that it has been left almost entirely to England to close the budget deficit, and is that right? Can that possibly be right? So, rather than—[Interruption.] Rather than—[Interruption.] Rather than the usual—[Interruption.] Rather than the usual harsh words about austerity, perhaps you should look a little bit closer to home about what we're doing in Wales to deal with the financial problems that this country was left with by a previous Government.     

Of course, a key change to this budget is the fact that, from April next year, the Welsh Government will be in total control of approximately £5 billion of revenue generated from taxes, or a third of its current combined spending. So, to coin the words of Harry S. Truman, the buck truly will stop here. Alongside land transaction tax and landfill disposal tax, the Welsh Government will also have income tax-varying powers, as we were told, from April 2019. And can I welcome the Cabinet Secretary's commitment not to increase income tax in Wales before the next Assembly election? I must say I don't think that this is an entirely selfless decision on the part of the Welsh Labour Government. To increase taxes at the same time as we face the uncertainty of Brexit, and when the Welsh economy is still underperforming in relation to other parts of the UK, would be, at best, counterproductive and, at worst, disastrous for the Welsh economy, not to mention Welsh Labour's election prospects, of course.

I must ask the question, though—and the Cabinet Secretary was quite clear on this—can we assume that, if Welsh Labour were to form the Government after 2021, then we can expect pretty sharp increases in income tax at the various rates, and, if so, by how much? I think the people of Wales do deserve an answer to that.

As we know, there are risks with varying taxes; I know the Cabinet Secretary would agree with that himself. The Welsh Government-commissioned Welsh tax base report notes that

'there would likely be some behavioural response from...taxpayers' should Welsh Government change income tax rates. This seems to be in stark contract to some of the assertions of the Welsh Government before Finance Committee that changes to taxation would not affect migration rates, so some clarity on that aspect of future tax policy would be appreciated. And I do support the Cabinet Secretary's decision to keep income tax rates as they are over the next couple of years, as we weather some of the storms that we're going to be facing.

If I can turn to the other taxes, the veteran taxes, if I can call them that, and the unusually good news about landfill disposal tax, now forecast to deliver £40 million to the Welsh budget rather than the original—£20 million, I think, was the original forecast. I suspect, Cabinet Secretary, you're right in your assessment that rather than waste tourism having gone through the roof over the past year—I haven't seen lorries of waste traversing up and down the M4 and the A55 in any greater quantities than they were before—the difference probably is due to the Welsh Revenue Authority collecting taxes over a smaller base and possibly doing so with the enthusiasm of youth. Whatever the reason—and perhaps there are lessons for tax collection across the border—it's important that Wales keeps this dividend, and I will also make that case strongly, as I believe you will as well.

Looking at the figures for the land disposal tax's bigger sister, the land transaction tax, it does look as though the opposite has been the case and there has been some drop-off in the amounts that were predicted to be collected for that tax, particularly at the higher rates. Could it be that the Welsh Conservative warnings about the effect of increasing rates at the higher end of this tax have come to pass? Now, I don't expect the Cabinet Secretary to rush to confirm this, at least not before 11 December, but if he could shed some light on this rather murky area, that would be illuminating to all of us. And, on the matter of reviewing those bands, the door should definitely be left open, particularly if there are changes to the English stamp duty land tax regime that deals with very high-end transactions by foreign nationals, although I do appreciate that the number of Russian oligarchs living in Blaenau Gwent is probably rather limited. Don't look this way, Minister Emeritus. [Laughter.]