Item 6 on our agenda this afternoon is a debate on the Welsh rates of income tax 2020-2021, and I call on the Minister for Finance and the Trefnydd to move the motion—Rebecca Evans.

Motion NDM7285 Rebecca Evans

To propose that the National Assembly for Wales in accordance with section 116D of the Government of Wales Act 2006, agrees the Welsh rate resolution for the 2020-21 Welsh rates of income tax as follows:

a) the proposed Welsh rate for the basic rate of income tax is 10p;

b) the proposed Welsh rate for the higher rate of income tax is 10p;

c) the proposed Welsh rate for the additional rate of income tax is 10p.

Motion moved.

I'm pleased to open this debate on the Welsh rates of income tax. Welsh rates of income tax were introduced in April last year and applied to income tax payers resident in Wales. The Welsh rates for next year were announced in the draft budget. In keeping with previous commitments, there will be no changes to Welsh income tax levels in 2020-21. This will mean that Welsh taxpayers will continue to pay the same income tax as their England and Northern Irish counterparts. This will continue to provide stability for taxpayers during a time of economic uncertainty and ongoing austerity.

Together with the block grant, Welsh taxes are essential to help fund the vital public services that many in society depend on. Over the coming months and years, and as the reality of the Brexit process becomes clear, protecting these services may become more challenging. This year, the unusual lateness of the UK budget means that the UK Government's tax plans for 2020-21 and beyond are currently unknown, which is unhelpful in the context of our plans for taxation in Wales. We will monitor the UK budget for any potential impacts for Wales.

Her Majesty's Revenue and Customs continues to administer income tax in Wales, and the UK Government continues to retain full responsibility for taxation of income from savings and dividends. My officials continue to work with HMRC on the detailed arrangements for the administration of Welsh rates of income tax, and are currently in the process of transitioning to a 'business as usual' governance model, following a successful implementation period. The correct C code is now being applied to approximately 97 per cent of taxpayers, and my officials are working with HMRC to increase that proportion further.

I am pleased to inform the Chamber that, as part of a wider low-cost engagement campaign on social media, and a letter from HMRC that included a leaflet from Welsh Government to all taxpayers living in Wales, the awareness of WRIT has increased across all age groups, socio-economic groups and regions in Wales, with a 14 percentage point increase between June 2018 and June 2019. 

The Welsh Government is committed to continuing to monitor awareness and increase our efforts to engage with the wider public on our taxation system in Wales. I'm also pleased to highlight the Finance Committee's ongoing inquiry, looking at the potential impacts of different income tax rates across the Wales-England border, and I'll be attending a scrutiny session with the committee in March. I look forward to hearing the committee's views on this issue.

The Assembly is asked today to agree the Welsh rate resolution, which will set the Welsh rates of income tax for 2020-21, and I ask Members for their support this afternoon.

Welsh Conservatives will be supporting this motion today. I appreciate it's a short motion, but it is a very important one, an historic one: the setting of income tax rates—the WRIT—for the first time in Wales. After many months, many years, of talking about this process, we are now in it. Admittedly, the rates being considered today are simply replacing the UK part of taxation that has been removed, as part of the transitional phase. So, we always knew, really, that the income tax rates that are being set today were going to be at that level and there'll be very little difference noticed out there on the streets and in houses by people paying the Welsh rate of income tax—at this point, anyway.

Gweinidog, the Welsh taxpayer needs to have confidence that these tax rates in Wales will remain competitive in the future. Can you give us an assurance—obviously not in this year, because the decision's been made, but looking beyond 2020-21—that every effort will be made to make sure that not only tax rates in Wales remain competitive, but that efforts are made as well to grow the Welsh tax base? Because, obviously, if we have a larger Welsh tax base and we have more higher-rate taxpayers in Wales, then the burden is spread across a larger number of people. So, you can actually get more tax in by actually not raising tax rates, but by taxing that larger number of people at a higher rate. That's something I'm sure you'll have to work with the First Minister and with the Minister for economy to achieve.

Can you also clarify if problems that were raised with Finance Committee some time ago with regard to identifying all Welsh taxpayers—I think there was a proposal about using postcodes at one point—have been ironed out successfully? How are you going to ensure that forecasting is as sharp as it can be and as it needs to be in future to make sure that, when it comes to making decisions about changes in future tax rates—by a future Welsh Government, now—those decisions are based on as solid economic data as possible?

Just a few comments from me. We too will be supporting the motion before us today. These are very early days, of course, following the devolution of a portion of the income tax rates last year, and it's important that confidence is being engendered amongst taxpayers and the public in these new devolved arrangements that are in place. We will have to, in the years to come, as political parties, and as Members of the Senedd in this place, make difficult decisions, and brave decisions indeed, I hope, with regard to the rates. But there is sense in going through this initial phase by maintaining consistency in the taxation arrangements.

One thing that I will say is this: we, as Members of the Senedd, and the public in Wales, need to see that the Welsh Government is being driven by the fact that they have control now over a portion of our income tax, and that they take advantage of this opportunity and continue to ensure that we increase the tax base that we have here in Wales. Because this is a genuine opportunity, we can't have business as usual. It would be a waste of devolution if that's the attitude that was adopted. But for the time being, there is sense in maintaining the status quo.

The Minister referred to these rates as applying to Welsh residents. Just a very slight correction: I think it's Wales's residents plus Neil Hamilton.

The bravery we referred to just now—. It would have been brave if Members, particularly on the Conservative and Labour benches, had stood for election on the basis of a clear manifesto—'If you vote for us, we're going to devolve these rates and allow people in Wales to have different tax from people in England'—but they did not. In the 2015 Westminster election, Labour made no mention of income tax devolution and the Conservatives said it would only happen once the Labour Government in Wales triggered a referendum. Then, in the 2016 Assembly election, Labour just said 'when' they're devolved, even though the law still specified there needed to be a referendum, and the Conservatives had some sort of vague fudge in their manifesto, not making the situation clear, and then in a debate said the law said there had to be a referendum but didn't say anything about how they were removing that referendum requirement. That only came in the month after the Assembly election, when they published what became the Wales Act 2017.

In 2014, I was in the Commons when the Wales Act of that year was debated. I remember, I think, the Second Reading in March, and we then had, I think—finally, by that stage, I was a UKIP MP—on 10 December 2014, debates on Lords amendments, when the lockstep was removed. And actually, as a Westminster MP, most of the impression of what all those debates were about was that they were about the lockstep and about dual candidacy. But actually, I supported that legislation, on the basis that there was going to be a referendum before it came in; yet, that requirement was removed. At the end of the debate, I think Stephen Crabb was then the Minister, he referred in 2014, in the final comments on that Act, that the Labour Party had put so many high hurdles in the way of devolution of income tax that he felt they were inspired by Cardiff's Colin Jackson. So, that's where my impression about where Labour were has come from.

But the reality is you haven't stood for election on this. So, that's why I'm objecting to our setting these rates of income tax, because the people of Wales were promised in a referendum—on the ballot paper—that these would not be devolved unless there was a referendum, and you've all gone back on your word.

I call on the Minister for Finance and Trefnydd to reply to the debate, Rebecca Evans.

The irony, of course, of Mark Reckless's protestations about not standing on a manifesto for something is not lost on me. But I think will respond to those points that are directly related to the regulations that are set out in front of Members today.

I agree, actually, with Nick Ramsay, who suggested that this is actually a very short motion for something that is incredibly important. It's important, I think, that we continue to recognise that as a Senedd. He's right again that, generally, people will not notice any change, in the sense that they'll still be paying the same rate of income tax, but what they will notice is the application of the C code alongside their national insurance number. Around 97 per cent of taxpayers are now using the correct code, and of course HMRC has an ongoing education and compliance programme to address those C code problems. It's got articles in its regular employer bulletins, for example, and is doing a great deal of work. It is confident that the number of errors should reduce again before the next scan, which will be taking place later in the year.

Will you take an intervention? You're right to say this is a short motion, and I can understand that, given that this year there's going to be very little change. I imagine, in future income tax motions, should there be changes in the tax rates, there'll probably be more vigorous debate and they probably will require a little bit longer. That's a message probably more for you with your Trefnydd hat on than as Finance Minister.

I'm sure that, in future, there'll be a great deal of debate regarding Welsh rates of income tax, because of course whilst it was a pledge not to raise income tax during the course of this Assembly, it'll certainly be a matter of particular interest, I think, as we go to the electorate for the next Assembly elections, in terms of determining what our respective parties' offer might be to the people of Wales.

The point was raised again how important it is that we work to grow the Welsh tax base. Of course, that's not just a matter for the finance Minister, actually; it's something for us right across Government. So, there's important work to be done in housing, in skills, and in other areas of Government to ensure that we do grow that tax base across Wales.

And also, it's important as well to recognise the important work that we do on forecasting. I know this has been a matter of interest to the Finance Committee. The Office for Budget Responsibility has been undertaking some work, and the forecast published alongside our final budget, which sets the rates at 10p for all bands, is expected to raise £2.2 billion in 2020-21. And of course, we have the final outturn figures coming forward then in future years, and any reconciliation payments would then be made. So, this is just the start of the very exciting journey, and I'd be grateful for Members' support for these regulations today.

Thank you. The proposal is to agree the motion. Does any Member object? [Objection.] Therefore, we defer voting under this item until the voting time.