11. Debate on the Finance Committee Report: Impact of variations in national and sub-national income tax

Part of the debate – in the Senedd at 5:04 pm on 23 September 2020.

Alert me about debates like this

Photo of Llyr Gruffydd Llyr Gruffydd Plaid Cymru 5:04, 23 September 2020

(Translated)

Thank you very much. Deputy Presiding Officer. May I thank everyone who has contributed to this debate—particularly to the Minister, as she mentioned earlier, for accepting all of the recommendations, either in full or in principle? We note, of course, that she is open to further devolution on taxation powers to Wales.

Mike Hedges has drawn attention, of course, to the fact that, when Nick Ramsay mentioned how many people crossed the border between Wales and England on a daily basis, that is not something that's unique to Wales. Certainly, if anything, I would think that it happens on a higher level in other countries worldwide. So, it's no reason for us not to get to grips with changes of tax rates. I don't think Nick suggested that was a barrier, but that is something that we need to be aware of. But, as Alun Davies and others said, there are examples across the world of where this has happened and where this is being effectively managed. So, I do think that—there is a risk that that could appear more of a problem than it should, and I think that we should be aware of that. 

Nick also referred to the unwillingness of the Welsh Government to consider tax divergence at the moment. I understand perhaps why they are doing that, but certainly the discussion and this report and this debate are part of this national conversation that we do need to have. Because, as Alun reminded us, it is a sign of a Senedd coming of age that we do have taxation oolicies or powers, but that dimension will add a very new dimension to the election in front of us in some months' time, with parties publishing their manifestos. I hope that the committee's work in this field will assist that discussion and debate within the parties, and more widely in Wales, in terms of our direction of travel from the point of view of tax policy. Because, as was mentioned, it's one thing to talk about how one spends money, but it's an entirely different discussion when you need to discuss how you spend the money that you're raising, and how you're levying that funding yourself to meet your expenditure commitments.

The varying factors have been referred to. Taxation is one element of what impacts on people's mobility, and Members have been entirely right to refer to such things as wage levels, house prices, quality of life and family networks, of course, which are just as important for a number of people.

One thing that is obvious, of course, is that there is a great deal more work that needs to be done, and that includes having a clearer picture of the Welsh tax base. The Minister referred to the need to examine the outturn from the first year of the Welsh rates of income tax next summer. We need to improve the work of collecting data in Wales and the dissemination of those data in Wales, and that has come through clearly in this debate, and to consider what drives taxpayer behaviour and how we can attract more of those groups that need to be attracted to boost revenues. 

But these are still early days in our tax devolution journey, and we recognise the challenges faced by the Welsh Government in seeking to anticipate taxpayers' migratory avoidance and economic responses to potential income tax rates changes in Wales. 

But it's important to recognise the role that the Welsh rates of income tax can play in developing the Welsh economy. It's an opportunity perhaps for us to think differently, to be innovative, and to develop policies that support the economic recovery in this current situation. 

But, as I say, I hope that the committee's report and this debate  this afternoon have contributed to that conversation that needs to be had, and that conversation will continue until the election in May and beyond.