The next item is item 13, the Land Transaction Tax (Temporary Variation of Rates and Bands for Residential Property Transactions) (Wales) Regulations 2020, and I call on the Minister for Finance and Trefnydd to introduce the regulations. Rebecca Evans. 

Motion NDM7393 Rebecca Evans

To propose that the Senedd, in accordance with Standing Order 27.5:

1. Approves The Land Transaction Tax (Temporary Variation of Rates and Bands for Residential Property Transactions) (Wales) Regulations 2020 laid in the Table Office on 24 July 2020.

Motion moved.

Diolch, Llywydd. I'm pleased to open the debate on the Land Transaction Tax (Temporary Variation of Rates and Bands for Residential Property Transactions) (Wales) Regulations 2020. This is the first time that we are voting on changes to LTT rates since they were first introduced and first set by the Senedd in January 2018. I am grateful for the Legislation, Justice and Constitution Committee's report and to the Finance Committee for giving me the opportunity to give evidence to them. 

The purpose of these regulations is to make a temporary variation to LTT rates and thresholds applicable to certain residential property transactions with an effective date on or after 27 July 2020 and before 1 April 2021. On 1 April, the tax rates will revert back to those in force before 27 July this year. Of course, I continue to keep the rates under review to ensure the taxes devolved to Wales are delivering the tax regime that we want for a fair and prosperous Wales. 

The regulations make a single change to the main residential rates. They remove the first band, so that tax starts to be paid on the consideration given for the property of more than £250,000, up from £180,000. Importantly, these changes, unlike in the other countries of the UK, are restricted to those paying the main residential rates only. There will be no tax reductions for investors in buy-to-let properties, furnished holiday lets or second homes. We therefore ensure that the benefits of this temporary variation are provided broadly to those purchasing homes in which to live. These changes mean that, from 27 July until 31 March next year, around 80 per cent of homebuyers in Wales will pay no tax, up from 60 per cent. And, for the 20 per cent of homebuyers who now pay tax, the amount payable is reduced by £2,450. 

I have also been able to provide £30 million to fund a substantial increase in the capital investment for the next phase of the homelessness response, as part of the phase 2 homelessness plan, with the aim of achieving our goal of ending homelessness in Wales. These changes should help our recovery by providing an economic stimulus to support the housing market and the broader economy in Wales by homebuyers spending money in the economy, local authorities investing to combat homelessness, and supporting jobs and businesses, thereby fostering confidence.

The temporary rates are a balanced response by this Government. They provide tax reductions to help stimulate the economy, retain our progressive tax principles and provide funding to help some of our most vulnerable citizens. I therefore ask for the Senedd's support to confirm these temporary changes. Diolch. 

I call on the Chair of the Legislation, Justice and Constitution Committee, Mick Antoniw.  

Thank you, Llywydd. We considered these regulations at our meeting on 3 August, and we laid our report on the same day. Our report noted one merits point, under Standing Order 21.3, in respect of these regulations. We noted paragraph 3.2 of the explanatory memorandum, which highlights the use of the provisional affirmative procedure for these regulations and explains what would happen if the Senedd voted against keeping the regulations in force. The explanatory memorandum suggests that, in the event of such a vote, a person who had paid less tax during the time the regulations were in force would be deemed to have underpaid tax. However, our understanding is that the regulations would cease to have effect at the end of the day on which such a vote took place and that anything done under the regulations before then would not be affected. Therefore, if a person had paid less tax during the time that the regulations were in force, then that person would have paid the correct tax that applied at that time. Whilst our report did not request a response from the Welsh Government to this point, the Minister may wish to comment on that. Thank you, Llywydd. 

The Chair of the Finance Committee. Llyr Gruffydd. 

Thank you, Llywydd. As this is the first time the LTT rates have been changed mid year, and given the implications for the Welsh Government’s budget and spending plans, the Finance Committee was eager to take evidence directly from the Minister, and we did so on 14 September. We were grateful to the Minister for attending at that time, and we heard that given the proximity of the Wales-England border, the temporary changes to SDLT meant that, inevitably, action would be taken in Wales. The committee notes that the change will support people looking to purchase first homes or those seeking to move up the property ladder.

However, unlike stamp duty in England, the change to the LTT tax exemption threshold in Wales will not apply to the purchase of additional properties such as buy-to-lets and second homes. This is something the Finance Committee may want to consider further during the next budget round, or as part of our inquiry into the implementation of the Wales Act 2014 and the operation of the fiscal framework that is currently being undertaken.

The medium-term outlook for the housing market is uncertain both in terms of house prices and the volume of sales. Much will depend on the performance of the wider economy, which will, in turn, be determined by how the pandemic and restrictions on activity evolve. Nevertheless, the committee was broadly content with the evidence provided by the Minister, and therefore we have no issues to report. Thank you.

I thank the Minister for bringing forward these regulations today. The Welsh Conservatives will be supporting these regulations as we have been calling for some time for a land transaction tax holiday here in Wales to mirror the stamp duty holiday that was originally introduced, primarily in England, as a mechanism to energise the housing market during this time of the pandemic and lockdown.

The Minister knows from my previous questions to her about my concerns regarding the thresholds that have been decided on in Wales—£250,000 is the level up to which the tax-free rate applies. This is considerably less than the £500,000 level across the border in England. For many parts of Wales that might not be so relevant, but certainly along the border areas, and particularly in south-east Wales, I am concerned that this could cause distortions in the market. So, along with my previous questions to the finance Minister and to go along with what you said earlier, will you give that commitment that you will keep this process under review?

I'm pleased to hear that the Finance Committee does also keep the door open on looking at the second homes issue, and other property issues as well. Key to this land transaction tax change is to energise the property market, and we must make sure that that remains competitive within Wales as across the border in England. 

We will support these regulations and support the fact that the Welsh Government didn't emulate the changes to stamp duty announced by the Chancellor of the Exchequer for England. We note that the threshold for LTT is to increase only for main residential properties. We see the value of doing this under the current circumstances as an economic stimulus. And, of course, we do understand that one of the implications of restricting the threshold to the main residence only is to not provide subsidies to those people who would want to use this as an opportunity to buy a second home. We know that there has been recently some strengthening in the feeling within communities in Wales, such as in my constituency, where there is a high percentage of second homes and holiday homes, that steps do need to be taken to prevent the loss of further housing stock to those purchasing second homes. 

Plaid Cymru announced in the past few days a series of steps to tackle this, including changes to planning regulations, capping the number of second homes within any community, making it a requirement to have planning consent to turn a main residence into a second home, and so on and so forth. But we do also need to use tax incentives. We recommend raising council tax for second homes, and certainly to close the loopholes that have allowed some to opt out of paying council tax entirely. I appeal to the Government here once again to tackle that issue. But we are also calling for land transaction tax to be used in a more far-reaching way—trebling it is a step that the Government could take immediately. These regulations in truth don't go far enough, in my view and in Plaid Cymru's view. I still don't see the urgency that I would like to see from the Welsh Government on the issue of second homes and safeguarding the housing stock in our communities. But at least what we are voting for today is something that recognises the problem, but let us do far more, let us take real action, because our communities expect us to take steps to safeguard their interests.

The Minister for finance to reply to the debate—Rebecca Evans.

Thank you, and thank you to those colleagues who have indicated their support for the regulations today. I will confine my remarks to the specific regulations that we're debating today. Just in response to the Chair of the Legislation, Justice and Constitution Committee, I'm very grateful for the work that the committee undertook. And I do very much accept the merit point that was raised, and in future I will ensure that the explanatory memoranda for future regulations include that point made as well. So, grateful for your work on that.

In terms of the threshold at which we set the rates, of course, we did it to recognise the different housing market that we have in Wales, where the average house price is £168,000, as compared to £254,000 across the border in England, and our average first-time buyer here in Wales pays £145,000, as compared to £213,000—although Nick Ramsay and I have, on a number of occasions, rehearsed the differences that there across Wales, and the fact that the situation in Monmouthshire is different because it's the only place in Wales that consistently has house prices that are at the very upper end of the spectrum. So, yes, obviously, I will keep the matter under review, although I do point out to colleagues that what we're voting on today is a limited measure, just for seven months, until the date at which it will end next year.

And then to the Finance Committee, as the Chair said, this is the first time that we as Members of the Senedd have used these powers to set new, albeit temporary, changes to the rates and thresholds of land transaction tax. We've used them in the best interests of the people of Wales, and I'm very, very happy to continue the discussions with the Finance Committee, and to continue to share our learning with Finance Committee, and to learn from the Finance Committee's work on this area as well. So, diolch to all colleagues.

The proposal is to agree the motion. Does any Member object? No. Therefore, the motion is—[Objection.]

Okay, fine. Thank you for the objection, and we'll therefore postpone the vote until the voting time.

Voting deferred until voting time.