Therefore, I'm going to call the Minister for Finance and Trefnydd to move the motions—Rebecca Evans.

Motion NDM7573 Rebecca Evans

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

1. Approves The Landfill Disposals Tax (Tax Rates) (Wales) (Amendment) (No. 2) Regulations 2020 laid in the Table Office on 21 December 2020

Motion NDM7572 Rebecca Evans

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

1. Approves The Land Transaction Tax (Tax Bands and Tax Rates) (Wales) (Amendment) Regulations 2020 laid in the Table Office on 21 December 2020.

Motion NDM7571 Rebecca Evans

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

1. Approves that the draft The Land Transaction Tax (Specified Amount of Relevant Rent) (Wales) (Amendment) Regulations 2021 is made in accordance with the draft laid in the Table Office on 22 December 2020.

Motions moved.

In the draft budget, published in December, I set out details of our plans for how Welsh devolved and partially devolved taxes are supporting our spending priorities and delivering a fairer and more progressive tax system in Wales. To bring the changes in the draft budget into permanent effect, Senedd approval is needed for three sets of regulations. Two are subject to the made affirmative procedure, and one to the draft affirmative procedure.

The Land Transaction Tax (Tax Bands and Tax Rates) (Wales) (Amendment) Regulations 2020 came into effect on 22 December. The Landfill Disposals Tax (Tax Rates) (Wales) (Amendment) (No. 2) Regulations 2020 will come into force on 1 April 2021. The Land Transaction Tax (Specified Amount of Relevant Rent) (Wales) (Amendment) Regulations 2021 are subject to the draft affirmative procedure and will be made if approved. I'm grateful to the Legislation, Justice and Constitution Committee and the Finance Committee for their reports, and the opportunity to provide evidence to the Finance Committee.

The land transaction tax rates and bands regulations came into effect from 22 December. They made changes to the rates that apply to the higher residential rates that are payable by people who already own an interest in another residential property. They also apply to companies that buy residential property. The rates payable were increased by 1 percentage point for each band, creating an effective 4 percentage point surcharge over the rates payable broadly by home buyers. The additional revenues will fund Welsh Government policy initiatives in 2021, 2022 and beyond, in particular investment in social housing.

I understand the concern expressed over the speed with which these changes were made, especially given that the changes increase the tax liability. However, it was not uncommon for changes to stamp duty land tax to be announced on budget day to come into effect the following day, and there are good reasons for these changes. Firstly, if the tax payable is to increase, a delay in bringing the charge into effect can result in transactions being brought forward in order to make a tax saving. Secondly, if the tax payable is to decrease, then transactions may be delayed to benefit from that tax reduction. Importantly, for transactions liable to the higher residential rates, the regulations contain protections for those taxpayers who have exchanged contracts and where the changes would result in an increased liability. Those taxpayers will be able, in the main, to pay tax based on the rates in force when they exchanged contracts. 

Changes to the tax bands for non-residential transactions were also made. The zero-rate bands for both consideration other than rent and consideration consisting of rent were increased by 50 per cent and mean that transactions with consideration of £225,000 or less will not pay tax. This modest reduction for business demonstrates this Government's support for businesses as they seek to recover from the pandemic, as well as encourage the start-up of smaller enterprises in Wales. 

I recognise the points raised in the committee reports in relation to the absence of one of the relevant powers in the preamble to the regulations. The Welsh Government's response to the committee sets out clearly why we consider the regulations as made to be valid. Case law is supportive of that position, and the primary regulations that are amended include all of the relevant powers in the preamble, and the regulations clearly indicate the changes to be made. 

The second set of land transaction tax regulations relate only to non-residential transactions and amend the amount of relevant rent. The relevant rent amount is an annual rental figure, and if it is paid together with consideration other than rents, an anti-avoidance rule is applied. These regulations increase the amount by 50 per cent, from £9,000 to £13,500. This maintains the relationship between the zero-rate thresholds and the relevant rent amount, ensuring the rule continues to operate as before. 

On landfill disposals tax, the Landfill Disposals Tax (Tax Rates) (Wales) (Amendment) (No. 2) Regulations 2020 relate to setting the 2021-22 tax rates for landfill disposals tax. These regulations set the standard, lower and unauthorised disposal rates for landfill disposals tax, which, subject to the outcome of today's debate, will apply to taxable disposals made on or after 1 April 2021. In accordance with my announcement at the draft budget in December, the standard and lower rates for landfill disposals tax will increase in line with the retail price index. This approach ensures that rates remain consistent with the UK for the next financial year, providing the stability that businesses have told us they need.

This year, by setting the same tax rates as the UK Government, public services in Wales will continue to benefit from tax revenue, while ensuring the risk of movement of waste across the border is reduced. The standard rate will be increased to £96.70, and the lower rate will be £3.10 per tonne. The unauthorised rate, set at 150 per cent of the standard rate to discourage illegal waste activity, will be £145.05 per tonne. I ask Members to approve these regulations. 

Thank you. I call on the Chair of the Finance Committee, Llyr Gruffydd. 

Thank you very much, Llywydd. The committee took evidence from the Minister on these regulations as part of our scrutiny of the draft budget. I will be focusing on LTT tax bands and tax rates regulations.

We heard from the Minister that there were two major decisions for making these regulations: firstly, to increase the rates of tax paid on the higher residential rates in order to generate additional funding to allow further Welsh Government spending, particularly on housing; and secondly, to reduce the amount of tax payable on non-residential transactions, which will provide some support to businesses as they emerge from the pandemic. The Minister told us that these rates were still progressive in terms of the Welsh Government's tax principles. She said that, where possible, announcements relating to tax should be made as part of the draft budget, given that they are linked to the spending commitments in the budget.

This Chamber will recall that the Welsh Government's time frame for making changes to LTT in summer 2020 was dictated by changes made in Westminster, following the UK Government's temporary stamp duty holiday rather than by the budget cycle. The committee therefore welcomes the approach, namely that these regulations have been made as part of the draft budget, given that tax changes are linked to spending commitments. 

The regulations were laid on 21 December and they came into effect the following day. We heard from the Minister that this was perfectly legitimate to limit the opportunities of taxpayers bringing forward transactions to avoid the increase in rates. However, she did recognise the implications of this for solicitors and others involved in property transactions. Whilst we acknowledge that LTT changes may need to be implemented immediately to avoid distorting behaviours, this could be viewed as contrary to the Welsh Government's tax principle, namely enabling stakeholders to plan with certainty.

Finally, we asked the Minister about the power for Welsh Ministers to specify the tax bands and percentage rates in the case of chargeable consideration, which consists of rent for non-residential or mixed leases, as this was not cited in the preamble, as the Minister mentioned, and whether that would have any impact on the validity of the regulations. We note the Minister's words earlier, the Welsh Government's response, which acknowledges that this power is not cited, but does not believe that this alters the effect of the regulations. The Welsh Government has confirmed, however, that for legal clarity, they will make the necessary amendments at the next available opportunity and we urge them to do that as soon as possible. To close, Llywydd, the Finance Committee notes the three sets of regulations.

Thank you. Can I call on the Chair of the Legislation, Justice and Constitution Committee, Mick Antoniw?

Thank you, Dirprwy Lywydd. In respect of items 6, 7 and 8, we considered these three sets of regulations at our meeting of 11 January and we laid our report on the same day. Our report on the Land Transaction Tax (Specified Amount of Relevant Rent) (Wales) (Amendment) Regulations 2021 raised no issues of note, so I'll therefore focus on the remaining two instruments for the purpose of this debate.

Our report on the Land Transaction Tax (Tax Bands and Tax Rates) (Wales) (Amendment) Regulations 2020 raised a number of technical points. Our first point noted that the Welsh Government had failed to cite one of the enabling powers used to make these regulations, and whilst we agree with Welsh Government's position that this does not alter the effect of the regulations, we welcome its commitment to make the necessary amendments at the next available opportunity, just for the sake of legal clarity.

The additional technical points we raised related to minor inconsistencies and drafting issues in the regulations, and again, we welcome the Welsh Government's confirmation that it will seek to correct these errors.

Our first merits point in relation to these regulations highlighted the short notice of the changes made by these regulations, and we are aware that the Minister has received correspondence from the sector on this very point. In this response to our reporting point, the Welsh Government stated that the changes came into effect shortly after they were announced to limit the opportunities of taxpayers to bring forward transactions to avoid the increase in the rates as set out by the regulations.

Our second merits point noted these regulations revised tax bands and percentage tax rates for certain transactions subject to land transaction tax collected by the Welsh Revenue Authority. Amounts collected by the Welsh Revenue Authority must be paid into the Welsh consolidated fund. A similar merits point was raised in our report on the Landfill Disposals Tax (Tax Rates) (Wales) (Amendment) (No. 2) Regulations 2020, and as the Minister has said, these regulations prescribed the three rates of landfill disposals tax in Wales collected by the Welsh Revenue Authority in exercise of its functions and paid into the Welsh consolidated fund. Diolch, Dirprwy Lywydd.

We will be supporting the first and final of these amendment regulations. We also recognise the beneficial impact for most small businesses of the intervening proposed amendment regulation. However, we also recognise that its broader proposals to increase land transaction tax for second homes applies to a lot more than just holiday homes in a small number of high-demand areas and risk serious consequences for both housing provision more widely and legitimate self-catering businesses across Wales already hit hard by coronavirus restrictions. This is detrimental to thousands of residents in the private rented sector and contradicts the Welsh Government's own budget-setting objectives. This is not a public health measure, and therefore has no such justification on these grounds. This also fails to recognise the financial impact for households and businesses already having to contend with the rapidly changing impact of coronavirus response restrictions. Not only is this an unwelcome burden to those private landlords providing housing for those who cannot afford or choose not to buy at such an uncertain time, it makes it harder for second-step owner-occupiers to move to a new home and thus free up stock for first-time buyers. This amendment once again ignores the reality that most private landlords are decent landlords with few properties, and reliant on them for their own living costs, who provide valuable housing for those who cannot buy or don't need to, and use up valuable social resources that, of course, are scarce. It would hamper the ability of good landlords to expand and diversify their portfolio to meet that need.

Buy-to-let properties should not be treated the same as second homes, as they provide, amongst others, for low earners who can't buy, and local people. Given the current economic situation, people will also be less able to buy, and private rented sector housing is therefore now an even more valuable service. As some decent landlords in Flintshire told me last week, 'The restrictions imposed by Government are rapidly reducing the stock of decent, affordable rental properties. We've learned a hard lesson this year, so we'll begin the process of relocating our rental portfolio to England. It's a sad decision, because we both come from a Welsh background.'

This amendment also raises questions about the impact on, for example, members of the clergy and armed forces personnel whose employment requires them to live elsewhere, but who seek to purchase homes in their own home communities. We will abstain accordingly.

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

Diolch, Dirprwy Lywydd. Thank you to all colleagues for their contributions, and particularly to the Legislation, Justice and Constitution Committee and Finance Committee for the work that they've done in terms of scrutinising the regulations. I'll just respond to what I think are the two most substantial points raised during the debate, the first being the timing of the announcement. We do recognise that the changes were brought in in very short effect after they were announced, and that would have some implications for the work of solicitors and others involved in conveying property. I do think, though, that it does remain the case that it is appropriate for us to announce these decisions alongside the draft budget when our spending plans are so interlinked with the contribution that devolved taxes make to funding that spend, and the changes were introduced in this manner for good reason—to limit the opportunities for taxpayers to bring forward transactions so as to avoid the increase in the rates, and to pay the four lower rates. But it's also important, I think, to recognise that transitional rules were also included, so that those who had exchanged contracts could pay the tax based on the rates at the date that they were exchanged so that they would not be disadvantaged as a result of that. So, I think that that was an important safeguard that we put in place.

Then, in respect of the impact on second-home purchases, I think that the measures that we undertook to bring in additional revenue for Welsh Government were proportionate to the challenges. As a result of the changes, the tax paid on higher residential rates transactions will increase by an average of £1,600 and there are around 14,000 such transactions every year. As a result, we expect this measure to provide an increase in revenues of £14 million in 2021-22, and as a result, you'll see that we've been able in our draft budget to increase the amount of funding that we're putting into our housing agenda, so I think that there is a close and clear link between the decisions that we've taken in this regard and our efforts to actually increase the supply of affordable housing for individuals across Wales. So, the decisions that we took in this budget I do think were modest and proportionate.

I think, Llywydd, I've responded to the main substantial points. Diolch.

Thank you very much. The proposal is to agree the motion under item 6. Does any Member object? No, therefore in accordance with Standing Order 12.36, the motion is agreed. 

Motion agreed in accordance with Standing Order 12.36.

The proposal is to agree the motion under item 7. Does any Member object? No, so therefore, again, in accordance with Standing Order 12.36, the motion under item 7 is agreed. 

The proposal is to agree the motion under item 8. Does any Member object? I don't see any objections, therefore the motion is agreed in accordance with Standing Order 12.36.

Motion agreed in accordance with Standing Order 12.36.