So, now we move on to item 12, which is a debate on the Welsh rates of income tax for 2021-22, and I call on the Minister for Finance and Trefnydd to move the motion, Rebecca Evans.

Motion NDM7611 Rebecca Evans

To propose that the Senedd in accordance with section 116D of the Government of Wales Act 2006, agrees the Welsh rate resolution for the 2021-22 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.

Thank you for the opportunity to open this debate on the Welsh rates of income tax. As you know, Welsh rates of income tax were introduced in April 2019 and apply to income tax payers resident here in Wales. The Welsh rates for next year were set out in the draft budget announcement in December. In keeping with previous commitments, there will be no changes to Welsh income tax levels in 2021-22. This will mean that Welsh taxpayers will continue to pay the same income tax as their English and Northern Ireland counterparts. This will continue to provide stability for taxpayers as we seek to address the longer term impacts of the pandemic and the UK Government's Brexit deal.

Together with the block grant, Welsh taxes are essential to help fund Welsh public services upon which many in society depend. Protecting these services is now more important than ever, and there are significant challenges going forward. It is disappointing that the future planned freeze to the basic rate threshold of income tax, included in the UK Government's budget announcement last week, impacted more on those least able to afford to pay. This runs counter to our commitment to delivering progressive tax systems here in Wales.

My officials continue to work closely with HMRC, which is responsible for the administration of WRIT. I'm pleased to report that the WRIT project has been formally closed after successful implementation. The final cost of the implementation project was just under £8 million, which was lower than the original forecast. One of the final elements of the project was to amend the annual tax summary that's available to every taxpayer, via their HMRC personal account. For Welsh taxpayers, this now shows the amount of WRIT they have paid for the tax year. Alongside this, we have developed an online WRIT calculator, providing a breakdown of where individual contributions have been allocated across key public services. These two products raise awareness and understanding of WRIT and how it's spent, delivering public services here in Wales.

I was also pleased the National Audit Office's report on the administration of WRIT, published in January, confirmed that HMRC has adequate rules and procedures in place to ensure the proper assessment and collection of Welsh rates of income tax, as well as the appropriate governance measures. The Senedd is asked today to agree the Welsh rate resolution, which will set the Welsh rates of income tax for 2021-22, and I ask Members for their support this afternoon.

We do not support, in the Abolish the Welsh Assembly Party, these Welsh rates of income tax, and we'd like to vote against them, but I shan't, because if they don't go through, we will see a massive hole in our public spending because of the amount by which the block grant has been reduced. So, we'll abstain on this motion.

We certainly don't support these Welsh rates of income tax because there shouldn't be Welsh rates of income tax, because we had a referendum in 2011, when voters were assured, on the ballot paper, 'The Assembly cannot make laws on tax, whatever the result of this vote.' That promise has been broken, and I'm afraid that referendum has been negated in consequence.

In 2016, December, Mark Drakeford, then finance Minister, now First Minister, agreed with the Westminster Government to devolve Welsh rates of income tax, having previously agreed not to, with that assurance on the ballot paper. And that promise was broken. We saw, in the 2017 Wales Act, the Conservative Government in Westminster break their promise as well. We were assured there would be no Welsh rates of income tax without a further referendum. That has not been the case.

I welcome what the First Minister says about publicising Welsh rates of income tax. A lot of people aren't aware of them, because they haven't changed. But, in one very important aspect, there has been a change, because when we got those Welsh rates of income tax devolved, the block grant was reduced by an equivalent amount, and it was necessary to project how much the block grant would be reduced in future years, including consideration of a forecast for those Welsh rates of income tax. Now we see that we are getting £35 million less money than we would, because of those Welsh rates of income tax, because their yield has not been as high as forecast, and we in Wales are on risk for that, because of that devolution of Welsh rates of income tax. Of course, there are other issues that the finance Minister can speak about in terms of the fiscal compact, but those Welsh rates of income tax should not have been devolved, and there is a £35 million cost contingent on that.

Now, the First Minister criticised the UK Government for freezing the personal income tax threshold, saying that those who find it hardest to pay would suffer the most. Of course, those who find it hardest to pay aren't paying the income tax, because many earn below that threshold, and particularly so in Wales. We also see the freezing of the upper-rate threshold, which, of course, leads to costs being borne by those who are more able to bear those costs, so I was surprised to hear that criticism. We need to understand that these rates being devolved, even if they haven't changed, is costing £35 million a year, on account of the revenue that we're not getting that was previously projected, and it is a breach of faith, and it negates that 2011 referendum because the promise on which it was based has been broken.

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

Thank you very much to Mark Reckless for his comments in the debate. I have an update for him that might change his mind in terms of the value of Welsh rates of income tax, because based on current forecasts, the net impact of WRIT is an increase of £30 million in 2021-22, and that, of course, is in contrast to the minus £35 million forecast in the Welsh taxes outlook in December. And that's partly to do with the result of recent data showing relatively higher earnings performance for income tax payers here in Wales. So, potentially that could change Mark Reckless's view of Welsh rates of income tax, although I suspect it won't be quite enough to do that. But I'm glad that he recognised the importance of taxpayer communication, because we are working closely with HMRC to ensure that people here in Wales are increasingly aware of Welsh rates of income tax. And our surveys, which we've commissioned by Beaufort Research, do show that there is an increase in terms of people's awareness. And as I've mentioned in the Finance Committee and in my opening remarks, we have introduced some new items this year, including that WRIT calculator that individuals can use online to see exactly where their Welsh rates of income tax are going in terms of supporting public services here in Wales. So, I think that's another step forward in terms of education, awareness, and also, importantly, transparency here in Wales. I'm grateful to Mark Reckless for his contribution, but would ask all colleagues to support our Welsh rates of income tax today. Thank you.

Thank you. The proposal is to agree the motion. Does any Member object? [Objection.] I see an objection, so we will vote again on this item at voting time.

Voting deferred until voting time.