Tax-raising powers, including the ability to create new taxes, are essential tools for governments to use as a means of raising revenue to support spending for public services and to influence behavioural change. The Wales Act 2014 devolved fiscal powers to the Senedd for the first time, including conferring tax powers to replace stamp duty land tax, landfill tax, as well as the ability to vary the Welsh rates of income tax. These additional fiscal powers mean that approximately 20 per cent of the Welsh Government’s budget is now funded from tax revenues. This in turn has increased the accountability of the Welsh Government to the people of Wales—clearly, a welcome development.

Last week, the Welsh Minister told the committee that she was continuing to work with the UK Government to secure devolution of a vacant land tax, but that the process has been both time-consuming and frustrating, with discussions already having taken over two years. The Minister has highlighted the challenges from HM Treasury continually requesting further information and has previously said that the UK Government is the final arbiter on whether enough information has been provided to support a proposal.

The Minister has mentioned pursuing an independent dispute resolution on whether or not the Welsh Government has provided the necessary information in relation to the vacant land tax, as set out in the Wales Act 2014. This is the first attempt at seeking competence for a new tax and, as a result, it is reasonable to expect teething problems as the process is ironed out. However, it is unlikely that the intention in the Wales Act was that this process would take so long, and casts doubt on whether the mechanism for devolving taxes is fit for purpose. As I’m sure Members from the third Senedd will remember, it has unfortunate echoes of the tortuous LCO system of devolving legislative competence on a piecemeal basis, which added an additional level of complexity and bureaucracy to an already protracted process. I don’t imagine anybody would like to return to those days.

In the previous Senedd, there was a reluctance from the then Chief Secretary to the Treasury to give evidence to the Finance Committee on its inquiry into the implementation of the Wales Act 2014. However, Simon Hart, Secretary of State for Wales, did attend and when asked about the mechanism for devolving new taxes he said

'if there is a legitimate concern that is raised about maybe the speed of progress or the manner of engagement' he’d be very happy to discuss the issue with the Treasury. We very much welcome the approach, and hope that the new Chief Secretary will be more willing than his predecessor to progress the devolution of this tax with the Minister. We also hope he will be more willing to engage with us as a committee, and participate in the scrutiny of powers that fall within the remit of both the UK Government and the Welsh Government on the devolution of tax powers and other fiscal matters.

The committee supports the Minister in working with the UK Government to ensure that there is an effective process for devolving new tax areas to this Senedd. What everybody wants is a smooth and transparent process, and that can only be achieved if the structures to support it are clear, robust and resilient. Diolch.