The next item is a statement by the Minister for Finance and Local Government on the Welsh Tax Acts etc. (Power to Modify) Bill. I call on the Minister, Rebecca Evans.

Diolch. Yesterday, I laid the Welsh Tax Acts etc. (Power to Modify) Bill, together with the explanatory memorandum, before the Senedd. Tax devolution is important; it provides a significant lever through which we are better able to deliver strategic priorities for Welsh citizens and businesses. The last four years of experience of tax devolution has enabled the Welsh Government to develop a considerable tax capability. We have established a distinct Welsh approach to shaping tax policy and to the delivery of that policy by the Welsh Revenue Authority. Our approach keeps the needs of Welsh citizens, communities and businesses at the forefront.

This Bill provides an additional fiscal lever by permitting Welsh Ministers to make amendments in response to changes made by the UK Government to predecessor UK taxes—that is, to stamp duty land tax and landfill tax—that will affect the Welsh block grant adjustment, and therefore the revenues available for essential public services. At the moment, every time there is a UK fiscal event, we take the risk that there may be a change that impacts on a devolved tax, and we may not have the appropriate mechanism by which to respond at pace. Such changes could have implications for businesses, the property market, and a direct budgetary impact on the Welsh Government’s resources.

This was demonstrated in July 2020 when the UK Government did not tell us in advance that they were cutting stamp duty land tax, despite the clear implications for the housing market in Wales and the UK's economic recovery from the pandemic. Although we can vary rates and thresholds for land transaction tax through regulations, we can't do this for every change.

Amendments to the Welsh tax Acts will also be permitted in order to respond to a number of other external circumstances, such as to ensure that devolved Welsh taxes are not imposed where to do so would be incompatible with any international obligations, for example, where a new trade deal is concluded with another country that has implications for our taxes.

It will also enable Welsh Ministers to make legislative changes to protect against avoidance activity, which can then be stopped with immediate effect. This includes cases where increased clarity in the legislation will put beyond doubt the intended application of the legislative provisions, and potentially benefit taxpayers by stopping the promotion of avoidance opportunities that don't actually exist. Such action has been taken by the UK Government to protect tax regimes and taxpayers in the past, and I want Welsh Ministers to be able to take similar action.

Lastly, this Bill will also allow Welsh Ministers to make changes where a court or tribunal decision identifies an issue that Welsh Ministers consider could benefit from legislative change, or greater clarification of the law. This includes decisions relating to the Welsh tax Acts, UK predecessor taxes, other taxes, or other laws that may affect the devolved taxes.

This Bill allows Welsh Ministers to make regulations that may have retrospective effect. The use of the power retrospectively will be considered on a case-by-case basis as justification for each may differ, depending upon the purpose in question. This will most commonly be limited to cases where the impact of the regulations is to confer a benefit to Welsh taxpayers. For example, the Welsh Government may want Welsh taxpayers to benefit from a reduction in their tax liability from the same date that a change was introduced in England. The Welsh Ministers may choose to achieve that by adopting, or adapting, the same or a different policy.

However, in the case of avoidance activity, Ministers may wish to be able to announce that the scheme will be closed down by future regulations effective from the date of the announcement. In such circumstances, taxpayers could reasonably expect retrospective changes to be introduced that ensure that they pay the right amount of tax.

I recognise that the use of retrospective legislation requires both policy justification and legal safeguard, and should only be used in situations where it is necessary. This is why the Bill places a duty upon the Welsh Ministers to publish a statement on the use of the power to make regulations that have retrospective effect. And a draft of this statement has been shared with the Finance Committee and the Legislation, Justice and Constitution Committee.

The Bill will provide the Welsh Ministers with an agile tool to protect Welsh revenues raised through devolved taxes, contributing to the drive for stable tax devolution. We have consulted with our stakeholders on the content of the Bill, and I would like to take the opportunity to formally thank all of those who have contributed to developing it. I look forward to the scrutiny process that will now follow and the constructive engagement of organisations who have already contributed and also that of colleagues across the Siambr. Diolch.

The Conservative spokesperson, Peter Fox.

Diolch, Deputy Llywydd, and thank you, Minister. Thank you for the statement and thank you to your officials for their technical briefing yesterday at our joint committee. It was really helpful and really interesting. I do have some sympathy with you; budgetary processes and taxation are very complex things, and this complexity has only increased during recent years.

It's right, then, to ensure that Welsh taxpayers are not left at a disadvantage compared to other taxpayers across the UK when changes are made to the predecessor taxes, as well as to close tax loopholes so that funds can be used to support our public services—it's quite right that we do that. However, as part of your consultation around the Bill, I know stakeholders such as the Chartered Institute of Taxation and the Institute of Chartered Accountants in England and Wales stated that their default position is that tax legislation should be in primary legislation, and particularly in the case where legislation relates to the exercise of tax powers, except in very exceptional circumstances. And this is a principle that I agree with, and I'm sure many in the Chamber—the virtual Chamber—would agree with too.

I think, to reflect the conclusions of the previous Finance Committee, that we need more of a legislative basis to our budget and taxation-setting processes in Wales to support the democratic scrutiny of public expenditure and taxation. It is in this regard that, by using regulations to make changes to taxation, this Bill could—and I stress 'could'—be used to go further than originally intended. Now, I note that there are some strict limits on the use of the powers within the Bill, but there is still some ambiguity as to when the powers may be used. In the original consultation, the Chartered Institute of Taxation stated that 

'the circumstances in which power 1 can be used leaves quite a wide discretion' and that a number of terms used within the section are vague and undefined. However, the Government rejected the idea of a Senedd lock on the use of power 1. Perhaps I could ask you, Minister, why that was the case. Could you also clarify the circumstances—and you've touched on this a bit already—where you envisage needing to use the power to modify Welsh tax Acts? And, ultimately, who in the Welsh Government is responsible for deciding which one of the purpose tests within section 1 has been met when bringing forward regulations through the Bill?

Finally, comments were made during the original consultation that multiple changes via regulatory powers risk making the primary legislation difficult to follow because of the amount of cross-referencing required. If a substantial volume of secondary legislation is needed, would there potentially need to be work to consolidate these to ensure that tax law is as accessible as possible? Thank you, Minister.

I thank Peter Fox for those questions. I am really pleased that the briefing that officials provided has been useful. I'm very much looking forward to the detailed scrutiny process, which will commence on 22 December, as an early Christmas present for us all, in committee. And I know that we'll be looking at many of these aspects in more detail, but I'm very, very pleased to at least set out my initial response to some of those questions this afternoon.

One of the substantive issues that you raised was, essentially, why not use a finance Bill, and I know that this has been an issue of interest to finance committees in the previous Senedd. My position does remain that I don't consider the timing right to introduce an annual budget or a finance Bill through which changes to Welsh tax Acts can be made. A key consideration for the Welsh tax Acts specifically is that the volume of secondary legislation that these Acts have so far generated is not significant at all, and as we develop more devolved taxes then I think that, potentially, there could be a strengthened argument for an annual finance Bill, but I would even contend that if we did have an annual finance Bill, we'd still need the powers that are provided for within this Bill, because they enable Welsh Ministers to respond to external events that might not necessarily coincide with the Welsh Government finance Bill cycle. For example, the UK budget at which changes may occur isn't on a fixed cycle, and it often occurs more than once a year, and there are also other fiscal events at which changes can be announced, for example, the July 2020 stamp duty land tax rates provide, I think, an example of that. And furthermore, the Bill will enable Welsh Government to be far more responsive to wider changes, such as court decisions and avoidance activity, than is the case with either the UK Government's finance Bill approach or the Scottish Government's approach, where changes are often made through a finance Bill only.

In terms of why we are not using existing powers—so, thinking about primary legislation, for example—the Bill aims to provide an additional flexible tool to allow Ministers to respond at pace to external circumstances that impact on our devolved taxes. Primary legislation generally takes around 12 to 18 months to develop and complete that cycle of Senedd scrutiny, so it wouldn't enable us to respond in an agile way if we needed to do so at short notice, for example, to close down tax avoidance activity.

And there was also a question in terms of why, despite consulting in the documentation on the Senedd lock, we subsequently removed that from our proposals. The lock was originally proposed to enable the Senedd to signify its approval of the use of the made affirmative procedure, and the original policy proposed the use of a power that could be used whenever Welsh Ministers considered it expedient in the public interest to do so. The lock was intended to respond to concerns that the power would be unusually broad, but the Bill now, as currently drafted, has much reduced the scope of the power to those four purpose tests, which can only be used when considered necessary or appropriate. And so that does, I think, sufficiently constrain the power so that a Senedd lock, which itself would have been unconventional and may set an unhelpful precedent for future made affirmative powers, wouldn't be appropriate, because we've narrowed things down with this Bill so much.

And then just to complete that, really, just to highlight that the scope of the power is limited to the four specific purposes: firstly, ensuring that landfill disposal tax and land transaction tax are not imposed where to do so would result in non-compliance with any international obligations; to protect against tax avoidance in relation to landfill disposal tax and land transaction tax; to respond to changes to predecessor UK taxes that impact, or could impact, the amount paid into the Welsh consolidated fund; and then to respond to the decisions of courts and tribunals that affect, or may affect, Welsh tax Acts or regulations made under them. So, we've very much, following the consultation, narrowed the scope of the Bill, which I think removes that need now for the Senedd lock, which was in our original consultation. But I very much look forward to exploring these issues in more depth in the weeks ahead.

Plaid Cymru spokesperson, Llyr Gruffydd.

Thank you very much, Deputy Presiding Officer, and I thank the Minister for her statement. Just to pick up on some of the previous comments on a finance Bill or an annual budget Bill, I still feel as I did when I chaired the Finance Committee in the previous Senedd that that is something I would certainly want us as a Senedd to move towards. I accept the Minister's comments on how quickly we can get to that point, but it's certainly a discussion that I would want to keep alive. And I also agree with the Minister, whether that happens or not, we still need the powers that the Government are seeking in the Bill before us today.

I've said in the past that I have no problem in principle with these kinds of powers being given to Welsh Ministers. It is entirely reasonable. Having the means to modify legislation at short notice in this way is something that I do think is reasonable, but it has to happen under particular circumstances. Failing to respond may lead to damaging or unfair implications. Under those circumstances, I think it's reasonable that we move in this direction. It is something that other Governments take for granted around the world. So, there is nothing unique in this.

Having said all of that, before we can support legislation that empowers Ministers in this way, we all have to be confident that the necessary restrictions are in place to ensure that the parameters are clear, first of all in terms of under which circumstances the Minister can act, secondly, to what extent the Government can act, and then thirdly of course, that there are strong measures in place to ensure timely parliamentary scrutiny and consent, or as soon as possible once the decision is made. At first sight, the legislation looks quite reasonable on those fronts, but obviously I look forward to scrutinising the proposed legislation over the next few weeks and months.

Just a few questions from me, Minister. There is a risk, of course—and we've perhaps seen this happen in other contexts—that, over time, powers like this can be used by Ministers to go beyond the authority provided to them. So, can you confirm on the record this afternoon that it's only under exceptional circumstances and only when there are no alternative options that you would intend to use the powers provided to Welsh Ministers in this Bill?

And also, in order to balance things slightly, what consideration have you given to including more independent voices or perspectives in the process of deciding to operate these powers? A suggestion has been made that there might be a more formal role for the Llywydd, perhaps, in the process. Cardiff University, in their response to the consultation last year, suggested that we need to ensure diversity in the group that decides when these powers should be used, and I'd be interested to hear how you intend to have some sort of balance within the process. Thank you.

Thank you very much for raising that series of questions, and for your generally warm acceptance of the need for the Bill, but obviously you're looking forward to the scrutiny process ahead. I'm sure that we will continue to return to the question as to whether or not a finance Bill is necessary at this point, but as I say, we will keep that under review as circumstances develop and change in future. Just to provide reassurance, I do think the parameters of the Bill are sufficiently clear, especially now that we've just narrowed it down to those four purposes for which the Bill should be used, which I've just outlined in response to Peter Fox. But we also recognise the real importance of the need for proper scrutiny, which is why we've included some real, I think, significant safeguards within the Bill in terms of the procedure.

The Bill would allow for regulations subject to the draft affirmative procedure to be laid in draft for a minimum of 20 days before they're put to the vote. Obviously, if they're approved, those regulations can be made, and regulations can lay for a longer period than the 20 days before being put to the vote. Under the made affirmative procedure, we would look to have that period for 60 days. And obviously, if the vote is lost or the 60-day period expires, then those regulations cease to have effect from those dates, and we've put in place a view as to what we would do should those regulations fall. The safeguards that we've put around the made affirmative procedure in particular, I think, are important, because they would only be used when Welsh Ministers consider the regulations necessary by reason of urgency and only for the four purposes that I've described. An example, I think, would be a need to urgently respond when the delayed closure of a tax avoidance scheme would result in considerable loss of revenue.

The proposed approach within this Bill isn't unprecedented and it won't be unfamiliar to tax practitioners. For example, section 109 of the Finance Act 2003 provides HM Treasury with a bespoke power to make regulations to make immediate but temporary changes to stamp duty land tax legislation, and regulations made under this are subject to provisional affirmative procedure, which is similar to the Senedd's made affirmative procedure, meaning that they must be approved by the House of Commons within 28 sitting days in order to have that permanent effect. So, I think that what we're proposing here isn't unusual or novel in that sense, despite being something that will enable us to respond very quickly to changes. In terms of roles for individuals and parties, I'm sure we'll have the opportunity to explore that in further depth in committee in due course, and on the floor, of course, of the Senedd. Diolch yn fawr iawn.

Thank you, Minister.