The next item, item 9, is the debate on Welsh rates of income tax. I call on the Minister for finance to move the motion—Rebecca Evans. 

Motion NDM7941 Lesley Griffiths

To propose that the Senedd in accordance with section 116D of the Government of Wales Act 2006, agrees the Welsh rate resolution for the 2022-23 Welsh rates of income tax as follows:

a) the Welsh rate for the purpose of calculating the basic rate of income tax is 10p in the pound;

b) the Welsh rate for the purpose of calculating the higher rate of income tax is 10p in the pound;

c) the Welsh rate for the purpose of calculating the additional rate of income tax is 10p in the pound.

Motion moved.

Diolch, Llywydd. Thank you for the opportunity to open this debate on the Welsh rates of income tax resolution for 2022-23. Welsh rates of income tax were introduced in April 2019 and apply to income tax payers resident in Wales. Welsh rates of income tax raise around £2 billion each year towards the funding of the Welsh Government budget. The Welsh rates for the next financial year were announced in the draft budget. There will be no changes to Welsh income tax levels in 2022-23. 

This will mean that Welsh taxpayers will continue to pay the same income tax as their England and Northern Irish counterparts, and this will continue to provide some stability for taxpayers during a time of uncertainty and wider global economic challenges. Together with the funding received through the block grant, Welsh taxes are essential to help fund the vital public services that we all depend on. Over the coming months and years, as we deal with the impact of the unwinding of the pandemic measures, such as furlough, as well as the cost-of-living crisis and the impacts that now are being felt as a result of the invasion of Ukraine, protecting these services will become more challenging. In addition to considering the economic impact of coronavirus, we need to recognise that people in Wales are facing an unprecedented cost-of-living crisis fuelled by soaring energy bills. Day-to-day prices of food, fuel, energy, clothes, travel and rent are all going up as inflation rises. 

The Bevan Foundation's snapshot of poverty revealed that more than a third of Welsh households do not have enough money to buy anything beyond the everyday essentials, and are having to cut back on their heating, electricity and water, and a quarter are having to cut back on food for adults. Alongside this, the UK Government's decision to increase national insurance contributions on top of the tax changes it previously announced in its March 2021 budget means that families already face a significant increase in their tax burden from April. The Resolution Foundation has calculated that families face a £1,200 hit from April as energy bills and taxes rise. 

All this means that it's clear that now is not the time to consider changes to Welsh rates of income tax. My officials will continue to work closely with HM Revenue and Customs, which is responsible for the administration of WRIT. I am confident that our robust processes and good working relationships with HMRC provide a strong basis for the effective and efficient use of WRIT going forward. I'm pleased to report that the first WRIT outturn figures for 2019-20 were published by HMRC last year. The outturn figures were close to the forecasts, providing further reassurance that the forecasting process and the end-of-binning data are robust. The next outturn for 2020-21 is due to be published this summer, and this will be the first year where the outturn will impact on the Welsh Government's budget, with any required adjustments applied to the budget in 2023-24 in accordance with the fiscal framework agreement.  

I will of course keep Members informed on this as we move forward, and I look forward to the debate today. The Senedd is asked today to agree the Welsh rates resolution that will set the Welsh rates of income tax for 2022-23, and I ask Members for their support this afternoon. 

Can I confirm that the Welsh Conservative group will be supporting the continuation of the freeze on the Welsh rates of income tax? And I recognise all of those pressures on families that the Minister shared and, indeed, I fear things may get worse with, obviously, what's happening in eastern Europe. 

If I may, though, I just want to push the Minister a bit further on the need to clarify the Welsh Government's future intentions on Welsh rates of income tax and, in particular, the commitment to not take more in WRIT from Welsh families for at least as long as the economic impact of coronavirus lasts and, obviously, these other pressures they are experiencing now. I appreciate that in the Minister's letter to the Finance Committee, the Minister stated that there is a need to consider future fiscal prospects for Wales, as well as the current pressures facing families regarding the cost of living when deciding future taxation plans. And I think the latter, in particular, is a consideration that all of us in the Chamber can agree with. But the Minister's response didn't really provide clarity as to what the Government's medium-term thinking is on what direction we are heading. The uncertainty facing Welsh taxpayers was something that was highlighted in the Finance Committee evidence sessions by the Institute for Fiscal Studies. They suggested that the commitment had served its purpose, and that we need a more precise definition, rather than one that can be interpreted in many different ways. 

To summarise, Llywydd, I do think that the Welsh Government could be more clear in indicating how it envisages using its taxation powers in the medium to long term, and to end the current uncertainty, and to allow the Senedd to begin considering these plans and their potential impact on people's incomes. Diolch. 

We will not oppose this motion either, and along the same lines, I would ask for greater clarity on the Government's intentions here, because in the last Senedd you refused to vary taxes, or ruled out varying taxes for the rest of the Senedd. Now, as we've heard, you are saying that you won't be varying tax levels while the economic impact of the pandemic remains. The question is, well, what does that mean, because the economic impact of the pandemic will be with us for many, many years? Are you therefore suggesting that there will be no variation in the level of taxation during the years of this Senedd? I'm not necessarily arguing that that's needed, but as we've heard, the cost-of-living crisis and circumstances in eastern Europe may mean that we will need flexibility to reduce taxes, perhaps, in response to the cost-of-living crisis, or to raise them to create extra revenue.

You say you make that statement to give assurances to people, but I don't feel it gives any assurance because what it does it to kick the decision down the road, without suggesting whether it's something that you're willing to consider during this Senedd at all.  

The Minister to respond to those contributions. 

I'm grateful to both speakers in the debate this afternoon, and recognise the particular query that they have in respect of the Welsh Government's commitment not to increase income tax for as long as the economic impact of the pandemic lasts. The economic impact of coronavirus, including its duration, its scale and legacy of course is monitored on an ongoing basis, and particularly now in light of the concerning and terrible events in Ukraine. I think that it is too early to take a view, given the effect of the winding down of the pandemic measures. So, we're still starting to feel the impact of the end of furlough, for example. That needs to work its way through in terms of the job market, so there's lots yet that we haven't fully felt in terms of the impact of the pandemic. And, of course, at the same time, we're seeing the issues around energy prices and other supply constraints, as well as labour shortages, which are holding back growth and increasing inflation and putting pressure on wages. So, there are lots of things happening at the moment that obviously mean it's not the right time to consider changes to Welsh rates of income tax.

But I do want to make the point that we're talking about two separate things, really, in the sense that there's no trigger point at which, if the economy performs in this particular way at that point, we will describe ourselves as no longer feeling the impacts of the pandemic. That doesn't necessarily mean that it will trigger an increase or a decrease in the Welsh rates of income tax. So, I think that we need to consider the overall economic position and what that means for families and for taxpayers in Wales, but then also not to suggest that if we were to reach a certain point of the recovery it would automatically trigger an increase or a decrease, because those things will be considered at that point. I'm sorry I can't be more detailed at this point, but at the moment there are still so many moving parts that we can't really get that picture. 

And I will take this opportunity to say that, actually, it is the UK Government that is increasing the tax burden on people and on households in Wales, and this is really going to start to be felt from April onwards. The OBR has reported that through the planned national insurance rise, which was announced in September, and also the corporate and personal tax increases, which were in the UK Government's March budget, the UK Government has raised the tax burden from 33.5 per cent of GDP before the pandemic to 36.2 per cent of GDP by 2026-27, and that is its highest since the early 1950s. So, whilst we're also considering the impact of the pandemic and the economic recovery, we also need to be understanding of the overall tax burden on taxpayers, so that decisions that we might take in future have to be considered in the round in terms of the responsibilities placed on taxpayers by the UK Government as well.

So, I'll leave it there for today, Llywydd, and ask colleagues for their support for the Welsh rates of income tax for the next financial year.

The proposal is to agree the motion. Does any Member object? No, there is no objection. Therefore, the motion is agreed.

Motion agreed in accordance with Standing Order 12.36.