Part of the debate – in the Senedd at 5:52 pm on 26 April 2022.
Diolch, Llywydd. I move the motions. It's a privilege to open this debate on the general principles of the Welsh Tax Acts etc. (Power to Modify) Bill, and to move the motion and the financial resolution. As Members have remarked many times in this Chamber, tax is an important and growing area of the devolution settlement. As a Welsh Government, we need, like every executive, a proportionate and effective suite of tools to manage those tax powers strategically and effectively in order to protect taxpayers and the public finances. This Senedd, like every parliament, needs strong and robust oversight of the use of those tools that can give consent and legitimacy to those powers. That's so vital to the democratic process. While it will take more than this Bill to get us to that position, I do believe that this proposed legislation is an important first step along the road to the coherent and transparent system that we need to support tax devolution in Wales.
I'd like to begin by thanking the Chairs and the Members of the Finance Committee and the Legislation, Justice and Constitution Committee for their thorough scrutiny of the Bill during Stage 1, and their comprehensive reports. I will say a little more in a moment about the ways in which I think we can positively work together to strengthen the Bill during its passage through the Senedd. I'd also like to thank all of those who have engaged with us and who have taken an active role in progressing the Bill, providing their expertise, their challenge and their perspective. That has contributed to our thinking as we have been developing the Bill. Both committees have made a number of important recommendations, the majority of which I am pleased to accept. Given the detailed nature of both committee reports, and the number of recommendations made, it's not possible to respond to each one of them individually today. I will therefore be writing to the committee Chairs following the debate.
I'll begin with what I believe is the common ground among all of us—that is, ensuring that we have effective arrangements to protect revenues as a result of changes that impact on our devolved taxes. The Bill is intended to afford that timely protection while respecting the Senedd and its proper oversight role. This Bill is not the final word or a longer term answer to how we make urgent changes to tax legislation. Rather, it is a pragmatic step to take now while we work through the full implications of tax devolution in Wales. As I have said, tax devolution itself is a relatively recent constitutional change, with our devolved taxes only commencing operation four years ago. As that devolution matures, I want to work with this Senedd to move us towards an architecture for making tax changes that is right for us here in Wales. Ultimately, this may look closer to the UK arrangements of an annual finance Bill, although this in itself would not offer a full solution. That will be for us working together to work out what arrangements and instruments are right for Wales.
I've listened to and reflected carefully upon the important constitutional points made in relation to this Bill, and in particular those by the Legislation, Justice and Constitution Committee on the separation of the powers between the legislature and the executive. That consideration has significantly influenced the amendments that I intend to bring forward in the upcoming scrutiny stages. I believe that this legislation can be seen as an important shorter term vehicle while we consider those longer term solutions that must be thoroughly researched and evaluated—work I think that we can do together as a Welsh Government alongside this Senedd and its committees, particularly in the context of an enlarged Senedd. As such, I'm pleased to accept the recommendations of both committees to require the Welsh Ministers to publish a report on the operation and the effect of the Act. I propose to publish this report at the start of the next Senedd term.
In addition, I'm prepared to go further. My intention is to bring forward an amendment during the passage of the Bill that no new regulations may be made using this regulation-making power after five years of the Bill receiving Royal Assent. However, I do think that it is important to provide the Senedd with the opportunity to extend the life of the Act by up to a further five years if that Senedd considers the powers should remain in force for that final extended period. This will be achieved by Members voting to approve an Order made by the Welsh Ministers. These actions are intended to ensure that we are ready to take an agreed next step on our devolution journey at a specified future point. Depending on what happens between now and then, if the number of devolved taxes increases or if there is a larger volume of tax legislation amendments, then there may well be case for a regular finance Bill. However, we still need to consider a mechanism for making urgent changes outside of any Welsh finance Bill cycle. Crucially, I commit today to working with committees to think through these important questions and challenges.
I'd like to turn to another key area that the Government agrees gives rise for the need for an amendment. I've carefully considered the views of the committees and stakeholders in regard to the ability to restrict retrospective legislative changes back to the date of initial announcement. I'm pleased to accept the guiding principle and intend to bring forward a Government amendment to restrict the ability of the Welsh Ministers to legislate retrospectively to the date of a Welsh Government announcement in cases where a change, and that is a monetary cost, may impact negatively on taxpayers. However, I consider any such restriction should still allow the Welsh Ministers to use the power to make changes with a retrospective effect further back than the date of any announcement where that change reduces the tax charged, for example if responding to a UK budget change would ensure that our taxpayers can benefit from the reduction at the same time as taxpayers in England. Overall, I've considered carefully and accepted the key recommendations of the committee reports and I intend to make important amendments to the Bill as a result.
Moving to the recommendations that I'm not able to accept, I do intend to write in response to each of these following the debate. I consider that some of those recommendations would encroach on the fundamental aim of the legislation to provide an agile and flexible mechanism to respond at pace to external circumstances that affect our Welsh tax Acts. There are others to which I have responded in other ways; in particular, I set out to the Chair of the Finance Committee examples of how the power may be used for the Welsh tax Acts in relation to each of the four purpose tests, for example. In conclusion, Llywydd, I accept this Bill cannot and should not be seen as the final word on the architecture that we need to make changes to tax legislation. However, the proposals that I have set out today seek to ensure that we can deliver a pragmatic legislative solution for the current circumstances on our devolution journey while we grapple with these longer term questions. I urge Members to agree the general principles and the financial resolution of the Bill. Diolch.