7. What consideration has the Minister given to revising tax policy due to the cost-of-living crisis? OQ58603

The Welsh Government is committed to supporting the most vulnerable through this cost-of-living crisis using our fiscal and policy levers. As part of the budget process, I will consider how we can continue to support our most vulnerable people through the cost-of-living crisis.

Diolch yn fawr, Gweinidog. Our friends in Scotland have greater levers than us to use. They have a progressive income tax system, introduced by the SNP Scottish Government, which ensures that those on lower income pay less tax than elsewhere in the United Kingdom, supporting stronger public services whilst also safeguarding those on lower incomes; a fairer tax system where those with the broadest shoulders are taking most of the weight. I hope, Minister, that you will raise this with your counterparts, with the shadow Cabinet at Westminster, so that Wales will also have the powers to vary the tax bands. Would the Minister agree with me that we shouldn't be left behind by our Scottish friends as they create a fairer nation up there?

Well, it is the case that we have a different system, and, of course, our system was only agreed in 2016. We've only been collecting Welsh rates of income tax for a couple of years, so it is important, I think, at least in this first instance, to let the system bed in, but also, I think, to understand what the implications would be of us having a more progressive, as you say, banding system. So, it's an interesting discussion that we should be having, whilst also considering what the implications would be for our overall tax take here in Wales and what options might be available to us. So, you know, there is work going on in terms of considering the future of the United Kingdom, including fiscal levers, and I think that that plays in well to those particular discussions.

Building on the tax powers that you have, finance Minister, are you in a position this afternoon to inform us, for every penny that you might seek to raise, if that was your advice to Cabinet at the budget-setting period, how much extra money would come into the Welsh Government coffers in the 45p and 40p threshold, and, conversely, every penny you might take off, what that would lose to the Treasury here in Wales? And, any behavioural concepts that you might have modelled into your advice to Cabinet, would you make that available so that Members are in possession of the full facts when considering the tax powers?

Well, Llywydd, we do have the Welsh rates of income tax ready reckoner, which was published in 2021, so it's there for all colleagues to be looking at and using. It's available on the Welsh Government's website, and that does show the effects of changes to the Welsh rates of devolved income tax revenue. So, you're able to play around with it and look at different things. But, just for clarity, the basic rate of income tax for next year, if we were to raise or lower it by 1p, that would have an impact of £220 million; for the higher rate, it would be £33 million; and the additional rate, £5 million. And, of course, there will potentially be behavioural impacts. We don't have a very clear view of what the behavioural impacts would be; those behavioural impacts, I think, would probably only come into play in the additional rate, in any case, because those people tend to be people who are potentially more mobile and who would have different options in terms of structuring their tax affairs. But, of course, I know that the former Finance Committee did an interesting piece of work that did look at the potential of people moving across borders to avoid an increase in additional rates of income tax. So, all of that information is available, and I do commend the ready reckoner to colleagues who want to find out a bit more about what the implications of different choices might be. But, I should say that any choice that we make will be announced alongside our draft budget on 13 December.