The next item is item 7, the Land Transaction Tax (Tax Bands and Tax Rates) (Wales) (Amendment) Regulations 2022. I call on the Minister for finance to move the motion. Rebecca Evans.

Motion NDM8116 Lesley Griffiths

To propose that the Senedd, in accordance with Standing Order 27.5:

1. Approves The Land Transaction Tax (Tax Bands and Tax Rates) (Wales) (Amendment) Regulations 2022 laid in the Table Office on 7 October 2022.

Motion moved.

Diolch, Llywydd. I'm grateful to the Legislation, Justice and Constitution Committee and the Finance Committee for their reports. The regulations the Senedd is considering today are subject to the made affirmative procedure. In this case they came into force on 10 October, but, to have permanent effect, they must receive the Senedd's approval today.

On 27 September I set out the changes I'd be making to the land transaction rates and bands. These changes came into force on 10 October. If the UK Government had chosen to share its plans with us earlier, we might have been able to make these changes on the same day that they were announced, or even on the day of the UK's now infamous mini-budget. However, the UK Government's refusal to share information with us meant we were not able to respond as quickly as we would have liked, and homebuyers in Wales had to wait a few weeks to benefit from the changes that we made to LTT rates.

As I said in Plenary on 27 September, I was already considering changes to LTT rates and bands to reflect the increase in residential property prices that we've experienced, especially over the last two years. I had planned to make changes when we publish our draft budget in December, but I've brought forward those changes to give homebuyers and the housing market certainty.

The changes to LTT mean that the starting threshold has increased to £225,000—equivalent to a 25 per cent uplift. The effect of this now is that 60 per cent of residential property in Wales is below the new threshold, including many homes acquired by first-time buyers. This means that just under half of residential property transactions will pay no tax, and that's a higher proportion than in England. The rate of tax charged on the new first tax band has increased from 5 per cent to 6 per cent, and this means that homebuyers buying a home costing less than £345,000 will see a tax reduction of up to £1,575. For those properties costing more than that amount, there is a maximum increase in tax payable of £550, which will affect around 15 per cent of residential property purchases.

Transitional rules enable those taxpayers who had exchanged contracts before 10 October to pay the old rates, where that is beneficial. Crucially, and unlike the UK Government, tax reductions were not provided to those liable to the higher residential rates of LTT, including those buying second homes, short-term holiday lets, or buy-to-let properties. The changes are forecast to cost £29 million in total for this year and the following two years combined. The net impact on the Welsh budget, due to the block grant adjustment provided by the changes to stamp duty land tax, is to increase our resources over that period by £45 million. I could have used the full amount of the block grant adjustment to further reduce the amount of tax collected. However, we are in a time of considerable economic uncertainty, including possible property price falls. It is also a time of incredible pressure on Government spending. I wanted to use this additional capacity for our spending commitments rather than providing tax reductions to some of our citizens who are most able to pay, and I ask Members to approve these regulations.

The Welsh Conservative group will be abstaining on these regulations. We are, of course, supportive of any measures to help hard-working people to buy their own home, particularly during these more difficult times, so I generally do welcome the steps that the Welsh Government have taken today. However, as is the group's long-standing position, we believe that the land transaction tax threshold could be increased further. We believe that there is a need for us to provide additional support in Wales at the present time, as house prices continue to be very high. According to the Principality Building Society, the average house price in Wales hit a record high in the third quarter of this year to just over £245,000. This was an annual rise of over 12 per cent. Here in Cardiff, for example, the average price is almost £300,000. So, increasing the point at which people pay land transaction tax could be brought more in line with the average house price, say around £250,000, to provide relief to more people, as well as recognising increasing house prices in Wales at the present moment.

Although outside of the regulations, I do believe that we could be more creative when it comes to using land transaction tax to help rather than hinder home owners, such as by reducing or abolishing the rate for first-time buyers and offering a discount to home owners who make energy improvements to the property. Thank you, Llywydd.

We will be supporting these regulations. We feel that they are acceptable rates. It's quite right that Welsh needs are reflected in this way, very different to other parts of the UK, of course. That's the purpose of devolution. It is disappointing, as the Minister highlighted, that there hasn't been co-operation from the side of the UK Government in preparing for these changes. It raises the question whether we will face doing this again after 17 November. Perhaps the Minister can tell us if there have been any discussions that have happened or will happen in the context of what will be announced by the Chancellor in Westminster on that day.

We of course welcome the fact that there are higher rates for certain types of properties. We also acknowledge, of course, that raising the threshold, as the Conservative spokesperson mentioned, is something that we would all like to see happening, but there is a balance that needs to be struck between protecting sources of revenue, particularly in the context of the cuts coming from Westminster. You can't have your cake and eat it—I'm not clear if it works in Welsh, but I'm sure that you're getting the gist.

The only other point that I would make, of course, is to look at the bigger picture. Suggestions have been made on making more creative use of the land transaction tax in trying to encourage the delivery of policy here too. I'm thinking specifically of the suggestion that there should be reductions on this tax on properties that are either improved in terms of being energy efficient before their sale, or perhaps in the year or two after their sale, and that individuals who deliver that could be given some kind of repayment or reduction, because that's the time, of course, when people do invest in works on their homes, and I do think that this tax could work harder in encouraging people to retrofit their homes, and, of course, there would be recognition of that in that the tax was used to encourage it. Thank you.

And now the Minister for finance to reply to those comments—Rebecca Evans.

Thank you. I'm grateful to both Peter Fox and Llyr Gruffydd for their comments this afternoon. And in terms of the first contribution, the changes to LTT do mean now that the starting rate is increased to £225,000, and as I say, that's equivalent to a 25 per cent uplift on the previous level, and that does more than make up for the increase in property prices that we've seen since we last set those levels. And as I said, the effect now is that 60 per cent of residential property in Wales is below that new threshold, and that does, of course, include many properties acquired by first-time buyers, and just under half of residential property transactions will pay no tax at all, and that, as I mentioned in my opening remarks, is a higher proportion than across the border. I do think that Llyr Gruffydd really hit the nail on the head in the sense that we have to balance between supporting home owners, but also investing in public services, and I think that the regulations before us today do strike that balance quite appropriately.

We haven't had any notification, as you would imagine, in terms of what might be in store for us on 17 November, when the Chancellor makes his next statement. But there's absolutely no reason why the UK Government couldn't be sharing, in confidence, at least, their thinking with us. We were in a very fortunate position in terms of being able to respond quickly, because over the summer, we had been doing a great deal of modelling and costing of policy options in advance of potentially making changes alongside the draft budget. So, in that sense, the work was done and so we were in a good position to respond very quickly. But it did mean that we couldn't respond on the day, and make those announcements and make those benefits available to people immediately, and I know that, inevitably, there's some frustration then for people who are caught in that period between, although we did put those transitional arrangements in place for people who had completed, to try and be fair to those people.

In terms of the other ways in which we can use land transaction tax, we're always thinking about what more we could be doing with that tax. Ultimately, LTT is one of the taxes for which its main purpose is revenue raising, and it does bring in significant amounts of funding to the Welsh Government. But I think it is important also to explore how we can potentially use all of our taxes for behaviour change in that context of climate change, which both colleagues have mentioned. And it's something that I am interested in exploring further as well.

So, thank you to all colleagues for their contributions to the debate. As I say, I think we've got the right balance between providing some reductions to taxes for those buying properties in the lower-to-middle part of our housing market, including most first-time buyers, and then also making sure that we raise additional revenue for essential public services by asking those who are purchasing more expensive properties to pay a little more in tax. And so, I commend the regulations to the Senedd.

The proposal is to agree the motion. Does any Member object? [Objection.] I will defer voting under this item until voting time.

Voting deferred until voting time.