8. What assessment has the Welsh Government made of the impact of the devolution of setting income tax thresholds to Wales? OQ58797

Devolution of the income tax thresholds would introduce opportunities and risks, and we would want to consider this as part of our wider strategy for devolved taxes. We need the UK Government to engage with us to review the process for securing the devolution of further tax powers to Wales.

Thank you for that. Of course, it's devolved to Scotland. That allows them to create thresholds that better reflect the profile of taxpayers in Scotland. And if you look at the taxpayer profile in Wales, of course, the vast majority of them are in the basic rate band, which is different, if you look at the figures, to the rest of the UK, in terms of the ratio of taxpayers, which then means, of course, that being forced to adopt Westminster's thresholds means that it doesn't reflect the needs and the situation here in Wales. It's, therefore, more regressive than it should be and, therefore, I want a clear message that you're keen for it to be devolved so that we can create thresholds that are more progressive and more reflective of the situation of incomes here in Wales. And may I ask whether you as a Government have considered carrying out any research or modelling to see what the possible options would be as part of making the case for the devolution of this area?

I was pleased to see the Member at our tax conference, which took place last week. I hope that he enjoyed it as much as I did. I think one of the really interesting sessions was with representatives from Scotland and Northern Ireland, where they considered the different risks and opportunities of the different fiscal frameworks that we have.

The devolution of the thresholds would allow us to have more policy flexibility, and it would enable us to determine our own approach to Welsh rates of income tax in a different way, recognising income distribution in Wales and the importance of a more progressive system, where those who are able to afford it pay more tax. However, it would be difficult to devolve the thresholds without devolving the whole of the tax base. I think that that would then, potentially, increase greatly our exposure to risk via revenues and the associated block grant adjustment. I think that we need to be very careful that we have the capacity and the flexibility to manage those kinds of risks. We only have to look at the experience in Scotland to see that the exposure to the whole of the tax base can really lead to some budgetary issues. Remember that black hole that we talked about a few years ago when the reconciliation was taking place in terms of the projected tax take and what actually was received? So, there are potential risks.

It is true though to say that our tax base does differ from England's. We do have that higher proportion of basic rate taxpayers. Pay is also lower here in Wales. For full-time employees, the median weekly pay in April 2022 was 94 per cent of the UK average. I think that we'd need to consider all of those factors in relation to the suggestion to devolve the thresholds, because there would be considerable risks that come alongside that. Also, as I said at the tax conference, devolution of Welsh rates of income tax itself is a fairly new thing. We've only been collecting it for a couple of years. I think that letting it bed in whilst also exploring what the future looks like would be the sensible way forward, and there's a role for the commission to look at that.

A point of order arising from questions—Alun Davies.

I'm grateful to you, Presiding Officer, for accepting this. The Minister, in providing a very good and full answer to my earlier question, referred to another Member, Cefin Campbell, in terms of delivering an executive role within the Government. We all understand the co-operation agreement, and as Members will know, I fully support the co-operation agreement. However, Members in this Chamber have no opportunity to scrutinise the Members of Plaid Cymru who form a part of this, and no opportunity to understand the role that is played. Our opportunity to provide the scrutiny of the agreement and the policies derived from that agreement is therefore limited. I'd like to ask you, Presiding Officer, whether you can take a review of this situation, because we're going to be marking a year of the co-operation agreement this week, to ensure that Members on all sides of this Chamber are able to scrutinise all aspects of the Government's work.

I'll consider the point that's been raised by the Member. The Minister, of course, is here to be scrutinised on all matters within her portfolio, which includes the operation of the co-operation agreement, but I'll give some further consideration to the points that the Member has made in light of the fact that it is a year of operation of the co-operation agreement. We do know, of course, that it is the subject of scrutiny as well in the First Minister's scrutiny committee next week. So, it's an opportune time to be reflecting on these matters. Thank you to the Minister for her scrutiny this afternoon.