Welsh rate of income tax “won’t be raised for the rest of the term”

(Title Image: HMRC via Twitter)

From this April, the Senedd has the power to vary income tax paid by people living in Wales (known as a Welsh Rate of Income Tax). Yesterday, the Conservatives demanded confirmation that Labour intends to stick to a key manifesto commitment from 2016.

The Motion

The Senedd:

  • Recognises the vital importance of attracting people, businesses and investment to Wales as a means of growing tax revenue in Wales.
  • Calls on the Welsh Government to commit to not raise the Welsh Rate of Income Tax for the remainder of the Fifth Assembly (2016-2021).

Tax devolution “belongs to us all”

Shadow Finance Minister, Nick Ramsay AM (Con, Monmouth), said the devolution of tax-varying powers will affect how people see the Senedd as well as how all parties in the Senedd develop policies as they’ll have to consider how their proposals affect people’s incomes and businesses for the first time.

He called for a competitive tax policy:

“How can we attract job creators, investors and entrepreneurs to Wales to set up new businesses, create new jobs and enrich our economy? Taxation can help us do all of this, but only if these new powers are used in the right way to attract support and nurture investment, rather than discouraging ambition and aspiration. Evidence shows that low-tax economies are more favourable to business start-ups, attract job creators, and can actually increase revenue because you’re encouraging greater economic activity. “
– Shadow Finance Minister, Nick Ramsay AM

He said Wales had to avoid a situation as in Scotland where increased taxes for the wealthy resulted in them leaving. He also wanted to use the debate to clear up any confusion over the Welsh Government’s plans for income tax this term.

Mohammad Asghar AM (Con, South Wales East) drew attention to comments of Mark Drakeford where he said he wouldn’t move away from Labour’s manifesto commitment “unless I’m compelled to do so”. Therefore, the Welsh Government can’t be trusted to keep its pledge.

Other AMs were concerned about the Senedd’s reputation if Labour reneged on their pledge, with tax changes often capturing the nation’s attention:

“Now, unlike me, some of my local party members disagree about these income tax powers coming to the Assembly because they simply don’t trust a Labour Government with them. And I try and persuade them that this is the rock on which the good ship Labour will finally be wrecked and the nation’s eyes will be opened, but they respond by saying that they’ll sink the whole of Wales in the process and, because people don’t distinguish between the Executive and us, the Assembly’s reputation with it.”
– Suzy Davies AM (Con, South Wales West)

Thinking creatively

Plaid Cymru broadly supported the sentiment of the motion but wanted to expand upon it, tabling an amendment which would express support for indigenous businesses. They didn’t believe though that now the Senedd has these powers it shouldn’t use them:

“….we can’t agree to support clause 2 of the motion, not because we as a party at the moment wish to increase income tax – we haven’t come to decisions on that as of yet – but because we think that insisting that the Government doesn’t use those powers sets quite an unfortunate precedent at the beginning of this period, as we adopt taxation powers for the very first time.”
– Rhun ap Iorwerth AM (Plaid, Ynys Môn)

Alun Davies AM (Lab, Blaenau Gwent) didn’t agree that getting people to move here to save on tax bills would send out the right message about commitments to public services.

“It isn’t good enough to say, ‘As a Welsh Government, we want to spend more money on the health service, on local government, on education or whatever it happens to be. We have a power to raise that money, but we declined to use that power, but we still want to spend more.’ That is no longer an adequate response to the challenges we face, and the challenges we face are greater than I think some people understand and realise.”
– Alun Davies AM

“No plans” to change income tax

Finance Minister, Rebecca Evans (Lab, Gower), said the Welsh Government wanted to use taxes to help its strategic objectives – they won’t be introduced, raised or lowered without a clear policy reason.

Events in light of Brexit will be monitored closely, but the Minister confirmed what the Tories wanted to hear:

“I have no plans to change income tax during this Assembly. It would be naïve, however, to say we would never raise taxes in Wales. There may be circumstances in the future in which there is a compelling case for fair, progressive change in Welsh taxes to provide the funding needed to continue to deliver the public services that people in Wales want.”
– Finance Minister & Trefnydd, Rebecca Evans

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