Acting in the best interests of Wales

Cabinet Secretary, can I welcome your statement today—and that’s not just paying lip service to it; as you know, I genuinely welcome the potential that this framework offers Wales and, indeed, the UK for the future. As you know, I’ve been a full supporter of a fiscal framework for some time now, and since it became clear that tax devolution was with us, was going to happen, and there was an overriding need for a new funding settlement, or at the very least an end or a restriction to the previous Barnett squeeze. So, it’s good news that the Treasury have agreed to a needs-based factor being set at 115 per cent; you mentioned the parameters that the Holtham commission referred to in your answer to Adam Price. That isn’t even at the bottom of those parameters, it’s within them, so that is set at a good level. Also, I recognise the transitional factor of 105 per cent, so, on the face of it at least, this does seem to be a good deal for the Welsh Government.

 

Key to tax devolution, as you said, is the appropriate adjustment to the block grant so that Wales is not penalised unnecessarily. That’s what this process is about, and, of course, the maxim that you and your predecessor, Jane Hutt, adhered to, that the Welsh Government should bear the responsibility for the fiscal decisions that the Welsh Government takes, but the UK Government should continue to carry its share of risk for the decisions it takes—not always an easy maxim to employ, but something that’s absolutely essential if we’re going to ensure a just and fair settlement for Wales in the future, and a just and fair taxation system.

 

So a few questions: firstly, can you reconfirm that this is a permanent agreement and is not subject to the whims of a future Government that may consider clawing back, or at the very least shaving off some of our additional funding? I think you mentioned £1 billion estimated over the first decade or so. What is the nature of that agreement? You’ve said previously that it is more permanent than the previous arrangement in the last UK Parliament—just how permanent is it? That’s very important. Can you give us some more detail on how the framework takes into account Wales’s circumstances, particularly our income tax base, which clearly has a lower percentage of higher rate taxpayers than the south-east of England, and, I think I’m right in saying, a small number of higher rate taxpayers who actually contribute proportionately more to the higher rate of tax within Wales than happens across the border in England?

 

You mentioned your intention to introduce Welsh rates of income tax from April 2019; clearly, a very important part of your statement today. Can I ask you, is it your intention to keep initial rates comparable with those in England, at least in the first few years? I know that in the case of other taxes—stamp duty, landfill tax—the Welsh Government has adhered to the maxim that, at least in the transitional period, things should be kept pretty much the same this side of the border as across the border to allow for consistency, and for people to adjust to the new regime. I don’t expect you to tell us what the new rates—you’re grinning, because obviously you wouldn’t do that, no finance Minister would—I’m not asking you what the rates would be. I’m just looking to see whether you’re going to employ a similar maxim with income tax as to the other taxes, or whether—[Interruption.] Well, you might be considering lower rates or higher rates. I’m not asking that, I’m asking: are you considering—in a roundabout way—a different method of employing those taxes? But I think you’ve not fallen my question, so I probably won’t get an answer to that, but I’d like to hear it at some point.

 

Population change has been mentioned in the document. We know that that was a key issue; it was particularly an issue for the Scottish negotiations with the Treasury. Wales is affected in a different way. Can you tell us a little bit more about how population change is factored into the equation so that changes in population growth over the next few decades, whatever they might be, do not adversely affect our budgets?

 

Turning to the new single Welsh reserve, on the face of it, this sounds a huge improvement—much simpler, much more straightforward. How will that reserve operate in practice? Is there going to be a cap on the reserve, a time limit, or will it provide maximum flexibility to the Welsh Government, which, clearly, along with the new borrowing powers, will, I imagine, become an extremely important tool in managing multi-year spending and financial planning?

 

Finally, I asked you last week about future dispute resolution between the Governments. Adam Price has asked you in detail about that, so I won’t bore the Chamber by continuing the process of mediation, other than to ask: you mentioned in your comments to the Finance Committee last week that you thought it would be important that there is a review process in place, and I think the Welsh Government can call one review in a yearly period, and the UK Government can as well. If you could tell us a little bit more about how that process would work and what happens if there is a surprise that befalls both Governments, and there is a need for an urgent review between those set times for a review to happen.

Finally, Deputy Presiding Officer—Cabinet Secretary, we welcome this statement, we welcome the new framework. It may not be perfect—very few things in life are—but it is head and shoulders above what we had before and it is setting a new framework for the future, which I think will be broadly welcomed. This is, as I said last week, a great example of what can be achieved when the Welsh and the UK Governments put their differences aside and work for what is, in the end, in the best interest of Wales.