Wales is to vote in a referendum on new financial powers to control income tax, David Cameron and Nick Clegg have announced.
The Prime Minister and Deputy Prime Minister made the announcement at the Welsh Assembly on Friday following a meeting with First Minister Carwyn Jones.
Wales would also be given a new ability to borrow money and control over stamp duty revenues, as part of the package of measures giving more responsibility to Cardiff Bay.
The Prime Minister also announced that the M4 is to be upgraded around Cardiff.
Mr Cameron said:“As our economy turns a corner, we must make sure that people in Wales share in the rewards. Wales needs more businesses creating jobs, a decent road network to make it easier compete in the tough global race and lower taxes so hardworking people have more money in their pocket at the end of the week.
“That’s why we’re cutting tax for over 1.1million people in Wales making the average taxpayer £700 better off. Its why we are ensuring that plans to upgrade the M4 around Cardiff can go ahead, easing congestion and creating jobs. And it’s why we are setting out plans to give the Welsh Government more powers to make the most of the talents of its people and businesses and deliver the growth Wales needs.”
Deputy Prime Minister Nick Clegg said: “This is a huge moment for Wales – the next milestone in Welsh devolution and the next step forward in Britain’s economic recovery. I’ve always believed that the only way to let different parts of the UK make progress in their own way is to truly devolve powers.
“Central government is putting its money where its mouth is. Today’s unprecedented transfer of powers to Wales means much greater freedom over the money raised here. Very simply, Westminster is letting go so that Welsh people can benefit from a boost in jobs, transport, homes and, potentially, cut people’s income tax bills too.
“Our economic recovery must be shared and it must have Wales at it’s heart. But that means putting the Welsh people firmly in the driving seat – and that’s what today is all about.”
Arrangements are to be put in place to enable the Welsh Government to fund upgrades to the key routes on the trans-European road network – the M4 in South Wales and the A55 in North Wales.
It will do so by a combination of extending existing borrowing powers and by devolving other tax and borrowing powers recommended in the Silk Commission’s first report.
Use of the existing borrowing powers will enable badly-needed improvements to the M4 to get underway as soon as possible.
The Wales Office statement confirms that:
• Welsh Ministers are to be given borrowing powers, so that they can borrow money to invest in Wales;
• Landfill Tax and Stamp Duty Land Tax in Wales will be devolved, as the Silk Commission recommended, ensuring the Welsh Government has an independent funding stream to pay back the money it borrows.
• A referendum will take place so that the people of Wales can decide whether some of their income tax should be devolved to the Welsh Government, in the same way as it is in Scotland.
The National Assembly of Wales’ Presiding Officer Rosemary Butler welcomed the announcement but said the new powers would bring extra responsibility for Assembly Members.
She said: “I look forward to considering the UK Government’s response in more detail and the implications for the Assembly’s procedures and processes. However, it is clear to me that this brings with it added responsibility for Members.
“I have already stated, in my submission to the Silk Commission, that I believe we need to increase the number of Assembly Members from 60 to 80 in order to reflect the change in the Assembly’s responsibilities and our increasing workload since the Assembly received enhanced powers following the Yes vote in the 2011 referendum.
“This announcement today reaffirms, in my view, the need for an Assembly with greater capacity and with more AMs to robustly scrutinise the Welsh Government on what will be important and difficult decisions around Welsh taxation and borrowing.”
Federation of Small Businesses Welsh Policy Unit Chair Janet Jones also welcomed the announcement but said there were still unanswered questions.
She said: “FSB Wales believes the devolution of business rates is essential given that small businesses here currently face the most onerous business rates regime in the whole of the UK. The full devolution of business rates would open the way for much-needed reform which would assist small firms and the wider Welsh economy.
“There is also a lack of clarity about the level of borrowing powers that would be available to Wales in line with today’s announcement. While the devolution of borrowing powers is undoubtedly welcome, we remain concerned that there is a danger that too much of the available funding could be swallowed up by the proposed M4 relief road, leaving little for vital infrastructure investment in other parts of Wales.”
I do not like the sound of this. It seems like a dangerous step forward. How exactly will these new powers work?
Borrowing Powers – What happens if Wales borrows an amount but then starts to default on its payments. Does the UK government step into help or do the Welsh people suffer?
Landfill Tax and Stamp Duty Land Tax – Surely this is silly as if Wales decides to increase stamp duty or land tax you could encourage people across the border to England. Looking at the Socialist idea held by many AM's and increase in stamp duty tax for the wealthy will drive them away. It would need to be a UK wide increase as they're more unlikely to emigrate than they are to move down the road.
Should a proportion of income tax be devoted to the Welsh government – What proportion would this be?
Will Wales be worse off? If the Welsh Government keeps a proportion of Welsh income tax, the money received from the UK government will be cut as Wales will be giving less to Westminster so will receive less from them in return. What if the reductions from Westminster were more than the income tax received by the Welsh Government?
One of the biggest needs (to set our own APD) has not been given. Cardiff will remain to be at a competitive disadvantage against Bristol. Wales needs to scrap APD to encourage more people to fly from Cardiff.
I agree with Dean. This seems like one step closer god evolution. It's Plaid getting their own way when they are not even in power at Cardiff Bay or Westminster.
I for one will vote against handing more powers to Labour down in Cardiff Bay. If such a transfer goes ahead, Wales will be taken to the doghouse and will be in a worse state than it currently is in.
The problem with Wales is that we have nothing. We have coal and that is great and yes it will boost the economy but it will not be large enough to run Wales and will not be sustainable. We need more types of manufacturing and need a greater focus on science and technology. Why can't Wales invest in a company similar to ARM Technology?
Beware of politicians asking for borrowing powers they do not yet possess. They borrow the money, you will pay it back!