Wales offered tax raising powers

Prime Minister David Cameron and Deputy Prime Minister Nick Clegg Prime Minister David Cameron and Deputy Prime Minister Nick Clegg arrive to give a news conference in Cardiff Bay

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The decision to offer the Welsh government some control of taxation has largely been welcomed following the announcement by Prime Minister David Cameron and Deputy PM Nick Clegg.

It follows a lengthy commission inquiry on devolving further powers to Wales.

Under the plans controls on stamp duty paid by house buyers and landfill tax would be devolved.

The way has also been paved for a referendum on control of some part of income tax.

Making the announcement in Cardiff Bay, the prime minister also said Wales would be given borrowing powers, allowing investment in major projects such as upgrading the M4 in Newport.

Political Reaction

First Minister, Carwyn Jones, said it was "an important day for Wales".

"We are now being treated like equals in the UK," he said.

Mr Jones said he did not expect the Welsh government to have the new powers until 2015

"This announcement today goes a long way to show devolution works and further strengthens the UK."

While Welsh Finance Minister Jane Hutt said it was a "step forward for a maturing democracy".

Welsh Secretary David Jones said the move showed a commitment to renew Wales' infrastructure.

The Conservative MP added: "These measures will make the assembly & the Welsh government more accountable to the people of Wales who elect them."

Labour's Shadow Welsh Secretary, Pontypridd MP Owen Smith, also backed the announcement: "Labour has repeatedly called on the government to give Wales borrowing powers, as proposed a year ago by the Silk Commission, so today's announcement is welcome."

Liberal Democrat leader in Wales Kirsty Williams said the move "should sharpen minds" in Cardiff Bay.

"Wales must have a proper functioning parliament with additional fiscal responsibilities to create a stronger economy and a fairer society," she said.

"I know that the Liberal Democrat side of the coalition is working hard to ensure that we achieve this aim.

"We want Wales to have further powers to drive forward Wales' economic development, creating jobs and prosperity for our people."

'Outstanding questions'

Plaid Cymru have also voiced guarded support for the announcement - but added: "We would have preferred them to have gone further".

The party's leader, Leanne Wood, said the issues surrounding income tax were crucial.

"We need powers over income tax to incentivise the Welsh government to create well-paid jobs, which will radically change the landscape," said the assembly member.

"This process needs to begin as soon as possible."

Ms Wood also said she remained disappointed that the UK government had not implemented all the recommendations in the Silk Commission report on devolution.

"There are many outstanding questions which will need to be addressed by the UK government in their fuller response," she added.

David Cameron and Welsh Secretary David Jones at the M4 outside Cardiff A new relief road for the M4 is one of the projects which could benefit from the new powers

Commission Chair Responds

The commission's chair, Paul Silk, said: "I am pleased that the UK government has today responded positively to our first report and as a commission we look forward to their full response later this year.

"Our cross-party report was agreed unanimously, endorsed by the National Assembly and warmly received by business and civil society in Wales.

"Together with the UK government's agreement on the use of the Welsh government's existing borrowing powers for key transport projects, today's announcement is an important step in bringing greater empowerment and responsibility to the National Assembly for Wales, which we believe is necessary for devolution in Wales.

Paul Silk gave his verdict after the announcement was made

"We made recommendations that we believed would strengthen Wales within the United Kingdom, and look forward to their implementation."

Presiding Officer of the National Assembly Rosemary Butler added: "The devolution of financial powers is unanimously supported by all parties in the assembly as a means of giving us more of the tools we need to improve the lives of people in communities across Wales."

Finance minister Jane Hutt paid tribute to the work of all political parties in the assembly for backing the reforms.

She added: "I would particularly like to thank the business community in Wales, whose overwhelming support for these reforms certainly strengthened the call for the new borrowing and tax powers."

Business Views

The announcement has also been broadly praised by the business leaders organisation, CBI Wales.

"This is a major day for Wales. To drive private sector growth, Wales needs modern and reliable road infrastructure and today's announcement will move the M4 relief road from blueprint to building," said CBI Wales director, Emma Watkins.

Start Quote

There is a danger that too much of the available funding could be swallowed up by the proposed M4 relief road”

End Quote Janet Jones, Federation of Small Businesses

"The M4 is the gateway to Wales, and this upgrade will bring clear benefits for both businesses and commuters, and enhance Wales' position on the global map."

But the CBI Wales director said she remained in favour of the status quo when it came to powers over income tax "in the absence of a full assessment of the costs and implications of devolving income tax".

The Federation of Small Businesses also backed the broader announcement, stating that FSB Wales has "consistently called for those recommendations to be implemented in full".

Pros and cons

But the FSB also voiced some concerns.

"There are many questions left unanswered by today's announcement, crucially over the full devolution of business rates to Wales," said the chair of FSB Wales' policy unit, Janet Jones.

"The full devolution of business rates would open the way for much-needed reform which would assist small firms and the wider Welsh economy."

Borrowing powers also came under FSB Wales scrutiny.

"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, added the policy unit's chair.

The Royal Institution of Chartered Surveyors (RICS) said it welcomed steps being taken to invest in infrastructure projects in Wales.

"There now needs to be a strategic plan for the long term infrastructure requirements of Wales," said a spokesperson.

"With this in mind, RICS welcomes investment to help prioritise the M4, which will provide critical support to the Welsh transport system and will help boost to the economy."

Rupert Joseland, regional director for developers St Modwen in Wales, said it was good news but added: "Putting up stamp duty would generate additional revenue for the economy but to stimulate more house building stamp duty would need to come down."

Although the South Wales Chamber of Commerce hoped the borrowing powers would lead to improvements on the M4, it warned that the tax raising powers should not be seen as a "cash cow" by the Welsh government.

Director Graham Morgan said: "We are pleased to see the Welsh and UK governments working together on something that could provide a real benefit to the Welsh economy.

"The devolution of these taxes enables the Welsh Government to borrow money which can play a major role in infrastructure projects such as the M4 relief road. We have, since 2010, highlighted the importance of this critical piece of infrastructure."

He said that businesses from Newport to Pembrokeshire were affected by congestion around the Brynglas Tunnels.

"This gives a very bad first impression of Wales, and needs to be addressed if we want to promote the country as a world class tourist destination," he said.

"The devolution of these taxes also opens up the options to able to pay for other infrastructure projects right across Wales, however, we would warn Welsh politicians against seeing these new powers as a convenient 'cash cow'.

"While many of the projects that could be paid for would benefit the economy, we need to be careful that taxes are not raised to the point that it has a negative effect on businesses."

Union reaction

The Wales TUC said devolution of more powers to the Welsh government would help "raise funds for investment in jobs and growth".

"There are many large scale infrastructure projects within the responsibility of the National Assembly, such as the M4 improvement, which the Welsh government have long wanted to progress - they now have the ability to do so," said Wales TUC general secretary, Martin Mansfield.

"The principle of devolving income tax is positive and we will play our full part in that debate when the people of Wales decide.

"However the overall financing of Wales must be properly resolved before this becomes a viable option. The outdated Barnett formula continues to short change us and must be modernised as a first step."

Margaret Thomas of Unison Wales added: "This is good news for Wales and for Welsh public services.

"Unison has long argued the case for the Welsh government to have additional tax raising abilities.

"Clearly these powers do not represent a silver-bullet for Wales and there are many other options that could be used alongside these powers, but we wholeheartedly welcome the news and look forward to seeing the outcomes."

Opposition

Potential investment in a new section of M4 motorway in the Newport area has not been universally welcomed.

The group, Campaign Against the Levels Motorway (Calm), said the spending was unnecessary.

"Quite frankly, we don't believe there is a case for a new road - but the government seems determined to build one," said Tom Clarke from Calm.

"So we favour a reasonable, viable alternative that enhances the existing road system around Newport.

He also argued that environmental cost of a new motorway section through part of the Gwent Levels wetlands was too high.

"The Gwent levels are nationally and internationally important. They are home to an astonishing array of wildlife and areas which wildlife organisations have identified for their importance on a landscape scale," he said.

"The route would cut through five Sites of Special Scientific Interest."

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