Wales politics

Tax devolution budget shortfall warning for Wales

Houses Image copyright PA
Image caption Control of stamp duty on property sales passes to Wales in 2018

Wales could suffer a budget shortfall if devolved taxes do not make up for grant cuts, academics have warned.

Stamp duty would raise less money per head in Wales than the rest of the UK, the Wales Governance Centre claims.

The Cardiff University experts fear the UK Treasury could cut the block grant based on revenue predictions inflated by the London property market.

They have called for the figures to be adjusted to set Wales "a more realistic and achievable target".

Control of property and landfill taxes passes to Wales in April 2018, with the prospect of power over income tax rates to follow.

Until now, the Welsh Assembly and Welsh Government have largely been funded by a block grant from the UK Treasury.

Negotiations are due to begin in the autumn over how much the grant will be cut as Wales raises more of its own income.

Image copyright PA

On the subject of stamp duty, a Wales Governance Centre report said there was a "very significant difference" between revenues per head in Wales and the UK as a whole.

It claimed it could result in a "large negative impact" on the Welsh budget - about £50m a year - if the higher UK figure was taken as the benchmark for income.

Report author Ed Poole said changes to grant funding "exposes the Welsh Government to the deep-rooted differences in UK housing market conditions".

He added: "In many ways, the property market of London and south east England is detached to that of the rest of the UK and is heavily influenced by international factors totally outside the control of the Welsh Government.

"And that distinct nature of London's property market has further amplified since the UK's vote to leave the European Union.

"Excluding revenues from London and south east England from the adjustment calculations would still provide an incentive for the Welsh Government to grow the Welsh tax base, but with a more realistic and achievable target."

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