Written Statement - Funding reform - continuing progress and the challenges ahead

We remain on target to implement the new Welsh devolved taxes in April 2018, and to put our fiscal arrangements on a sustainable footing for the long-term.

Last Thursday, the Finance Committee completed its Stage 2 scrutiny of the Tax Collection and Management (Wales) Bill, which will provide the powers for us to establish our devolved tax arrangements, including the Welsh Revenue Authority.  Subject to the Assembly's further consideration, the Bill remains on course to become an Act before the Assembly dissolves.  Work is also underway to ensure that the next Welsh Government will be ready to introduce two further Bills, early in the next Assembly, to put in place the Land Transaction Tax and Landfill Disposals Tax.  I welcome the constructive engagement we have received from the Finance Committee and a range of stakeholders across Wales in developing our proposals for devolved taxation, and I hope that this collaborative approach can continue as we move forward.

We are making good progress in all areas that are within our powers.

However fiscal devolution is not something we can accomplish on our own.  The UK Government still needs to play its part and demonstrate the same commitment as is being shown here in Wales.  In particular we need to reach agreement with the UK Government on the fiscal framework which will underpin our future funding arrangements for the long term.  This framework will need to set out how much the block grant will be reduced in return for the devolved tax revenue, define precisely the methodology for calculating the funding floor, and clarify the process for reviewing the floor to ensure that Wales will continue to be funded fairly.  I will continue in constructive dialogue with the Chief Secretary to the Treasury to find the right solution on those important issues.

Until a fiscal framework is agreed that is fair to Wales and provides long term clarity about fiscal arrangements, we will not be in a position to consider the opportunity for more significant tax devolution which is offered by the powers over income tax provided by the Wales Act 2014.
We still await the UK Government's decision on the devolution of Air Passenger Duty (APD) - more than three years since the Silk Commission recommended devolution and almost a year after the Secretary of State's St. David's Day commitment to consider the case for Wales.  It is totally unacceptable for the UK Government to devolve APD to Scotland and Northern Ireland but not to Wales.  At the very least we should have devolution of direct long haul flights, as has already happened in Northern Ireland.

Over the coming weeks I hope that we will make progress with the UK Government on the next phase of this important agenda as we seek to take forward the ambitions of the Welsh Government and the National Assembly for Wales, in line with the cross-Party Silk Commission’s recommendations.