Finance Secretary Mark Drakeford has said the Welsh Government’s powers to adjust income tax rates are ‘unusable’ in their present form, and has launched a review to examine how Wales can create its own fiscal policy.
Speaking at a press conference, Drakeford said “we have had these powers now for over half a decade, and they never have been used. And in my view, they are unusable powers.
The former First Minister added “the Welsh Government has to take responsibility for raising money as well as spending it, and our income tax raising powers in Wales will raise over three billion pounds next year.
“But I think we need more flexibility in those powers to make them a genuine tool, a tool that you can actually use as part of that.
The Government of Wales Act 2017 gave the Welsh Government the ability to adjust the basic, higher or additional rates of income tax as set in England, but not the power to change the tax bands (i.e. who pays which rate).
Drakeford said he had met with the Scottish Finance Secretary Kate Forbes, who is able to adjust the tax brackets, to discuss the matter and that Forbes has offered to advise the Welsh Government on what powers could be granted.
Drakeford’s Labour colleague Jenny Rathbone had previously told CJS News that the proposed “higher income tax base in Wales is too low to consider greater fiscal change” like Scotland, adding that Scotland has more higher rate taxpayers than Wales.
Speaking in the Senedd chamber yesterday, Drakeford confirmed that the review would be conducted by an external panel of experts and would aim to publish its report ahead of the next Senedd election due in May 2026. Drakeford, 70, has announced his intention to retire from the Welsh Government and the Senedd at that election and says he hopes the policy will have a positive impact for the next government.
“I’d like to offer the incoming government a report that could allow them to have a more flexible and more usable set of powers than we have at the moment, and then it’ll be up to them to choose whether or not to use them.”
In response to the review, Conservative Finance spokesperson Sam Rowlands said in the Chamber that “people up and down Wales would be worried that the Labour Party would be seeking to hike up taxes, as they have done with the national insurance increases in Westminster and as they are doing with the inheritance tax for family farms as well.
“The record from Labour Governments for far too long is to increase taxes on people; particularly right now when people are in desperate need to have more cash in their pockets, it’s a real worry for them when a Labour Government here in Cardiff is seeking to expand its powers on taxation.