Welsh Government draft budget – Wales must be ready for income tax powers

​Wales must be fully prepared to raise revenue from income tax according to the National Assembly’s Finance Committee.

For the first time, almost a fifth of the Welsh Government’s total budget, around £2 billion, will be generated from a Welsh rate of income tax.

The Committee wants assurances budget forecasts are as accurate as possible. It wants the Welsh Government to learn lessons from Scotland where revenue has been overestimated in the past.

The Committee also wants to see close monitoring of the number of Welsh income tax payers. Currently, there is uncertainty over the status of the 100,000 people who cross the border between England and Wales to work.

“Having a Welsh rate of income tax is an exciting moment in our history,” said Llyr Gruffydd AM, Chair of the Finance Committee.

“It is proof we are maturing as a devolved nation and taking more control over our own budgets and mechanisms for raising revenue.

“We must be fully prepared for this major change when the time comes, learning the lessons from other nations, developing accurate forecasts and closely monitoring the number of Welsh tax payers.”

The Welsh Government budget is worth more than £16 billion pounds per year and is used to fund Welsh hospitals, social services, schools, the transport network and local authorities, among other things.

The draft budget is also examined by the Assembly’s policy and scrutiny committees which are charged with looking closely at the different devolved powers in Wales.

The Climate Change, Environment and Rural Affairs Committee says Brexit will have a huge impact on farmers in Wales and is very concerned by what appears to be the lack of preparatory work for a replacement funding programme for the Common Agricultural Policy.

EU support for UK farmers will end following Brexit but Welsh Government proposals for new schemes have been seriously criticised by Welsh farming unions. The transition to new payment schemes will begin in 2021. However, there is no additional money in the 2019-20 draft budget for modelling, piloting or for providing advice to farmers in advance of that transition.

The Committee is unconvinced this can be addressed through existing budgets.

The Equality, Local Government and Communities Committee welcomed the announcement of additional funding to provide local authorities with a cash flat settlement, and to raise the funding floor to 0.5%, but acknowledges that in real-terms local government is still facing a funding reduction.

It’s also calling for the Welsh Government to commit to provide funding to reduce youth homelessness in future budget rounds.

The Children, Young People and Education Committee highlights growing concerns about school funding in Wales. The Committee welcomes the fact that, since the draft budget’s publication, funding arising as a result of UK budget announcements has been allocated to local authorities to meet the cost pressures of implementing the school teachers’ pay award.

The Committee calls for more detail on this announcement and for assurances that the overall level of funding available for education will be sufficient.

The Health, Social Care and Sport Committee was told by the Cabinet Secretary for Health and Social Services that service transformation must become a mainstream activity for health and social care organisations and confirmed it will be their core funding which will/should be used to deliver change.

The Committee has deep concerns about whether the NHS and social care services will be able to achieve this, given the demand and cost pressures identified, and the continuing failure of most health boards to break even.

The Culture, Welsh Language and Communications Committee called for greater ambition from the Minister for the Welsh Language.  The Committee is concerned that the cash flat budget for the Welsh language portfolio is insufficient to achieve the ambitious target of 1 million speakers by 2050. 

It also called for greater clarity on when the new Welsh Language Bill will be presented during this Assembly. The Committee welcomed the improving financial health of CADW and awaits the announcement on a Football Museum and Contemporary Art Gallery with interest.  Members also endorsed a dispersed approach to the presentation of our sporting and artistic achievements.

The Economy, Infrastructure and Skills Committee raises questions about a lack of transparency around the operation of the £115 million apprenticeships programme. It asks for more detail on why EU Transition Fund money went to big companies, rather than training providers.

Draft budget reports have been published on the National Assembly website*. The debate on the Welsh Government’s draft budget will take place on Tuesday, 4 December.

*Due to the Cabinet Secretary for the Economy and Transport meeting the committee a week late because of unforeseen circumstances, the Economy, Infrastructure and Skills Committee will publish its report next week.

The issue of budget impact assessments was also considered by three Assembly committees as part of their examination of the Welsh Government’s draft budget.

The aim of budget impact assessments is to provide information about how the possible outcomes of financial decisions have been considered and measured, and how this has influenced final allocations of money to different areas.

In recent years there has been growing frustration from Assembly committees at the quality of budget impact assessments. The Finance Committee, Children, Young People and Education Committee (CYPE) and the Equality, Local Government and Communities Committee (ELGC) held a concurrent meeting to look at the issue more closely, taking evidence from the Children’s Commissioner for Wales, the Equality and Human Rights Commission, the Cabinet Secretary for Finance and the Leader of the House.

In a joint statement the Chairs of the three committees said:

“There have been repeated concerns by Assembly committees about the quality of Welsh Government draft budget impact assessments, and a lack of clear evidence of their influence on budgetary decisions. As a result, the Finance, CYPE and ELGC Committees met during this budget round to scrutinise the Welsh Government’s approach. The Committees intend to report jointly and make recommendations to improve the process, with a view to influencing future budgets and spending.”

The findings of the three committees will be published in the new year.

Read the full reports:

Finance Committee - Scrutiny of the Welsh Government Draft Budget 2019-20 (PDF, 1 MB)

Health, Social Care and Sport Committee Report on the Welsh Government Draft Budget 2019-20 (PDF, 850 KB)