Although plans for the transition are going well, significant challenges remain in forming detailed plans and delivering key projects, such as the formation of the Welsh Revenue Authority.
These findings were included in a report released today by the Wales Audit Office that assessed the Welsh Government’s general approach to the fiscal devolution process. Under the plans, Wales will take responsibility for raising an element of its own tax revenues for the first time in 800 years.
From 1 April 2018, taxation and borrowing powers will pass from the UK government to the National Assembly for Wales, as laid out in the Wales Act in 2014. The Act empowers the Welsh Government to legislate for taxes on the purchase or leasing of land and buildings and the disposal of waste to landfill for the first time.
The Act paves the way for the future devolution of an element of income tax-raising powers to the National Assembly. It also extends the circumstances in which Welsh Ministers can engage in short-term borrowing to manage the Welsh budget, and the Act also grants ministers new powers to borrow for capital expenditure.
Further to this, the Tax Collection and Management (Wales) Act 2016 established the foundations for a devolved tax regime for Wales. A key plank of this is the formation of the Welsh Revenue Authority, a new non-ministerial government department.
The auditor concluded that the fiscal reform agenda was “well structured, has been appropriately resourced, and is making generally good progress,” with the assistance of sufficiently experienced and skilled staff.
The Welsh Government has also made good progress so far in developing the legislative and tax framework for the devolved powers. However, auditors identified a potential challenge in agreeing a timely fiscal framework, “striking the balance between preparing forecasts as late as possible to ensure accuracy,” and allowing adequate time for the Welsh Assembly to scrutinise the 2018-19 budget.
Implementation of the Welsh Revenue Authority has been well structured and well-staffed, although the auditor said the project would require “careful management” in the coming months. The Welsh Government estimates that the costs of the resources needed to set up the agency are in line with initial predictions. however, ensuring the right resources are in place at the right time remains “a key challenge”.
Commenting on the report, the auditor general for Wales, Huw Vaughan Thomas, underlined the “huge significance” of the transfer of tax and borrowing powers to Wales.
He said: “Handling this transfer effectively is crucial if the next phase of devolution is to be smooth and a success.”
While “significant challenges remain”, Thomas added, he was “encouraged… to see that preparations are on track”.
Meanwhile, applications for the chair and members of the Welsh Revenue Authority have opened and are set to close early in the new year.
“The chair and non-executive members will be critical in ensuring the WRA has the capability to collect tax revenues to fund our public services while making sure this is done to the highest possible standards,” said finance secretary Mark Drakeford.
“The WRA will need to establish itself quickly. I see it as a confident and professional organisation, expert in what it does and providing a service tailored to the needs of Wales.
“I would encourage anyone who believes they have the necessary experience, qualities and skills to apply for these positions.”
