Welsh finance secretary pledges greater certainty with draft budget

3 Oct 17

Welsh finance secretary Mark Drakeford today issued his draft budget for next year, pledging greater certainty for public services amid ongoing austerity.

The draft budget is the first to be accompanied by Wales’ new tax-raising powers, which take effect from April 2018.

Two-year revenue plans have been published for 2018-19 and 2019-20 to try and provide stability for local government and the health service. Alongside this, three-year capital plans, worth almost £5bn, have been published.

“Rather than just setting out our revenue and capital spending priorities, this draft Budget is the first to outline the decisions we have taken to raise a proportion of our own revenue to support public services,” Drakeford said.

He criticised the UK government’s “flawed policy” of austerity, which was putting Welsh spending under continued pressure.

By the end of the current decade, the Welsh budget will have been cut by £1.2bn in real terms, or 7%, since 2010, the finance minister said.

“On top of this, the UK government’s £3.5bn of unallocated cuts to public spending for 2019-20 continue to cast a shadow over our plans for the future – this could mean a further cut of up to £175m to the Welsh budget depending on where the unallocated cuts fall,” he added.

The budget included an additional £230m for NHS Wales next year and a further £220m for 2019-20, protection for social care and education spending, £70m over two years for child care and an extra £10m to tackle homelessness each year.

On capital spending, it included £340m out of the £1.4bn already pledged for the construction of 20,000 more affordable homes, £40m for schools and an

extra £90m for NHS capital projects.

Drakeford also unveiled the rates for the two new devolved taxes ¬– land transaction tax (LTT) and landfill disposals tax (LDT). These will replace stamp duty land tax and landfill tax from next April.

Residential rates for LTT will see average first-time buyers pay no tax at all and those purchasing properties up to £400,000 will pay the same or less than they do under the stamp duty land tax regime.

For properties between £400,00 and £750,000, a tax of 7.5% of the purchase price will be levied. This will rise to 10% for properties between £750,000 and £1.5m and the top rate is 12% for properties valued at over £1.5m

Wales will have the lowest starting rate of tax for the purchase of business premises in the UK, the finance minister said.

All businesses buying premises valued up to £1.1m will either pay no tax or up to £1,000 less tax than under stamp duty land tax.

On LDT, the standard and lower rates will remain the same as landfill tax for two years, but a new unauthorised disposals rate will be introduced, set at 150% of the standard rate.

Drakeford said: “The devolution of tax powers provides us with the opportunity to reshape and make changes to improve existing taxes to better meet Wales’ needs and priorities.

“These new progressive rates and bands for land transaction tax and landfill disposals tax will make a real difference to people’s lives; help change behaviours and deliver improvements to communities across Wales. We are being bold but balanced and leading the way in creating a fair and progressive tax system.”

Ideas are also being explored for four new taxes for Wales. These are:

•          a vacant land tax;

•          a disposable plastic tax;

•          a tourism tax

•          a levy to support social care.

  • Vivienne Russell

    Vivienne Russell is managing editor of Public Finance magazine and publicfinance.co.uk

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