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Welsh budget funding deal with Treasury expected Income tax powers for Wales set to come in 2019
(about 2 hours later)
A new agreement on the funding the Welsh Government gets from the UK Treasury is expected to be announced. Income tax rates in Wales could be varied from April 2019 as part of a deal with the UK Treasury.
The deal will set out how the arrangements will work once new taxes are devolved to Cardiff Bay. It is the first time a date has been indicated for the transfer of powers, which will not require a referendum.
From April 2018 a Land Transaction Tax, replacing stamp duty, and a Landfill Tax will be collected by the Welsh Government. In addition, the amount the Welsh Government can borrow for capital spending - funding for building and infrastructure - will double to £1bn.
Measures are also in place for the partial devolution of income tax, though no timetable has been agreed. It follows an agreement on how the Welsh budget will be adjusted to take account of tax powers.
The deal is the culmination of discussions between UK and Welsh Government ministers and officials over the past three months. The deal also paves the way towards the transfer of other powers, including over energy and water, included in the Wales Bill.
The vast majority of funding for the Welsh Government's annual budget of around £15bn comes directly from the UK Treasury. First Minister Carwyn Jones has said the assembly should not consent to the bill before an agreement on the budget deal.
But this is likely to be reduced once the administration in Cardiff begins to levy and collect its own taxes. Known as the fiscal framework, it ensures "fair funding", Finance Secretary Mark Drakeford said on Monday.
In October, academics from Cardiff University and the Institute for Fiscal Studies warned that the Welsh Government could lose hundreds of millions of pounds if the deal did not take account of lower tax proceeds in Wales due to "substantially lower" incomes than other parts of the UK. Tax devolution will give Welsh ministers powers over about 20% of the money they have available to spend on public services.
Analysis by David Deans, BBC Wales political reporter But most of their budget will continue to come in an annual block grant from the Treasury.
We will not know for certain until later on Monday, but the negotiations between both governments appear to have been much less tortuous than those that went on with the Scottish Government. Included in the details of the framework is a new way to calculate changes to that grant which is designed to reflect Wales' needs.
A fiscal deal for Scotland was negotiated at the start of the year. Those changes are determined by the Barnett formula. This framework does not scrap the formula, which the Welsh Government has said leaves it short-changed.
But that was after the deadline for the deal was extended amid disagreements between the two sides. Instead, there will be new protections for the Welsh budget within the Barnett formula.
If that has happened here, neither the UK or Welsh Government have made it public, although the extent of the tax powers devolved to Scotland are much greater than those coming to Wales. The Welsh Government has already acquired powers over stamp duty - to be replaced by a Land Transaction Tax - and the tax on landfill sites, both of which will take effect in April 2018.
Given that Wales' Finance Secretary Mark Drakeford was predicting that a deal would be done by the start of 2017, it does seem to have been a smoother ride. It is also be responsible for business rates and council tax.
The income tax powers would allow ministers to cut or raise rates by 10p within each tax band.