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Income tax powers for Wales set to come in 2019 Income tax powers for Wales set to come in 2019
(35 minutes later)
Income tax rates in Wales could be varied from April 2019 as part of a deal with the UK Treasury.Income tax rates in Wales could be varied from April 2019 as part of a deal with the UK Treasury.
It is the first time a date has been indicated for the transfer of powers, which will not require a referendum.
In addition, the amount the Welsh Government can borrow for capital spending - funding for building and infrastructure - will double to £1bn.In addition, the amount the Welsh Government can borrow for capital spending - funding for building and infrastructure - will double to £1bn.
It follows an agreement on how the Welsh budget will be adjusted to take account of tax powers. Finance Secretary Mark Drakeford said agreement on the fiscal framework guaranteed "fair funding" for Wales.
The deal also paves the way towards the transfer of other powers, including over energy and water, included in the Wales Bill. Welsh Secretary Alun Cairns hailed the deal as a "significant milestone in the Welsh devolution journey".
First Minister Carwyn Jones has said the assembly should not consent to the bill before an agreement on the budget deal. It follows negotiations over how the Welsh budget will be adjusted to take account of the transfer of some responsibility for tax raising.
Known as the fiscal framework, it ensures "fair funding", Finance Secretary Mark Drakeford said on Monday. 'Undue risks'
The Welsh Government has already been granted 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.
It is also 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, and will no longer require a referendum.
"I am pleased we have been able to reach agreement about a new fiscal framework which puts our funding on a stable and long-term footing," Mr Drakeford said, as the deal was announced on Monday.
"This is an agreement which is fair to Wales and the rest of the UK.
"It ensures fair funding for Wales for the long-term, something we have consistently made the case for and builds on the work of the Holtham Commission and the cross-party Silk Commission.
"This package of measures paves the way for partial income tax devolution in Wales.
"But crucially it protects our budget from the range of undue risks that could arise following the devolution of tax powers from 2018 and provides additional flexibility to manage our resources."
Reflecting needs
Tax devolution will give Welsh ministers powers over about 20% of the money they have available to spend on public services.Tax devolution will give Welsh ministers powers over about 20% of the money they have available to spend on public services.
But most of their budget will continue to come in an annual block grant from the Treasury. But most of their budget - currently around £15bn a year - will continue to come in an annual block grant from the Treasury.
Included in the details of the framework is a new way to calculate changes to that grant which is designed to reflect Wales' needs.Included in the details of the framework is a new way to calculate changes to that grant which is designed to reflect Wales' needs.
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.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.
Instead, there will be new protections for the Welsh budget within the Barnett formula.Instead, there will be new protections for the Welsh budget within the Barnett formula.
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. Mr Cairns said: "Agreement on the fiscal framework is a significant milestone in the Welsh devolution journey.
It is also be responsible for business rates and council tax. "It lies at the heart of the Wales Bill's determination to provide secure long-term funding for the Welsh Government and give Cardiff Bay greater visibility when looking at spending decisions.
The income tax powers would allow ministers to cut or raise rates by 10p within each tax band. "We have worked hard to arrive at a deal to provide the Welsh Government with a clear financial structure with which it can push on with improving the Welsh economy.
"This framework underlines the mature relationship between Westminster and Cardiff as we move closer to agreeing a lasting settlement for the people of Wales."
The agreement on funding also paves the way towards the transfer of other powers, including over energy and water, included in the Wales Bill.
First Minister Carwyn Jones has said the assembly should not consent to the bill before an agreement on the budget deal.