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Tax-varying powers call for Wales Tax powers calls made for Wales
(40 minutes later)
Gerald Holtham says the funding system should be based on needGerald Holtham says the funding system should be based on need
Wales should have the power to vary income tax levels to become more accountable for its spending, an inquiry has said.Wales should have the power to vary income tax levels to become more accountable for its spending, an inquiry has said.
The Holtham Commission into how Wales is funded said part of a Treasury block grant should be replaced with revenue raised from Welsh taxpayers.The Holtham Commission into how Wales is funded said part of a Treasury block grant should be replaced with revenue raised from Welsh taxpayers.
The commission wants ministers to be able to vary the basic and higher rates of income tax by up to 3p in the pound.The commission wants ministers to be able to vary the basic and higher rates of income tax by up to 3p in the pound.
The Welsh Assembly Government and political parties welcome the report.The Welsh Assembly Government and political parties welcome the report.
The assembly government's annual budget of nearly £16bn is calculated via the Barnett formula, which is based on spending in England on areas including health and education. Currently, the assembly government's annual budget of nearly £16bn is calculated via the Barnett formula, which is based on spending in England on areas including health and education.
A previous report from the commission last year said Wales was losing out under the population-based formula and would be better off if it was funded on the basis of need. A previous report from the commission last year said Wales was losing out under the population-based formula and would be better off if funding was based on need.
Delivering its final report to the assembly government, the commission said a "vital discipline" on Tax allowances
Assembly Government spending was missing. The second report suggests half of each income tax band is devolved, with the ability to vary each rate separately.
Explaining the title of his group's findings - Fairness and Accountability - But the power over tax allowances and thresholds should, the independent report says, remain with the UK government.
Commission chairman Gerry Holtham said: "We think the present funding regime is Delivering the second report to the assembly government, commission chairman Gerald Holtham said its watchwords were "fairness and accountability".
defective in both those two areas." "We think the present funding regime is defective in both those two areas," said the Aberdare-born economist.
The report restates a case for scrapping Barnett, used by the Treasury since "At a time when public spending is under unprecedented pressure, it would be regrettable if the UK government persisted with an unfair, outdated and arbitrary system for allocating funding to the devolved nations.
the 1970s, and calls for the introduction of a "funding floor" to stop public
spending per head in Wales declining further when compared with England.
"At a time when public spending is under unprecedented pressure, it would be
regrettable if the UK Government persisted with an unfair, outdated and
arbitrary system for allocating funding to the devolved nations," Mr Holtham
said.
"This year over #50 billion pounds of public money will be handed out to the
devolved administrations without even the most cursory attempt to see if what is
provided is in line with what is needed.
"The allocations are not only unfair to Wales but also to many regions of
England."
mfl
061139 JUL 10An influential group of economists has called for the assembly government to be given the powers to borrow money and to vary income tax.
The proposals by the Holtham Commission, led by Gerald Holtham, would be a radical overhaul to the way Wales is funded.
The commission was set up two years ago as part of the coalition deal between Labour and Plaid Cymru.
It previously said Wales was losing out on £300m a year because of the formula.
The second Holtham Commission report calls for the limited devolution of income tax-varying powers to Wales.
The independent report suggests half of each income tax band is devolved, with the ability to vary each rate separately.
But the power over tax allowances and thresholds should, the report says, remain with the UK government.
Currently, the assembly government receives a block grant from the UK Treasury, which bases the amount Wales is entitled to on spending in England on areas including health and education.
The report identifies what it regards as the weaknesses of the current funding regime - known as the Barnett formula - describing it as "unfair" and as hampering the assembly's accountability to people in Wales.
Total cost
The report says that funding should be based on need and argues for a system that would reduce the total cost of funding the devolved administrations.
Aberdare-born commission chair Mr Holtham said: "At a time when public spending is under unprecedented pressure, it would be regrettable if the UK government persisted with an unfair, outdated and arbitrary system for allocating funding to the devolved nations.
"This year, over £50bn of public money will be handed out to the devolved administrations without even the most cursory attempt to see if what is provided is in line with what is needed.""This year, over £50bn of public money will be handed out to the devolved administrations without even the most cursory attempt to see if what is provided is in line with what is needed."
The report argues that the assembly government should have power over half of each tax band - 10p of the basic rate, 20p of the existing higher rate, and 25p of the new higher rate of tax. Total budget
The total amount raised via income tax in Wales in 2007/08 is estimated to be £5.2 billion, while the assembly government's total budget this year is £15.7 billion. The report argues that the assembly government should have power over half of each tax band - 10p of the basic rate, 20p of the existing higher rate and 25p of the new higher rate of tax.
The total amount raised via income tax in Wales in 2007/08 is estimated to be £5.2bn, while the assembly government's total budget this year is £15.7bn.
The assembly government has welcomed the report.The assembly government has welcomed the report.
Business and Budget Minister Jane Hutt said: "Building on the analysis in the commission's previous publications, the report takes forward the arguments for aligning funding with needs and also provides a thorough analysis of the scope for devolution of additional fiscal powers for Wales.Business and Budget Minister Jane Hutt said: "Building on the analysis in the commission's previous publications, the report takes forward the arguments for aligning funding with needs and also provides a thorough analysis of the scope for devolution of additional fiscal powers for Wales.
"I welcome both the report's demonstration of how a needs-based funding regime could be made to work in practice and also its reassertion of the case for the introduction of a floor in the Barnett formula for Wales, pending further reform."I welcome both the report's demonstration of how a needs-based funding regime could be made to work in practice and also its reassertion of the case for the introduction of a floor in the Barnett formula for Wales, pending further reform.
Welsh Liberal Democrat leader Kirsty Williams said the report provided "a good basis for the Westminster government to build on" in reforming the way the devolved institutions are financed.Welsh Liberal Democrat leader Kirsty Williams said the report provided "a good basis for the Westminster government to build on" in reforming the way the devolved institutions are financed.
The Welsh Conservatives have initially welcomed the report and are due to respond. Plaid Cymru's finance spokesman Chris Franks said: "I would urge the UK government to realise the importance of the issues raised in the report and respond positively, allowing this Welsh government to continue its work for the good of our communities."
The Welsh Conservatives have initially welcomed the report and are due to respond fully.
The commission was set up two years ago as part of the coalition deal between Labour and Plaid Cymru.
It previously said Wales was losing out on £300m a year because of the formula.