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Tax Collection and Management (Wales) Act 2016 and the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 (Consequential Amendments) Order 2018

Volume 793: debated on Tuesday 6 November 2018

Motion to Approve

Moved by

My Lords, the draft instrument we are considering will make changes to UK legislation arising from the National Assembly for Wales’s Tax Collection and Management (Wales) Act 2016 and the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017. Perhaps it would be helpful if I first give some background to this order.

As noble Lords will recall, the Wales Act 2014 implemented the vast majority of the recommendations in the Silk commission’s first report to devolve tax and borrowing powers to the National Assembly for Wales and Welsh Ministers. This included powers to replace stamp duty land tax and landfill tax in Wales, as well as the creation of Welsh rates of income tax. The Wales Act 2014 represented a significant moment in Welsh devolution, enabling the Assembly to legislate to establish the first specifically Welsh taxes in almost 800 years—a land transaction tax and a landfill disposals tax—and to establish the Welsh Revenue Authority, or WRA, to collect and manage these new devolved taxes. I am pleased to note the positive collaboration that has taken place between the UK and Welsh Governments to manage the transition to these devolved taxes, which came into effect from 1 April. The Government continue to report annually on this work, and the fourth report on the implementation of the finance provisions in the Wales Act 2014 will be presented to Parliament next month.

Noble Lords will no doubt recognise that 1 April was also significant as the date on which the new reserved powers model of devolution for Wales, put in place by the Wales Act 2017, came into force. The Wales Act 2017 further demonstrated the Government’s firm commitment to devolution. Alongside the new model of devolution, the Act devolved further powers that can make a real difference to people’s lives in areas such as elections, transport and natural resources.

This order, made under powers in Section 150 of the Government of Wales Act 2006, makes consequential provisions on the establishment of the Welsh Revenue Authority and the creation of land transaction tax. It has four provisions. Article 2 inserts the new WRA into Schedule 1 to the House of Commons Disqualification Act 1975, so as to disqualify the chairperson and non-executive members of the WRA from being Members of the House of Commons. This puts the WRA on the same footing as HMRC in this respect. Following the devolution of powers over Assembly elections in the Wales Act 2017, it is of course a matter for the Assembly as to whether the chairperson and non-executive members should also be disqualified from being members of the National Assembly for Wales.

Article 3 inserts the Welsh Revenue Authority into the list of public bodies at Part 6 of Schedule 1 to the Freedom of Information Act 2000, thereby providing a right of access to information held by the WRA. In doing so, the order brings the WRA within the definition of Welsh public authority under that Act.

Article 4 of the order inserts a reference to the Welsh Revenue Authority in the schedule to the Public Interest Disclosure (Prescribed Persons) Order 2014, ensuring the same protection for whistleblowers who contact the WRA under the Employment Rights Act 1996 as that afforded to whistleblowers who assist HMRC.

Finally, Article 5 inserts a reference to land transaction tax to Regulation 45 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. Under those regulations, HMRC is required to maintain a register of the beneficial owners of certain trusts. This amendment provides that these reporting requirements apply to trusts that are liable to pay land transaction tax in Wales.

This order again demonstrates the Government’s continued commitment to work with the Welsh Government to deliver the effective implementation of devolved taxes in Wales. In assuming tax and borrowing powers, devolution in Wales has truly come of age as the devolved institutions become responsible not just for how money is spent in Wales, but how it is raised. Following the implementation of Welsh rates of income tax, the Assembly will be responsible for raising more than £2 billion in tax revenue, around 15% of the Welsh block grant. These fiscal powers, together with the powers devolved through the Wales Act 2017 and the fiscal framework, pave the way for the Assembly to become a fully-fledged Welsh Parliament. I beg to move.

My Lords, I thank the Minister for introducing this order. I have two very brief questions for him. First, although he partly covered this in his speech, can he assure the House that the National Assembly fully supports the changes that have been made by this order? Secondly, as a considerable amount of devolution came into force on 30 April, does he foresee any further orders of this sort?

My Lords, I am grateful for the opportunity to speak in this debate on the order which updates UK legislation as a consequence of the Tax Collection and Management (Wales) Act 2016 and the rest of it. On these Benches, we welcome the order and recognise the landmark stride forward it represents in the Welsh people’s devolution process. We also recognise the work of the Welsh Government in designing, in their words,

“a fiscal regime that works much better for Wales”,

and results in,

“better taxes, more suited to Welsh priorities, with more Welsh tax revenues spent in Wales and improved accountability”.

We particularly welcome the setting up of the Welsh Revenue Authority as a separate legal body from the Welsh Assembly. As the Minister said, from 1 April this year, the WRA took over responsibility for the collection and management of land transaction tax and landfill disposal tax which together should raise approximately £300 million a year. The Welsh Revenue Authority will also be responsible for setting rates of income tax in Wales, and I am pleased that the Welsh Government have seen fit to maintain income tax rates in line with those of England and Northern Ireland for the coming year. However, the power to vary rates remains, and we welcome the further status the implementation of this power gives to the Welsh Government and the Welsh Revenue Authority.

From 6 April next year a proportion of income tax collected from Welsh taxpayers will, for the first time, be devolved to the Welsh Government. Income tax will continue to be collected by HMRC, but a proportion will be transferred directly to the Welsh Government to be spent on public services in Wales. The Welsh Government estimate that in total these three taxes will raise £2.5 billion for Welsh services.

These Benches also welcome the amendments contained in this order to ensure that whistleblowers who help the Welsh Revenue Authority in relation to these new taxes are protected in the same way as individuals who assist HMRC. It is a welcome inclusion. The rights of those who see wrongdoing and report it must be protected. However, I seek clarification from the Minister in relation to Section 7.3 of the Explanatory Memorandum. The second sentence reads:

“The amendments ensure that whistleblowers … are potentially protected by the provisions of the Employment Rights Act 1996”.

I wonder why the word “potentially” has been included. It seems to convey an element of uncertainty, but perhaps its use here has a legal connotation of which I am unaware.

The Welsh Government have, as I said at the beginning, cited the improved accountability that should result from these changes, and I look forward to seeing increased scrutiny from politicians and the electorate of how the money from these taxes is apportioned and spent.

My Lords, every point I might have wanted to make has been made either by the Minster or by those who have spoken. I will be interested to hear the Minister’s answer to the question from the noble Lord, Lord Wigley, about whether the Assembly has been fully consulted and whether it is the full opinion of the Assembly to move down this line. He seemed to suggest that there had been the fullest of collaborations, so I expect an affirmative answer, but it will be interesting to see how that comes back.

The process is under way: the various Acts of Parliament have been established, the revenue-gathering authority has been set up, and the elements that now need to be integrated into other Acts of Parliament are all referred to here.

I have just one remark, apropos of nothing except that I want to seem responsible in standing at the Dispatch Box, with something to say. It seems extraordinary that all these existing Acts of Parliament now have to be modified to include a reference to the organisations we are setting up. The complexity of the cross-referring required to root this measure in the legislative material of the Assembly, and of Wales in general, is really rather interesting. Given that it is so complicated to get such a simple measure established, heaven help those who are negotiating our exit from the European Union.

On the back of those comments from the noble Lord, Lord Griffiths, let me give a fairly short reply to the questions that have been raised.

I thank the noble Lords, Lord Wigley and Lord Griffiths, and particularly the noble Baroness, Lady Humphreys, for their general support for these measures. The noble Lord, Lord Wigley, raised a couple of questions and the answer is in the affirmative: the National Assembly has been kept fully in touch with these measures and is fully behind them. There are no ifs or buts on that point.

We will continue to work with the Welsh Government on further orders, and will bring forward any that are required as a result of Assembly legislation. They may or may not be required, but hopefully that gives an answer.

On the question raised by the noble Baroness, Lady Humphreys, I think it is more of a legal point, and I hope that I can give an answer that will satisfy her. It is fair to say that the word “potentially” is a legality; what it really means is that the protection is covered, provided the Employment Rights Act 1996 process is met. It is a process legality. I hope she is nodding. If she is shaking her head, I am more than happy to write her a letter giving the legal explanation.

I think that covers all the points that were raised. Without further ado, I commend this order to the House.

Motion agreed.