The Welsh Government has been granted powers which will allow it to vary income tax rates from 2019 under a new fiscal framework. The new devolution rules will apply to stamp duty land tax, landfill tax and Welsh rates of income tax, allowing the Welsh Government to fix rates for the first time. In addition, the fiscal framework sets out increased capital borrowing powers, increasing the Welsh Government’s overall capital borrowing limit to £1bn and the annual limit to £150m.
A new single Wales reserve will be created to enable the Welsh Government to better manage its budget, including the new tax revenues. The Welsh Government’s Cabinet Secretary for Finance and Local Government, Mark Drakeford, said: "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. 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.
Chief Secretary to the Treasury, David Gauke, added: “After constructive negotiations, we have agreed a fair and principled long-term funding settlement with the Welsh Government. The path is now clear for the Welsh Assembly to consent to the implementation of the Wales Bill. We are delivering on our commitments and the Welsh Government can now decide how to use their greater powers and responsibilities to grow and support the Welsh economy.”