Welsh taxes outlook
Since 2019, we have prepared independent forecasts of devolved Welsh tax revenues for the Welsh Government Budget. This is in accordance with the Welsh Government’s fiscal framework.
We agreed a Memorandum of Understanding, Terms of Reference and a Financial Framework to guide this work.
Legislation and background
The Wales Act 2014
The Wales Act 2014 gave new powers to the Welsh Assembly relating to taxation and borrowing. It provided for the full devolution of SDLT and landfill tax from April 2018. It also stated that the Welsh Assembly will be able to set new Welsh rates of income tax (WRIT), which would operate in a similar way to the SRIT. The UK Government intends to devolve the aggregates levy too subject to the resolution of ongoing legal challenges.
The Command Paper: Wales Bill: Financial Empowerment and Accountability – published alongside the Wales Bill in 2014 – required us to begin to forecast Welsh taxes alongside Autumn Statement 2014 and twice a year thereafter. This includes forecasts for SDLT, landfill tax, aggregates levy and the WRIT.
Tax Collection and Management (Wales) Act 2016
The Tax Collection and Management (Wales) Act 2016 created a new Welsh Revenue Authority, which will oversee the collection of devolved taxes in Wales. The Welsh Government has announced it will replace SDLT with a ‘land transaction tax’ (LTT) and landfill tax with a ‘landfill disposals tax’ (LDT). Further details about these taxes were announced as part of the Welsh Government’s budget on 3 October 2017 with further changes to LTT announced on 19 December 2017.
The Wales Act 2017
The Wales Act 2017 removed the requirement for a referendum before the WRIT can be introduced. The WRIT will take effect in April 2019. It also increased the Welsh Assembly’s borrowing powers and set out the OBR’s right to information from the Welsh authorities.
Welsh Government fiscal framework
In December 2016 the Welsh and UK Governments agreed the Welsh Government’s fiscal framework. This establishes a mechanism for adjusting the Welsh Government’s block grant to reflect the devolution of tax powers. The block grant will be determined via the ‘Barnett’ formula plus a new ‘needs-based factor’ as recommended by the Holtham Commission.The block grant is then adjusted as set out in the fiscal framework. The OBR has no direct involvement in block grant decisions or adjustments.
We have worked with the Welsh Government to ensure that we can bring all relevant information to bear when producing our Welsh tax forecasts and agreed a Memorandum of Understanding to guide our engagement.
In a Command Paper published with the Wales Bill 2014, the Government requested that we also produce Welsh forecasts for the Welsh rate of income tax, stamp duty land tax, landfill tax and aggregates levy.
We publish these forecasts twice each year alongside ourEconomic and fiscal outlook (EFO).
‘UK economy and the implications for Welsh taxes’ presentation by Andy King to ‘Welsh Taxes: The Way Forward’ conference 19 July.
Evidence to the Welsh Assembly