Assembly to debate the general principles of the Landfill Disposals Tax (Wales) Bill

17 March 2017

Article by Helen Jones, National Assembly for Wales Research Service

View this post in Welsh | Darllenwch yr erthygl yma yn Gymraeg

Image from Flickr by Adam Levine. Licensed under Creative Commons.

The Landfill Disposals Tax (Wales) Bill was laid before the Assembly on 28 November 2016, and introduced in plenary by the Cabinet Secretary for Finance and Local Government on 29 November 2016. The Assembly will debate the general principles of the Bill on 21 March 2017.

The Landfill Disposals Tax (Wales) Bill (LDT) is concerned with establishing the legal, administrative and operational framework to replace Landfill Tax (LfT) in Wales in April 2018. Landfill Tax is currently a UK tax on the disposal of material as waste by way of landfill at landfill sites which are permitted under environmental legislation. The current tax was introduced in 1996 as a key environmental behaviour change driver in encouraging the diversion of waste from landfill, greater recycling, reuse and recovery of waste. Since the tax was introduced it has contributed to a significant reduction in the proportion of waste sent to landfill, and an increase in recycling.

This Bill is the third piece of legislation related to the devolution of tax powers in the Wales Act 2014. The Bill was preceded by the Tax Collection and Management (Wales) Act 2016 which established the legal framework necessary for the future collection and management of devolved taxes in Wales and the Land Transaction Tax and Anti avoidance of Devolved Taxes (Wales) Bill, which will replace Stamp Duty Land Tax from April 2018.

Further information on the background to the Bill, an overview of its parts, a summary of financial implications, and a Welsh glossary are provided in the Research Service’s Bill Summary (PDF, 844KB).

The Finance Committee reported (PDF, 1MB) on its Stage One consideration of the general principles of the Landfill Disposals Tax (Wales) Bill on 10 March 2017.

The Finance Committee’s report sets out a number of recommendations aimed at strengthening the legislation. For example, the Committee would like to see the proposed rates of taxation, a list of qualifying materials and provisions for bad debt relief, included on the face of the Bill.

Whilst the Welsh Government intends to bring forward secondary legislation in relation to some of these provisions, the Committee remains concerned that secondary legislation is not subject to the same amount of scrutiny as a Bill.

The Committee also believes that businesses need certainty when it comes to the application of new tax legislation, and that including such detail in the law itself would help to address concerns.

The Committee heard considerable evidence in relation to the importance of the Landfill Disposals Tax Communities Scheme. The Committee recommend that a Communities Scheme is included on the face of the Bill to show commitment to the scheme going forward, but accept that some of the detail could be specified in regulations.

The Constitutional and Legislative Affairs Committee considered the appropriateness of the provisions in the Bill about powers to make subordinate legislation. Its report (PDF, 2MB) was also published on 10 March 2017.

Subject to the Assembly agreeing the general principles of the Landfill Disposals Tax (Wales) Bill, the Bill will proceed to Stage Two (detailed Committee consideration of the Bill and any proposed amendments). Stage Two proceedings are expected to be completed by 26 May 2017.

Welsh Government Second Supplementary Budget 2016-17

03 March 2017

Article by Gareth Thomas and David Millett, National Assembly for Wales Research Service

Darllenwch yr erthygl yma yn Gymraeg | View this post in Welsh

The Cabinet Secretary for Finance and Local Government (Mark Drakeford AM) laid the Second Supplementary Budget 2016-17 on 7 February 2017.  This was accompanied by an explanatory note and tables showing departmental allocations.  This supplementary budget amends the First Supplementary Budget 2016-17 approved by the National Assembly in July 2016. The Finance Committee published its report on Scrutiny of the Welsh Government Second Supplementary Budget 2016-2017 on 2 March.

Over two thirds of the revenue allocations in this budget are additional funding to the NHS, including £75.9 million to address forecast overspends by Local Health Boards (£7.5 million of which is in addition to the £68.4 million announced in November 2016), £50 million to mitigate winter pressures, £27 million to fund a shortfall in income from the Pharmaceutical Price Regulation Scheme and £16 million to support the launch of the New Treatment Fund

Also, £20 million has been allocated to the Higher Education Funding Council for Wales to address financial demands from the recommendations of the Diamond Review, £8.5 million to establish Transport Wales to design and let the rail and South Wales Metro franchises, and £4 million to Tata Steel for skills support.

The main capital allocations are £47 million to support trunk road projects (including £22 million for M4 Route Development), £33.4 million capital grants and loans to deliver economic development priorities and £30 million to support the Programme for Government commitment to build an additional 20,000 affordable homes.

These investments are funded by a mixture of allocations from reserves and funds carried over from the previous financial year, and also takes account of changes in funding from the UK Government.

Changes in overall budget allocations, and in allocation of fiscal revenue and capital expenditure between different Welsh Government departments between the previous Supplementary Budget and this one, are summarised in the accompanying chart.

The business rates revaluation and transitional relief: An update

01 March 2017

Article by Gareth Thomas,  National Assembly for Wales Research Service

View this post in Welsh | Darllenwch yr erthygl yma yn Gymraeg

Business rates revaluations have been a subject of interest across Britain over recent weeks and months, with concerns raised about the impact on businesses who will see their business rates rise from April 2017. Different approaches have been taken to address this across Wales, England and Scotland (Northern Ireland’s revaluation came into force in 2015).

This blog article updates our previous one, published in December 2016, which provided details of the revaluation and its impacts.  The revaluation in Wales has been independently undertaken by the Valuation Office Agency (VOA), and the Welsh Government does not apply policy or guidance to the revaluation.

What impact has the revaluation had on different parts of Wales?

As the previous article explains, changes to rateable values are one component of the overall business rates bill, which is also affected by the business rates multiplier set by the Welsh Government every financial year, as well as any reliefs that businesses may be entitled to.

The areas that have seen the largest rises in rateable values between the 2010 valuation and the draft 2017 revaluation figures are predominantly rural areas, such as Conwy (9.2% average increase), Gwynedd (8.9% average increase) and Monmouthshire (7.0% average increase). These figures are different from the estimated impacts on bills in England that have been discussed in the media in recent days, as stated above rateable values are only one component of the calculation of business rates bills.

The VOA have published maps of the average percentage change in rateable value in each local authority, and these are set out below. When looking at these figures, it is important to note that this is an average across the area and sectors, so the impact on particular sectors and areas within local authority areas may be different.  Some businesses in all local authority areas will have seen increases, while others will have seen decreases in their rateable value.

Map showing changes in rateable value of businesses in each local authority

What measures has the Welsh Government put in place to help businesses whose bills will rise due to the revaluation?

The Welsh Government has introduced two measures that will provide transitional relief from April 2017 to businesses negatively affected by the revaluation.

The first scheme, announced in September 2016, is targeted at small businesses, and the Welsh Government will provide £10 million funding which will benefit 7,000 ratepayers.  Businesses who currently have premises with a rateable value of up to £12,000 and are eligible for small business rate relief in 2016-17, but will receive either less or no relief in 2017-18 due to the rateable value of their property increasing will benefit from this scheme.  The proposed transitional relief will spread increases in business rates liability over a three-year period, so businesses will pay 25% of their increased liability in 2017-18, 50% in 2018-19 and 75% in 2019-20.  By the start of the 2020-21 ratepayers will pay their full bill based on the 2017 revaluation.  Regulations introducing this scheme were discussed and passed through a vote in Plenary on 13 December 2016.

On 17 February, the Welsh Government set out details of a further transitional relief scheme, the High Street Rates Relief scheme.  This is targeted at high street businesses such as shops, restaurants, cafes, pubs and wine bars. This scheme will also cost the Welsh Government £10 million, and will be introduced from April 2017, benefitting 15,000 businesses.   The Cabinet Secretary’s written statement sets out the qualifying criteria for the scheme. Retailers can find out whether they are eligible for the scheme by contacting their local authority.

There are two tiers of relief under this scheme. Under the first tier, high street retailers with a rateable value of between £6,001 and £12,000 who are already receiving either small business rates relief (SBRR) or transitional rates relief will receive a reduction in their rates bill of £500 or, if their bill is less than £500, it will be reduced to nil.  Under the second tier, eligible high street retailers with a rateable value of between £12,001 and £50,000 which are experiencing a rates increase from April 1 will receive a reduction in their bill of £1,500.

How does this differ from what is being proposed elsewhere in Britain?

Both England and Scotland have stated that they will implement different approaches to mitigating the negative impact of the revaluation on some businesses.

Under the UK Government’s scheme for England, it is proposed that all businesses who see an increase in their business rates bill as a result of the revaluation will receive some transitional relief.  A key difference to the scheme in Wales is that this is a self-financing scheme, which is paid for by capping the reductions that businesses who see a decrease in their bills will receive.  Small and medium businesses receive greater support than larger businesses.  The UK Government Secretary of State for Communities and Local Government announced on 22 February that he is working closely with the Chancellor of the Exchequer to provide further support to businesses in England facing the largest bill increases, with an announcement expected at the UK Government budget on 8 March.

In Scotland, the Scottish Government has capped bill increases at 12.5% for hospitality businesses such as hotels and pubs, and also offices in Aberdeen and Aberdeenshire.  The hospitality and pub sectors have raised concerns about the scale of increases they will face, and also the different valuation methodology used in these sectors.  The cap on offices in Aberdeen and Aberdeenshire is due to the impact of the fall in oil prices on the local economy.

Debate on the Final Police Settlement 2017-18

10 February 2017

Article by Sarah Hatherley and Owen Holzinger, National Assembly for Wales Research Service

Darllenwch yr erthygl yma yn Gymraeg | View this post in Welsh

flikr_jon_candy

Image from Flikr by Jon Candy Licensed under the Creative Commons

Policing policy is not devolved to Wales; however, the Welsh Government delivers an element of the annual funding as part of a three-way system that also involves the Home Office and council tax. Police forces also have access to special and specific grants and other income sources.

Under the Police Reform and Social Responsibility Act 2011 Police and Crime Commissioners (PCCs) replaced police authorities in each police force area (outside of London), with the first elections held in November 2012. More recently, PCC elections were held alongside the Assembly Elections in May 2016. PCCs appoint the chief constable, set local policing priorities and set the budget and council tax precept.

The Police settlement is derived in a two-stage process with a provisional settlement released in line with the Welsh Government’s draft budget and a final settlement in line with the final budget. The four Welsh police forces are consulted on the provisional police settlement, before agreeing the final settlement. The National Assembly for Wales must then approve this funding. As part of this process, the settlement will be debated in plenary on Tuesday 14 February 2017.

Final Police Settlement 2017-18

For 2017-18, the overall funding allocated to PCCs in Wales has been set at £349.9 million. This represents a 1.4% reduction from the 2016-17 settlement and is a 1.4% reduction for each of the four PCCs. The overall funding is outlined in table 1 below:

Table 1: Police Revenue Funding – Total Central Support

2014-15 2015-16 2016-17 2017-18
Dyfed-Powys 53.0 50.3 50.0 49.3
Gwent 76.8 72.9 72.5 71.5
North Wales 77.1 73.2 72.7 71.7
South Wales 169.2 160.6 159.6 157.4
Total   376.2   356.9   354.9   349.9

Within the £349.9 million allocation, the Welsh Government’s element is £138.7 million. This can be broken down further and comprises funding from the Revenue Support Grant (£85.8 million) and Non-domestic rates (£53 million). The remaining £211.2 million funding is provided through the Home Office. The sources of Police funding are outlined below:

Home Office Police Grant

In England and Wales, the main source of income for police forces is the central UK government grant made available through the annual Home Office Police Grant Report. The Home Office Police Grant is general revenue funding and is not ring-fenced. It is paid directly to PCCs. The Police Allocation Formula determines the allocation of central government funds between the 43 police force areas of England and Wales. This is based on the estimated workload of each police force area, including crime related activity, policing special events, policing sparsely-populated areas and population and socio-economic factors. The Home Office has recently reviewed its funding formula for police forces, which will continue to be a needs-based formula. As has been the case in recent years, the Home Office has again decided to overlay its needs-based formula with a floor mechanism. This ensures all police forces in England and Wales can expect to receive the same percentage reduction, this year this is 1.4%.

Funding from the main grant is subject to “damping”, which in 2017-18 will redistribute £12.2 million from South Wales and £417k from Gwent to Dyfed Powys (an additional £5.1 million) and North Wales (an additional £7.4 million). The PCCs for Dyfed-Powys (£3.6 million) and North Wales (£2.4 million) also receive top-up grant.

Welsh Government formula grant/ Police Revenue Settlement

In Wales, the equivalent funding previously provided by the UK’s Department for Communities and Local Government in England is devolved to the Welsh Government. The Welsh Government funding to PCCs still forms part of the local government finance settlement and is paid under provisions of the Local Government Finance Act 1988 and must be approved by the National Assembly for Wales.

Council tax precept

Each police force can also raise additional revenue funding through council tax precepts. The elected PCC in each police force area determines the annual level of the police precept, which is added to residential council tax bills. A greater proportion of police funding comes from council tax in Wales than in England; 37% compared with an average of 24% in England in 2015-16. There is also much less variation between the Welsh police forces than in England. PCCs are known as major precepting authorities. Whilst they set the precept, the funds are collected on their behalf by local authorities. In 2016-17 the Police element of council tax amounted to approximately 16% of the total, average, council tax bill in Wales.

The Welsh Government has the power to cap excessive council tax rises (generally considered to be anything over 5%).

Specific and special grants

There are also a smaller number of special and specific grants that are ring-fenced for national policing priorities. The Home Office provides a series of specific and special grants in addition to the Police Main Grant. This funding comes from the Home Office resource departmental expenditure limit crime and policing group. Some of the grants are funded by top-slicing the Police Main Grant, that is reducing the funding available for general revenue funding through the Police Main Grant to pay for some specific grants. The largest element of this is the Counter Terrorism Police Grant; other grants include the Police Special Grant and the Police Innovation Fund.

Other income

Police forces can also charge for some of their services. The main source of income from fees and charges is through charging for special police services. These are police services provided over and above core policing at the request of a person or organisations, such as football matches and music concerts. The basic powers to charge for services are set out in the Police Act 1996. Police forces are prevented from making a profit on special police services and for some types of event are prevented from recouping 100% of costs.

More information regarding how each element of police funding is calculated can be found in the Local Government Finance Report (No. 2) 2017-18 (Final Settlement – Police and Crime Commissioners). Welsh Government has published the financial tables and other information regarding the police settlement on their website.

Welsh Government Second Supplementary Budget 2016-17

09 February 2017

Article by Gareth Thomas and David Millett, National Assembly for Wales Research Service

Darllenwch yr erthygl yma yn Gymraeg | View this post in Welsh

The Cabinet Secretary for Finance and Local Government (Mark Drakeford AM) laid the Second Supplementary Budget 2016-17 on 7 February 2017.  This was accompanied by an explanatory note and tables showing departmental allocations.  This supplementary budget amends the First Supplementary Budget 2016-17 approved by the National Assembly in July 2016.

Over two thirds of the revenue allocations in this budget are additional funding to the NHS, including £75.9 million to address forecast overspends by Local Health Boards (£7.5 million of which is in addition to the £68.4 million announced in November 2016), £50 million to mitigate winter pressures, £27 million to fund a shortfall in income from the Pharmaceutical Price Regulation Scheme and £16 million to support the launch of the New Treatment Fund

Also, £20 million has been allocated to the Higher Education Funding Council for Wales to address financial demands from the recommendations of the Diamond Review, £8.5 million to establish Transport Wales to design and let the rail and South Wales Metro franchises, and £4 million to Tata Steel for skills support.

The main capital allocations are £47 million to support trunk road projects (including £22 million for M4 Route Development), £33.4 million capital grants and loans to deliver economic development priorities and £30 million to support the Programme for Government commitment to build an additional 20,000 affordable homes.

These investments are funded by a mixture of allocations from reserves and funds carried over from the previous financial year, and also takes account of changes in funding from the UK Government.

Changes in overall budget allocations, and in allocation of fiscal revenue and capital expenditure between different Welsh Government departments between the previous Supplementary Budget and this one, are summarised in the accompanying chart.

Infographic showing key allocations in the Welsh Government Second Supplementary Budget 2016-17