New tax and borrowing powers for Welsh Government

"Businesses will be looking for reassurance that these powers will be used wisely"

The Wales Act 2017 received Royal Assent on 31 January 2017 and is now an Act of Parliament, although the majority of changes will not come into force until 2018. Some of the main provisions of the act relate to increased borrowing capacity and devolved tax raising powers.

At the same time, limitations on the legislative competence of the National Assembly mean that it will not be able to legislate on anything reserved to the UK Parliament. Devolved powers include consenting for new energy projects up to 350MW, as well as for fracking and sewerage - including a comprehensive package of water and sewerage devolution. The National Assembly will be able to change its name and take control of its own affairs, including assembly elections and local government elections in Wales.

Michael Lawley, Chairman of Cooke & Arkwright comments, “With the power to introduce new rates of Welsh income tax by either cutting or raising rates by 10p in each tax band, the Welsh Government will be held even more to account by the Welsh public for the money they spend. Businesses will also be looking for reassurance that these powers will be used wisely and help improve the economic viability for companies to locate, invest, do business and thrive in Wales.

“The ability to grant consent for new energy projects could help smooth and speed up the process for major schemes like the Swansea Bay Tidal Lagoon proposal. Moreover, increased capital borrowing powers should facilitate additional investment in this and other projects like the much needed M4 Relief Road. We are hopeful that the new Act will galvanise the Welsh Government to help Wales to become a much more competitive business environment.

At a glance, the main aspects of the Wales Act 2017 are:

• Limitations on legislative competence of National Assembly
• Amount that Welsh Ministers can borrow for capital expenditure doubled to £1bn (annual limit £150m)
• Removal of requirement for a referendum before bringing in power for National Assembly to set Welsh rates of income tax
• Ability of National Assembly to set Welsh rates of income tax from April 2019
• Creation of new Welsh cash reserve to help WG manage budget fluctuations resulting from tax devolution
• Independent body to oversee disputes between Welsh and UK governments on fiscal matters
• Power to grant or refuse planning permission on energy projects up to 350MW.