Wales politics

Avoid row like Scotland's on income tax says report

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A year-long row over plans to devolve income tax powers to Scotland must be avoided in Wales, a report suggests.

The UK government wants to give Welsh ministers the power to vary some income taxes in Wales.

But there are concerns the UK Treasury could cut the Welsh government's annual grant, with Wales' tax base not growing quickly enough to cover any gap.

A similar argument in Scotland was finally resolved on Tuesday, after talks that began in March 2015.

'Substantial cut'

The report, from Cardiff University's Wales Governance Centre, says: "The population growth of Wales has recently diverged significantly from the rest of the UK, with Wales' population growing at less than half the rate of the UK as a whole between 2008 and 2014.

"This will tend to mean slower growth in the Welsh tax base. In addition, the UK government's policy to rapidly increase the personal allowance will have drawn disproportionately more Welsh incomes out of the income tax base than was the case across the UK as a whole.

"Such a move would have meant a substantial cut to the Welsh budget under currently proposed methods of adjusting the Welsh block grant."

Ed Poole of the Wales Governance Centre said: "Over the five years of an assembly term, a block grant adjustment method that disadvantages Wales could represent a cumulative loss of hundreds of millions to the Welsh budget."

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