Wales will keep the stamp duty rate on second homes in line with England when the tax is devolved from April 2018
Welsh Government Finance Secretary Mark Drakeford said he hoped that a City Deal to boost the economy of the Swansea Bay City Region will be confirmed in the first Autumn Statement from Chancellor Philip Hammond next month.
However, addressing a meeting of Cardiff Breakfast Club , Mr Drakeford – whose portfolio also covers local government – said there was not the same enthusiasm in Theresa May’s new government for projects championed under the leadership of David Cameron – where City Deals were driven by George Osborne who was sacked as Chancellor when Mrs May announced her first cabinet.
Mr Drakeford, who on Tuesday will published the Welsh Government’s draft budget, said the Welsh Government is in discussions with the four local authorities that make up the Swansea Bay City Region over submitting their finalised internet coast themed City Deal in time for it be approved in the Autumn Statement on November 23.
The proposed City Deal is being delivered via the Swansea Bay City Region Board, chaired by telecommunications billionaire Sir Terry Matthews.
It is estimated that over 20 years a deal – which would draw down funding from the UK and Welsh governments with local authorities in the region entering into a yet to be determined long-term interest repayment agreement with the Treasury – could lever around £3.3bn of output and £1.3bn of gross value added for Wales, while supporting around 39,000 jobs in the region.
And with private sector investment, and other funding sources, the firepower of any deal is expected to be north of £1bn.
Mr Drakeford said: “It is hoped a bid can be put in so it can get the go ahead in the Autumn Statement next month. However the tide is receding rapidly on any agreements of the previous regime [David Cameron’s government].
“City Deals were an idea of George Osborne and are being treated with caution by civil servants who don’t want to find themselves on the wrong side of history.”
He said that “tricky negotiations,” lay ahead between the Welsh Government and the UK Government as Wales moves towards a new era of having devolved powers on taxation – which will see the funding tap from the Treasury switched off for stamp duty land and the landfill tax in 2018, with revenues instead collected by a Welsh treasury.
The first meeting of the Joint Exchequer Committee by between Mr Drakeford and the Chief Secretary to the Treasury, David Gauke, was held in September.
Mr Drakeford said “it was very cordial and business like, but was at the easy end of the negotiations by setting the timetable. At the end of this month we have to agree some tricky issues with big consequences. And get them wrong and the money that flows to public services [in Wales] will be radically affected.”
Mr Drakeford later confirmed that Wales will not deviate from England on the new high rate of stamp duty on second homes when it takes on direct responsibility for the tax in the spring of 2018.
In his final budget as Chancellor in March, Mr Osborne announced an extra 3% stamp duty on the purchase of an additional property, which are often funded by buy-to-let mortgages. That came into effect in April
However, the Welsh Government will not opt to change the rate when the tax is devolved – following a technical consultation which received around 100 responses.
The Office for Budget Responsibility (OBR) estimates the higher rate for additional residential properties will raise £9m in 2016-17 in Wales, rising to £14m in 2020-21. Retaining the higher rate will generate vital revenue to fund public services in Wales.
Mr Drakeford has confirmed the higher rate will continue to be levied in Wales when the land transaction tax replaces stamp duty land tax.
To do this, government amendments will be brought forward at stage two of the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Bill, which is currently going through the National Assembly, to enable land transaction tax to include a higher rate levy for additional residential properties.
Mr Drakeford said: “We have had an excellent response to the technical consultation about the higher rate of tax on purchases of additional residential properties and whether this should continue to apply in Wales when stamp duty is devolved in April 2018.
“There was a clear view from respondents about the importance of maintaining a single, consistent rate across the UK. I am today announcing that this levy will exist in Wales when land transaction tax – the successor to stamp duty in Wales – comes into force.
Cardiff Breakfast Club is sponsored by Effective Communication, Blake Morgan, Lloyds Banking Group, Stills Branding and the Western Mail.
Credit: Sion Barry, Wales Online