New financial powers for Wales

There have been swift moves to quash suggestions I reported on earlier that income tax-varying powers could be devolved without a referendum. A source close to the Secretary of State told me there is 'no question of imposing [tax devolution] on the people of Wales.'

The source said the UK Government's position is unchanged: we intend to proceed with a referendum and will call for as early a vote as possible. Welsh Conservatives will campaign for a 'Yes' vote to give Wales a competitive edge.'

I understand that some MPs in the government parties are considering the possibility of pushing through plans to transfer tax-varying powers to Wales without a referendum because of what they see as Labour 'intransigence' on the issue. The current plans require a referendum before any such move.

If you want to catch up on the row, and see why Labour thinks the proposal is a politically-motivated 'trap,' click here, here and here. The other parties believe Labour is angry that devolution has been taking out of its hands for the first time.

One Conservative source said that 'intransigence' raises 'serious questions about the way in which fiscal responsibility can be imposed on the Welsh Government' and used the word 'imposed' deliberately. It's controversial even to suggest and is a sign of exasperation on the government benches.

Plaid Cymru has joined criticism of the Shadow Welsh Secretary's comments on plans to transfer tax-varying powers to the Welsh Government. Hywel Williams MP says Labour has shown its 'true colours as the anti-devolution party.'

At a reception for lobby journalists last night, the Prime Minister used a phrase I think you'll hear from Conservative politicians a lot more in 2014. The phrase was 'double yes' and is David Cameron's shorthand for his approach to what should happen next with income tax powers for Wales.

A Wales bill is expected to be published before the end of the year (which only leaves next week) paving the way for a referendum to be held. If there were a Yes vote in that referendum, it would give the Welsh Government partial control over income tax raised in Wales.

When I asked David Cameron about the prospects of a referendum he said he'd be pushing for a 'double yes' and added that meant 'yes' to holding a referendum in the first place and then campaigning for a Yes vote in that referendum. And he's urged Welsh Tories to do the same.

Labour is against getting that power without reform of the way the Welsh Government is funded. Only this week, the First Minister said it would be a Tory 'trap' to transfer income tax control with unfair funding. You can see his comments by clicking here.

Welsh Conservatives in the Assembly are in an awkward position. They back the transfer of income tax powers but remain disappointed by the type of transfer on offer. They want the power, as recommended in the Silk Commission, to alter separate tax bands so that they can cut the middle rate.

But the power that will be set out in the Wales Bill next week is what's known in the jargon as 'lockstep' which means that a future Welsh Government would only be able to vary each of the three income tax bands at the same rate.

Sources close to Welsh Conservative leader Andrew RT Davies says he and Tory AMs will continue to campaign to be able to lower the 40% band 'because it's the only realistic band to reduce.'

They're clinging onto that in the face of the difference of opinion with the London end of the party because there have been some hints that the Treasury might leave open the prospect of future change to the form of income tax power.

Certainly the Welsh Liberal Democrats would want that to be the case because they want to cut the basic rate by 2p. And they, don't forget, boast of a direct line to the Lib Dem Chief Secretary to the Treasury, Danny Alexander.

That's for the longer-term. In the near future, 2014 looks set to be a struggle between Labour's resolute no and David Cameron's 'Double Yes.'

Sources have been suggesting that a draft Wales Bill to usher in the tax and borrowing powers announced by the Prime Minister last week could contain a 'sunset clause' which would set a deadline for holding a referendum on transferring the power to vary income tax.

The Conservatives, Plaid Cymru and the Liberal Democrats are all keen to see such a referendum held within the next few years, but senior Labour figures such as the First Minister, Finance Minister and Shadow Welsh Secretary have refused to back a vote without the promise of fair funding.

The Silk Commission report said 2017 was the 'earliest' date for holding a referendum but it's now being touted as a likely one. A sunset clause would mean that Assembly politicians would have to agree to trigger a vote by whatever deadline was set or lose the right to do so altogether.

The Welsh Liberal Democrat leader says she expects further details about transferring tax and borrowing powers for the Welsh Government to be set out at 'an event' later this month. Kirsty Williams says it will involve Chief Secretary to the Treasury, Danny Alexander and Finance Minister Jane Hutt.

The changes were announced by the Prime Minister during his visit to Wales last week. Click here for further details of what was announced and what it means.

She also says she understands that the key financial changes including a referendum on income tax are likely to be added to a previously-announced draft Wales Bill which overturns the so-called 'dual candidacy' ban in Assembly elections.

The Prime Minister has confirmed that the Welsh Government will be given powers to raise their own income tax - subject to a referendum. Stamp duty on the purchase of homes and other property will definitely be devolved.

There will also be more powers for the Government here to borrow money for major construction projects like the M4 relief road.

Our Political Editor Adrian Masters reports on how we could pay some of our taxes direct to the Welsh Government in the future.

Today's agreement gives a way for the Welsh Government to borrow money to pay for an M4 relief road to ease the massive congestion that we regularly see around Newport.

It's also sparked angry warnings from environmentalists that the project will threaten the internationally important Gwent Levels.

Our Business Correspondent Carole Green has been listening to the arguments

The Prime Minister and Deputy Prime Minister answer a question from our Political Editor Adrian Masters at this morning's press conference in the Senedd.

Mr Cameron said he was reluctant to indicate a preference for when he would want a referendum on Wales taking some control over income tax to take place.

"Our role as UK politicians and leaders is to pass the enabling legislation" he said.

"As a Conservative is to say I think it's good when governments are responsible for raising some of the money that they spend themselves"

"I look forward to the opportunity of being able to campaign as a low-tax Conservative in Wales".

There was no mention from David Cameron and Nick Clegg of one of the taxes that the Welsh Government was expecting. That's because Aggregates Levy -a tax on taking material out of the ground- could be challenged in the European Court.

The European Commission is investigating whether the exemptions to the levy, such as for coal mining, breach the European Union's rules on state aid to industry. The UK Government has decided that it cannot be devolved until that legal dispute is settled.

The Welsh Government knows that it will definitely not be getting one tax that it wanted -long haul Air Passenger Duty. So hopes of attracting transatlantic flights to Cardiff Airport by offering them a tax cut have been dashed. The taxes that will be transferred are:

• Stamp Duty on property sales, currently worth £115 million a year
• Landfill Tax, currently worth £60 million a year
• Some income tax but only after a referendum. The First Minister says he will not even consider holding it until Wales gets a better deal on its funding from Westminster.