The Welsh Budget 2021 (for 2022/23)

On 20 December 2021, Rebecca Evans MS, Minister for Finance and Local Government, published the Outline Draft and Detailed Draft Welsh Budget.?

Welsh Labour are a minority Government in Wales, though a Co-operation Agreement entered into with Plaid Cymru will ensure that the draft Budget is reflective of the Final Budget, due for publication on 01 March 2022.

It is important to remember that National Health Service (GIG Cymru) and health and social care funding are devolved responsibilities.? It is the Welsh Government that decides on policy and the monies that will be allocated to these functions.

However, it is true to say that the Welsh Government has benefited from additional funds raised by the UK Government in Westminster though the increase in UK-wide National Insurance Contributions (NICs in 2022/23) and the Health and Social Care Levy (2023/24 onwards).? These additional monies are then passed onto the devolved nations through the block grant, already predicted in the October 2021 UK Budget and Spending Review.

Whilst I am not a mathematician, it seems to me that the increased funding in these areas is not the same as the increased funding that will apply in England – remembering that the increased NICS and the Health and Social Care Levy will fund English reforms and do not have to be replicated in the devolved nations.

Which confirms to me all the more that HMRC’s non-statutory ‘request’ for a payslip message in 2022/23 is confusing, incorrect and should not be used.

WRIT is not a fully devolved tax-raising fiscal mechanism, unlike the fully-devolved Landfill Transaction Tax (LTT) and Landfill Disposals Tax (LDT).? It is a shared tax, i.e. shared between the Welsh Government and the UK Government.? Nevertheless, the tax-raising powers will account for 11% of the Welsh Government funding in 2022/23 unlike LTT and LDT combined which will account for 2%.

However, the devolution and sharing of taxes means that the Welsh Government’s block grant allocation from the UK Government is reduced, reflecting the fact that revenues go directly to the Welsh Government rather than the UK Exchequer.

The Welsh Tax Policy Report 2021 outlines the proposed Income Tax rates for Welsh Taxpayers in tax year 2022/23.?? As such, the following rates will apply in 2022/23, where each of the three UK Income Tax rates (20, 40 and 45) is reduced by 10 percentage points for Welsh Taxpayers with an adjustment made, i.e. the WRIT:

Welsh Taxpayers will then pay the WRIT using rUK tax thresholds, already announced, with a comparison to those that applied in 2021/22:

All a long way of saying that there are no changes in 2022/23 compared to 2021/22!? Point 3.08 says:

The ‘Tax policy framework’ outlines the Welsh Government’s five tax principles as follows:

1. Raise revenue to fund public services as fairly as possible.
2. Deliver Welsh Government policy objectives.
3. Be clear, stable and simple (but not the use of the word ‘progressive’ later in the paper)
4. Be developed through collaboration and involvement.
5. Contribute directly to the Well Being of Future Generations Act goal of creating a more equal Wales

The Tax policy work plan 2021-2026 (gov.wales) details possible future developments in tax (not only Income Tax):

• Development of the WRIT (which will examine ‘potential changes’)
• Reforms to Council Tax
• Consultation on a Tourism Levy
• ‘Making the case for clear and stable tax devolution for Wales’, including Air Passenger Duty, already devolved to Scotland and Northern Ireland
• Working with the UK Government, where appropriate, on the development of ‘environmental taxes’
• Developing Land Transaction Tax policy (LTT was the first devolved Welsh tax from April 2018, previously known as Stamp Duty Land Tax which still applies in England and Northern Ireland)
• Development of Landfill Disposals Tax policy (LDT was also devolved to the Welsh government in 2018, previously known as Landfill Tax which still applies in England and Northern Ireland)

The Detailed Draft Welsh Budget is supporting Local Government in providing social care and other essential services.? In response to the ongoing recruitment and retention issue within the sector money is allocated to support authorities to meet the additional costs of starting to pay the Real Living Wage of ￡9.90 an hour to social care workers from April 2022.

Wales’ ‘Childcare Offer’ provides qualifying parents with 30 hours per week early education and childcare, for up to 48 weeks of the year.

The Budget, in line with the Programme for Government paper, invests to extend this to include two year olds, ‘with a particular emphasis on strengthening Welsh medium provision’.

Working parents will also be interested to note that the Plaid Cymru agreement means that, over the course of the agreement, an additional 196,000 children will become eligible to take up the offer of a free school meal.

The Budget promises to deliver additional investment up to 2024/25 in the Young Person’s Guarantee and employability support.? This includes the Wales all-age apprenticeship programme and an expansion of the Personal Learning Account.

The United Kingdom is more than just the UK Budget.? Whilst important, it is not the only Budget that payroll and reward professionals need to consider.?

Some of the above is mentioned as a demonstration of devolved responsibilities, remembering that if we are UK professionals, we need to consider all of the UK, not just what come out of Westminster.