Cynulliad Cenedlaethol Cymru

We move on to item 2, which is the consideration of the amendments to the Welsh Tax Acts etc. (Power to Modify) Bill. The purpose of this meeting is to undertake Stage 2 proceedings on the Welsh Tax Acts etc. (Power to Modify) Bill. In relation to the item, Members should have before them the marshalled list of amendments and the grouping list of amendments for debate. The marshalled list of amendments is the list of all amendments tabled, marshalled into the order in which the sections appear in the Bill. So, for this meeting, the order in which we will consider amendments will be sections 1 to 8 and the long title. You will see from the groupings list the amendments have been grouped to facilitate debate, but the order in which they are called and moved for a decision is dictated by the marshalled list. Members will need to follow the two papers, although I will advise Members when I call them whether they are being called to speak in the debate or to move their amendments for a decision. 

There will be one debate on each group of amendments. Members who wish to speak in a particular group should indicate in the usual way. I'll call the Minister to speak in each group. For the record, in accordance with the convention agreed by the Business Committee, as Chair, I will move amendments in the names of the Minister and Llyr Gruffydd. For expediency, I'll assume that the Minister and Llyr wish me to move all their amendments, and I will do so at the appropriate place in the marshalled list. If you do not wish to move a particular amendment, then please indicate that at the relevant point. In line with our usual practice, legal advisers to the committee and Ministers are not expected to provide advice on the record. If Members wish to seek legal advice during proceedings, please do so by passing a note to the legal adviser or requesting a short break in proceedings to take legal advice.

We'll move on to the first group. The first group of amendments relates to the scope of the power in section 1. The lead amendment in this group is amendment 7. 

As Chair, I move amendment 7 in the name of Llyr Gruffydd. I call on Llyr to speak to the lead amendment and other amendments in the group.

Diolch yn fawr, Gadeirydd. Thank you. You will all be aware, of course, that I was opposed to this Bill at Stage 1, and that's because, primarily, of the strong evidence that both this committee and the Legislation, Justice and Constitution Committee received. I've always said that I understand the rationale behind the Minister or Ministers wanting the power to respond to changes in circumstances that might require changes to taxes in Wales, but it has always been caveated by a need to retain the Senedd's integrity in such a process.

The Bill as it stands doesn't strike the right balance, in my view. In fact, it undermines the powers of the Senedd. And although the Bill appears to be a practical piece of legislation, it does move power away from the legislature and invests it too heavily in the Executive, the Welsh Government, in my view. There is a big question of principle there, in that respect, and as a Senedd, and as Members of the Senedd, we need to ask each other, really, to what extent we're content to cede those powers to Ministers.

As the LJC committee said, and I think the Chair has said in the Stage 1 debate, changes to tax law shouldn't be made through subordinate legislation in a retrospective manner. It's entirely contrary to the good practice and the acknowledged practice in these isles and internationally. The acknowledged way to do it is to deal with such issues through primary legislation. There are parallels to LCMs here, I think. Retrospective changes will mean more limited scrutiny, and there's no way to amend relevant provisions through subordinate legislation, whereas, of course, that could be done through primary legislation. This Bill, I feel, is contrary to one of the cornerstones of the constitution of these isles. Taxation powers should be under the care of the legislature, not the Government, and I don't think it's an overstatement to say that people throughout the centuries have fought for that fundamental right.

This Bill will allow tax Acts for Wales that have already been passed by the Senedd to be amended through subordinate legislation, and as stated by the LJC committee, the Welsh Government's chosen approach is, and I quote,

'contrary to established parliamentary practice and principles associated with good law-making.'

You will have heard the evidence from some of Wales's leading legal and constitutional minds. They raised concerns and fundamental doubts about this Bill, and clearly that's one of the reasons I was opposed to it at Stage 1. I'll remind you of some of that. Sir Paul Silk, of course, said, and I quote:

'Governments naturally want as few obstacles in their way and will often favour secondary legislative routes if possible. It is the job of the legislature to ensure that appropriate checks are kept in place and that it does not surrender its legislative role.'

He expressed concerns that this Bill is another example of the Executive, and I quote again,

'taking over functions that I think properly belong to the legislature'

and, of course, in this particularly contentious area, I'd argue, or potentially, at least, of taxation. His views were shared by Professor Emyr Lewis, who suggested, and again I quote, that

'There is also the core question of whether, as a matter of principle, the legislature should allow its own primary legislation to be amended by Ministers.'

So, my amendments 7, 8, 9 and 10, and consequential amendments 20 and 21 as well, in this group, are an unashamed effort, really, to try and limit the ability of the Minister to use the powers that are sought in the Bill. I know passing these amendments will probably mean that we need some sort of tidying up at Stage 3, but this really plays through a fundamental issue I have with this legislation, and I think it's the only way that we can now restrict the powers available to the Minister. I'd urge Members, even if you don't want to listen to me, to listen to some of the eminent minds that have contributed evidence to this committee and the LJC committee. I ask you kindly to support the amendments. Diolch.

Does anybody else wish to speak on these amendments? Peter. 

Thank you, Chair. I'll be speaking to amendment 13, tabled in my name. I thank Llyr for outlining his amendments, which I agree with. The purpose of my amendment is to insert a definition of 'protecting against tax avoidance' into the relevant section of the Bill. It references the definition provided by the general anti-avoidance rule in Part 3A of the Tax Collection and Management (Wales) Act 2016, meaning that it is already established within Welsh statute. This amendment responds to concerns raised to the finance and LJC committees that by having an undefined term of tax avoidance, it leaves Welsh Ministers with quite a wide range of discretion as to how to use their powers within the Bill. The Minister originally rejected the recommendations made by both committees, saying that the Welsh Ministers want to be able to potentially address the broadest meaning of tax avoidance. However, in reference to this power, the Finance Committee argued that we do not understand why the Minister is keen to take a power for this purpose when the need for it has not been demonstrated other than the suggestion of a potential future risk.

The committee also said that it is not appropriate to take a wide Henry VIII power to amend the Welsh tax Acts in relation to tax avoidance using the same terminology as the TCM Act without any attempt to limit the extent of that term. To me, taking a power just in case it is needed in the future without adequate limitations is just not appropriate. As such, the committee noted the need for a definition of tax avoidance within the Bill to constrain the powers available to Welsh Ministers. So, I urge committee members to accept this amendment. I will also be supporting the amendments, as I mentioned earlier, in this group tabled in the name of Llyr Gruffydd, which respond to the wide-ranging concerns about the powers included within the Bill. Thank you, Chair. 

Mike.

It's a really quick point, but I would have thought after yesterday that Llyr might have reconsidered whether he wanted to stop Ministers having these powers.

But on the loopholes, I think you need to stop loopholes. The situation existed on income tax where a firm decided to pay people in Krugerrands, which were not worth a lot of money as a Krugerrand, but had very high gold content. They might have been paid £100 a month in money, but it might have been worth £15,000 a month in the value of the gold. As such, you need to have some means of dealing with that. No-one ever thought that was going to be done, but somebody had worked out you could get round it. So, I think you do need to have a means of dealing with loopholes quickly. If you want a criticism, it's that this wasn't dealt with when the Bill came in. When we passed the Bill, which is only a few years ago, it's unfortunate the Minister and the Minister's advisers didn't realise we needed something like that. But I think we've got to have a means of stopping loopholes and stopping them immediately, otherwise you're going to have a situation where people will find ways through it.

I don't know that much about land transaction tax. I know quite a lot about landfill disposals tax, and there are things you could do in terms of pumping water into refuse to treat it as landfill disposals tax and treat it as mainly water rather than mainly rubbish and paying the much lower rate. But these are things that you could do in order to get round it. I think we'd all want the Minister to act immediately if people started filling their landfill disposal items with enough water to avoid having to pay landfill disposals tax at the higher rate. So, I think you really do need to have a situation where something immediately can be done, otherwise everybody's going to do it if it's easy.

Rhianon.

With regard to amendment 13, I think there was discussion and different evidence to this committee with regard to the purposes of defining tax avoidance. I think it was a mixed commentary around that. For instance, on Mike's point around the loopholes, there were comments that this would then, potentially, look to cause people to seek avoidance because of that very definition. So, I think I would not agree with Peter Fox's amendment.

Thank you very much. I call on the Minister to talk to this amendment and to her amendments—. Oh, no, there are no amendments, sorry. Over to you. 

Thank you, Chair. I'd like to just begin this morning by recognising the really positive engagement that I think I've had with the Chairs of both committees and also members of the committees following our general principles debate seeking to address the concerns that were raised at that point. I'm really grateful to you for your engagement and your constructive approach in terms of working together to strengthen the Bill. I think that we're creating a good model for future development of legislation in that kind of collaborative way.

I would say that the Bill before us today is very different already to that which was originally envisaged, and that's because of the way in which I've tried to listen and respond positively. I do think it is important that we debate what's in front of us today, in terms of the shape of the Bill, recognising that it is very different to that which was originally proposed, and I suppose the basis of the original evidence that the committee received and the original discussions, I have to say, that we were having with experts, all of which has led us to make some fundamental changes to the Bill. I'd also add that the substantive Government amendments that we're bringing forward today have been developed because of the scrutiny that there's been of the Bill during Stage 1 and the continued engagement that we have. Many of the amendments that I'm tabling today do seek to achieve, fundamentally, the same result as the non-Government amendments that have been tabled.

And also, just to be clear that the Bill is intended to be part of the progress towards establishing the long-term mechanism for making changes to devolved tax legislation. I have committed to commencing work with both committees on the longer term architecture for making changes to the Welsh tax Acts formally following the passage of the Bill, but, already, I'm starting to consider the potential scope of that and exploring who needs to be involved in that work. Just to reiterate, Chair, at the start today, that my commitment to continue to work with the Senedd is very strong. I do think that we all have a common purpose in terms of wanting to ensure that we do get the right solutions for us here in Wales.

So, just turning now to the amendments, amendments 7, 8, 9 and 10, tabled by Llyr Gruffydd, remove the four purpose tests from the scope of the regulation-making power as set out in section 1 of the Bill, and amendments 20 and 21 are consequential amendments to 7 and 9 and remove some linked definitions for the purpose tests.

The scope of the power has been deliberately constrained by the inclusion of the four specific purposes, which set out with clarity in which circumstances the power may be used. And these have been identified as the most likely future external events that may impact our devolved taxes, thereby ensuring that the power could not be used to make Welsh Government changes where there was not an external trigger event. 

So, amendments 7 to 10 remove the four purpose tests, but of course the wording in section 1(1) that states the power must be used

'for or in connection with any of the following purposes'

still remains, and without a consequential amendment to remove that remaining wording in section 1(1), the power will be unusable, as there will be no defined purposes. I do understand that that is the purpose behind these amendments, to make it unusable, and it is disappointing, given the kind of collaborative approach with which I've tried to develop the Bill. I've genuinely tried to respond to the concerns raised. But I'm not going to be disheartened, Chair, and I will just increase my resolve to work positively and purposefully to shape the Bill, as we move forward, with colleagues. And I look forward to further discussions after today.

But, just while we are debating the four purpose tests, I do think it's worth us just reminding ourselves of why the Welsh Government is bringing forward this Bill and what the four purposes would seek to achieve.

So, purpose test 1(1)(a) will ensure that landfill disposals tax and land transaction tax are not imposed where to do so would result in non-compliance with any international obligations. The UK Government at the moment is currently seeking trade agreements, and double taxation agreements are regularly updated. Whilst it's unlikely that these will impact on our devolved taxes, the possibility does exist and therefore it is right that we are prepared for those changes that we might need to make.

Purpose test 1(1)(b) enables Welsh Ministers to make legislative changes to protect against avoidance activity in relation to landfill disposals tax and land transaction tax that can then be stopped with immediate effect. That includes cases where the amendment of the legislation will clarify the intended application of the legislative provisions and potentially benefit taxpayers by stopping the promotion of avoidance opportunities that do, and did, not actually exist. Such action has been taken by the UK Government to protect tax regimes and taxpayers in the past, and I would like to be able to take similar action to protect our tax regime and our taxpayers.

Purpose test 1(1)(c) will enable Welsh Ministers to respond to changes in the predecessor UK taxes—that is, stamp duty land tax or landfill tax—that impact on or could impact on the amount paid into the Welsh consolidated fund. For example, in the event that the UK Government introduced a new charging regime, similar to the SDLT higher rates for additional dwellings regime, then the regulation-making power would enable Welsh Ministers, if necessary or appropriate, to respond at pace, potentially introducing a similar or equivalent type of change through our purpose test 1(1)(c) to our LTT higher rates residential property transactions.  

Finally, purpose test 1(1)(d) would enable, if required, clarification with near immediate effect in situations where, for example, any court decision interprets the filing obligations on taxpayers or what constitutes a notifiable transaction differently from how the rules had previously been understood to operate. Such a decision could potentially undermine the effective self-assessment of LTT or LDT. The powers in the Bill would enable such clarification, if considered necessary or appropriate, through triggering the purpose test in section 1(1)(d), and this could be actioned then at pace using the made affirmative procedure.

So, these tests are very much at the heart of the Bill, and I was pleased when both this committee and the Legislation, Justice and Constitution Committee recommended supporting the Bill at Stage 1. But, of course, they made a range of recommendations. 

I'll just move on now to the definition of 'tax avoidance' in respect of amendment 13, tabled by Peter Fox. That seeks to define the meaning of 'tax avoidance' in section 1(1)(b) by reference to the general anti-avoidance provisions set out in Part 3A of the Tax Collection and Management (Wales) Act 2016.  

As I've set out previously to the Legislation, Justice and Constitution Committee in response to its recommendation 5, whilst I recognise a precise definition of what constitutes avoidance activity might be attractive, it's not possible to provide that degree of certainty in this legislation. If defined in this way, there is a risk that Welsh Ministers might find the purpose is too narrow, and those seeking to bend the rules may also structure transactions in a way that falls just outside of that narrower definition, but would still achieve a tax result that was contrary to the intentions of the legislation. And I think Mike Hedges gave some examples of the ways in which people can be very creative when trying to manoeuvre in this way. Welsh Ministers would want to be able to, potentially, address the broadest meaning of tax avoidance, so it is appropriate not to define this term, but instead to allow the phrase 'tax avoidance' to take its ordinary meaning.

I do, however, agree, with the principle that this should be set out very clearly, and I would like to commit today to providing an update in the revised explanatory memorandum at Stage 3, setting out that tax avoidance is not defined in the Bill and therefore does take its natural meaning. And it may, of course, ultimately, be for the courts to determine the scope of the Welsh Ministers’ ability to use the power provided by the Bill to address tax avoidance activity.

So, I'll conclude there, Chair, and just repeat, really, for the reasons I think I've set out, that I can't support amendment 13 in this group, unfortunately, tabled by Peter Fox, or any of the amendments tabled by Llyr Gruffydd.

I call on Llyr to reply to the debate.

Thank you, Chair, and thank you to everyone who's commented on my proposed amendments. The Minister is right—my amendments are speaking to the broader principle issue that I have with the Bill, rather than the exact individual purposes listed in that particular section. But it is a legitimate concern, isn't it? There is a dangerous precedent being established here, and my fear is that we will see this as the start of an increased or an extended creep of powers drifting away from the legislature to the Executive, and I don't think that's healthy and I don't think that's right. 

And Mike was right about the point about loopholes, and I haven't got an issue with that, fundamentally. But, of course, where does that stop, then? Because the Government, I'm sure, could list the length of your arm of loopholes that they could identify in all sorts of policy areas. 

Will you take an intervention? 

Yes, I presume it's in order, isn't it? Yes. 

No-one thought that being paid in Krugerrands was ever going to be done. If the Westminster Government had produced a list of tax avoidance loopholes, being paid in Krugerrands would not have been on it. And this is, really, the creativity of these people who try and avoid taxation. That's why this is necessary. The Krugerrands is just one extreme example of something that somebody would never have thought of before, which was brought in.  

And I don't disagree with you that there's a potential for that. How likely that is, I don't know, but you're right that we need some sort of protection against that kind of scenario. But I'm arguing that we should retain that within primary legislation and an expedited primary legislative process, and not just gift the powers to an Executive who could actually set a hare running that could end up somewhere that none of us intends it to end up in. So, that's the case I'm making, that there's a more fundamental issue at play here, and the fear is that the transfer of power starts now, and my question is: where does that end?  

Okay. Llyr, do you wish to proceed to a vote? 

Yes, I do. Diolch.

The question is that amendment 7 be agreed. Does any Member object? [Objection.] Okay, so the question is that amendment 7 be agreed. Will those in favour please raise your hands? And those against. As there's a tied vote, I use my casting vote in the negative, that is, against the amendment, in accordance with Standing Order 6.20(ii). Therefore, amendment 7 is not agreed. 

I move amendment 8 in the name of Llyr Gruffydd. The question is that amendment 8 be agreed. Does any Member object? [Objection.] The question is that amendment 8 be agreed. Those in favour, please raise your hands. And against. As there is a—[Interruption.] Sorry, yes. In favour two, against two. So, as there is a tied vote, I use my casting vote in the negative, that is, against the amendment, in accordance with Standing Order 6.20(ii). Therefore, the amendment, amendment 8, is not agreed.

I move amendment 9 in the name of Llyr Gruffydd. The question is that amendment 9 be agreed. Does any Member object? [Objection.] The question is that amendment 9 be agreed. Those in favour, please raise your hands. And against. So, that's two all. Therefore, as there is a tied vote, I use my casting vote in the negative, that is, against the amendment, in accordance with Standing Order 6.20(ii). Therefore, amendment 9 is not agreed.

I then move on to amendment 10 in the name of Llyr Gruffydd. The question is that amendment 10 be agreed. Does any Member object? [Objection.] The question is that amendment 10 be agreed. Those in favour, please raise your hands. And those against. So, that's two for, two against. Therefore, as there's a tied vote, I will use my casting vote in the negative, that is, against the amendment, in accordance with Standing Order 6.20(ii). Therefore, amendment 10 is not agreed.

So, we now move on to group 2, the extent of permitted changes to the Welsh tax Acts. The second group relates to the extent of permitted changes to the Welsh tax Acts. The lead amendment in this group is amendment‍ 12. I call on Peter Fox to move and speak to the lead amendment and the other amendments in the group.

Thank you, Chair. Yes, amendments 12, 15, 18 and 19 in my name remove—. I move those amendments, Chair. Those tabled in my name remove the Tax Collection and Management (Wales) Act 2016 from the scope of the regulation-making powers in section 1. This responds to concerns that powers to make regulations under the relevant section to protect against tax avoidance are too broad and could be used, despite the 'necessary or appropriate' test, to amend other pieces of legislation, which would not be desirable or necessary. For example, the general anti-avoidance rule within the 2016 TCM Act, the GAAR—at the moment, the Welsh Government is proposing to take the ability to decide what it wants to legislate for in relation to any tax-avoidance activity. And as I said in the previous debate, I don't believe that such a power is appropriate, and so restricting the powers available to Ministers is a necessary safeguard to ensure that future Ministers do not overstep the mark.

Amendment 16 clarifies that the regulation-making powers in section 1 may not modify provisions of the Welsh tax Acts that confer power on the Welsh Ministers to make subordinate legislation. It has been drafted in line with recommendation 11 of the Legislation, Justice and Constitution Committee. The Minister accepted this recommendation in part, and I will come onto this amendment shortly. In her response to the committee, the Minister suggested that 

'a restriction on amending the existing regulation making powers will be overly restrictive.'

However, as the LJC committee argued, we do not consider it to be constitutionally appropriate for Welsh Ministers to hold such a power, which the Minister has acknowledged could theoretically be used to change existing powers delegated to the Welsh Ministers by the Senedd. It is then important that we have an additional safeguard within the Bill.

Amendment 2, tabled in the name of the Minister, aims to restrict the scope of the regulation-making power within section 1 of the Bill. The effect of this amendment is to prohibit the Welsh Ministers from using the power within section 1 of the Bill to make any provision relating to the investigation of criminal offences. It also introduces provision restricting the Welsh Ministers' ability to amend the existing regulation-making procedures set out within the Welsh tax Acts, and any future regulation-making procedures to be introduced into the Welsh tax Acts. Although I generally support restrictions on the current powers within the Bill, my amendment 16 seeks to go further by preventing modification of provisions in the Welsh tax Acts, conferring regulation-making powers on Welsh Ministers. However, should other amendments not pass, then I will abstain on this amendment so that the Bill is at least somewhat strengthened to limit the powers of the Welsh Ministers, with the potential to strengthen this further at a later date.

So, to conclude, Chair, I urge Members of the committee to support amendments 12, 15, 16, 18 and 19, tabled in my name, and to abstain on amendment 2.

Thank you, Peter. I believe that Llyr wishes to speak to this. 

No, I think Peter's made the case very eloquently. It was just to reiterate that I acknowledge that the Minister, in her amendment, is moving in that direction, although like Peter—I believe that Peter's amendments are stronger, so I'll be supporting those. And, clearly, I won't be opposing the Minister's amendment, but I would prefer those tabled by Peter Fox.

Does anybody else wish to speak? Okay. I'll call on the Minister to respond.

Thank you. So, as we've heard, all of the amendments in this group seek to further limit the scope of the regulation-making power in section 1 of the Bill. And as Members are aware, I've already significantly reduced the scope of the power in the Bill as a result of the policy consultation and ongoing engagement with stakeholders, and in particular with tax practitioners. The inclusion of the four purpose tests, limiting the circumstances in which the power may be used, and the necessary or appropriate test, does limit the circumstances in which the power may be used.

Amendments 12, 15, 18 and 19, tabled by Peter Fox, seek to exclude the whole Tax Collection and Management (Wales) Act 2016 from the scope of the regulation-making power in section 1 of the Bill, and make necessary consequential changes to ensure the Bill operates appropriately with this exclusion. Prior to the general principles debate, in my response to the Chair of the Finance Committee, I set out a detailed review of the parts of the TCM Act and examples of future scenarios where amendments may be made by regulations under the Bill, and I think this clearly demonstrates why the ability to amend this TCM Act is important, and why the majority of the Act should remain within the scope of the regulation-making power in the Bill. 

For example, the regulation-making power could be used to provide clarification of the law as regards the investigatory powers of the Welsh Revenue Authority within Part 4 of the TCM Act. The Welsh Ministers may decide that clarification of Part 4, subject to Senedd approval, is required to enable the WRA to continue to operate its compliance activity effectively. Cases could arise where the taxpayer challenges the use of the WRA information powers, for example because they are ultra vires, that is beyond the legal authority, and this might result in a decision to change the WRA's ability to use them.

Information powers are essential for the work undertaken by the WRA, to check that taxpayers are paying the correct amount of tax, and early clarification will be important to ensure that our tax authority can continue to carry out its duties properly. Peter Fox's amendments would significantly narrow the scope and usefulness of the Bill, and therefore, I am unable to support them. However, I do agree, in principle, that we should be as transparent as possible about the need for this regulation-making power. So, I would like to commit to setting out clear examples in the explanatory memorandum of the potential use of the power in relation to each of the three Welsh tax Acts. 

Furthermore, Members can be assured that I have continued to consider the scope of the regulation-making power in this Bill, and to limit the power as far as is appropriate. And that's why the intended effect of the first part of my amendment 2 is to prohibit the Welsh Ministers from using the power within section 1 of the Bill to make any provision relating to the investigation of criminal offences. And I'm also really interested in Members' thoughts on other specific sections or parts of the Welsh tax Acts that they consider should be excluded, and I'd really welcome continued dialogue on this matter, and, obviously, we'll consider any suggestions or proposals that you bring forward very seriously. 

Amendment 16 was tabled by Peter Fox. I consider that a restriction on amending the existing regulation-making powers would be overly restrictive. For example, using the power in the Bill to amend Schedule 5 to the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017, which relates to higher residential rates, could also result in widening, or narrowing, the existing scope of the associated regulation-making power, simply because the scope of Schedule 5 has been changed. The acceptance of amendment 16 could mean that the ability to use the power within section 1 isn't possible where there is already an existing regulation-making power within the WTAs, which then cannot be amended to accommodate new legislation. And this would fundamentally undermine the purpose of the power provided by the Bill.

Similarly, if the power in the Bill was used to create a new LTT obligation for taxpayers to make a return, then it would be right to amend section 52(2) of the LTTA so that the new provision would be added to the list of eight existing return obligations that can already have their filing dates amended by regulations, subject to the draft affirmative procedure. And, again, such a change would be considered to amount to amending the regulation-making powers when it's simply ensuring that the statute operates in a coherent and consistent manner. This amendment would potentially stop the use of the power to make changes to sections or schedules where there is an existing regulation-making power. And I do not consider that the level of restriction that this would impose is appropriate, and therefore I'm unable to accept this amendment.

However, the second part of amendment 2, tabled in my name, was drafted in response to the Legislation, Justice and Constitution Committee's recommendation 11, and I think that this does go some way to addressing Peter Fox’s concerns. I did accept this recommendation in part, and the amendment introduces a restriction on the Welsh Ministers' ability to use the power within the Bill to change the procedure for making regulations as regards any regulation-making powers in the Welsh tax Acts. The restriction will apply to all regulation-making powers, whenever they were inserted into the WTAs. And this will include those that exist already and any subsequently created by any means.

It is for these reasons I do not support the amendments in this group tabled by Peter Fox, namely amendments 12, 15, 16, 18 and 19, but I do ask for your support for the amendment tabled in my name, amendment 2. Thank you.

Okay. I call on Peter to respond.

Thank you, Chair. And thank you, Minister, for your clarity and your commitment to make things clearer within the memorandum. I think that is welcome. What I've sought to do through these recommendations is to reflect those strong feelings that were felt from the Finance Committee and the LJC committee; our concerns are not necessarily—well, they are relevant to now, but about what could happen with future Ministers and future interpretations of the Bill. But, Chair, I think I've clarified my position through my opening remarks and I'm happy to move to the vote.

Thank you very much, Peter. The question is that amendment 12 be agreed. Does any Member object? [Objection.] Okay. The question is that amendment 12 be agreed. Those in favour, please raise your hands. And those against. So, two for, two against. Therefore, I use my casting vote under Standing Order 6.20, and therefore amendment 12 is not agreed.

Chair, in relation to that, then, as 12 has not been accepted, I'm content not to take 15, 18 and 19 to the vote. But I will be wanting to take 16 to the vote.

Okay. Thank you very much. Llyr.

You said 15—

Sorry, 20 and 21.

Yes.

And, Peter, you said 15, 18 and 19. Bear with me just a second.

Fifteen, 18 and 19.

Right. Okay. 

So, therefore, we move on to amendment 13. So, Peter, do you wish to move amendment 13?

Yes, I do. 

Okay. The question is that amendment 13 be agreed. Does any Member object? [Objection.] Okay. The question is that amendment 13 be agreed. Those in favour, raise your hands. And against. That's two all. Therefore, a tied vote, and I use my casting vote in the negative. Therefore, amendment 13 not agreed. 

So, we move now to group 3. The third group of amendments relates to regulations that have a retrospective effect. The lead amendment in this group is amendment 1. 

I move amendment 1 in the name of the Minister and call on the Minister to speak to the lead amendment and other amendments in the group. Minister. 

Thank you. Amendment 1, tabled in my name, is a substantive amendment, and responds to the Finance Committee's recommendations 5 and 6 and the Legislation, Justice and Constitution Committee's recommendation 10. The amendment inserts a new restriction, which prevents regulations made by the Welsh Ministers that have a retrospective effect from applying from a date further back than the date the legislative change was warned or announced, either by a ministerial oral or written statement. The restriction will only apply in cases where there is a negative tax impact. That is, where there is any new liability or increased liability to land transaction tax or landfill disposals tax on a taxpayer. The restriction does not extend to situations where the Welsh Ministers use the power to make changes with retrospective effect that reduce the tax charged, and therefore that have a positive effect for the taxpayer. This is so that changes can be made to legislation to reduce taxpayers' liabilities to a date before the announcement. For example, if responding to a UK budget change, it will ensure that our taxpayers can benefit from the reduction at the same time as taxpayers in England. The amendment also restricts the ability to withdraw an entitlement to a tax credit retrospectively only as far back as the date of a ministerial announcement, either by an oral or written statement. 

I intend to publish at Stage 3 an update on the draft policy statement on the use of the retrospective legislation. This updated draft policy statement will reflect the new restriction if this amendment is approved.

In response to amendment 17 tabled by Peter Fox, I have been clear that the statement required by section 3 is a policy statement on how the Welsh Ministers will use the power to make retrospective legislation as proposed by the Bill, and the Bill itself also sets the limitations on the use of that power. A statement by the Ministers cannot be permitted to alter the effect of legislation, and the statement itself obviously needs to be in compliance with that law. The statement is intended to inform the public and the Senedd how the power to make regulations with retrospective effect will be used, and to address the reasonable expectations of tax advisers that such a document would be provided, to assist their understanding of how Welsh Ministers will use the power to make retrospective legislation. It is not intended to be a form of legislation in and of itself.

The statement is to provide a similar reassurance for our public and tax advisers to that which already exists in relation to the UK Government's various statements on retrospective legislation. The aim is to provide a degree of continuity to enhance the public and the tax advisers' confidence in the Welsh Government's actions. In the event necessary or desirable changes need to be made to the policy statement, the Welsh Government will gather views on any changes from relevant stakeholders before the publication of an amended statement, which obviously and primarily will include this committee. I therefore do not see a statutory role for the Senedd in approving and amending the statement, and therefore I cannot support this amendment. However, my officials are continuing to work with external stakeholders to ensure that the statement is clear and meets its policy aims. I also intend to share at Stage 3 an update on the statement to gather your views as well. 

Amendment 14 is a consequential amendment, which provides a signpost to the section introduced by amendment 17. If amendment 1 tabled in my name is accepted, then amendment 14 becomes unnecessary, as the subsection it seeks to amend will be deleted and replaced with much fuller rules in relation to the use of the power to make retrospective legislation. Chair, I cannot support amendments 14 and 17, but I ask for support for amendment 1, tabled in my name. Thank you.

Thank you, Minister. I believe that Peter and Llyr want to speak to this group, but I'll go to Peter first.

Thank you, Chair. I'll be speaking to amendments 14 and 17, tabled in my name. Amendments 14 and 17 amend section 3. They would still require the Welsh Ministers to publish a policy statement, but now provide that the power in section 1 may only be exercised retrospectively in accordance with the policy statement that has been approved by the Senedd. These amendments respond to recommendation 7 of the Finance Committee. During scrutiny, the Finance Committee argued that,

'Given the particular importance of scrutiny of legislation with retrospective effect, we do not feel it is appropriate that the Bill allows the Welsh Ministers to simply publish and revise the policy statement at any time, without the Senedd's formal approval.'

I know that the Minister has stated that the statement is a policy statement about how Ministers intend to use powers, but the fact is, given the particular importance of scrutiny of legislation with retrospective effect, there should be a Senedd mechanism to check the use of such powers. I hope all Members of this committee see the need to ensure that there is an appropriate safeguard on the use of these powers within the Bill and that ultimately it should be down to the Senedd to arbitrate on the use of legislation.

Okay, Peter. Llyr has indicated that he does not want to speak on this, but Mike has. So, Mike.

I think the key is that you can't go back before the statement, and I welcome the Minister bringing that in, because I think that was a matter of concern for everyone—that you'd have legislation and, 'Oh by the way, 20 years ago, that house you bought, you now need to pay more land transaction tax on it.' So, I think it really is important that it can't go back before the statement. And there has to be a statement because we don't meet for something like 14 weeks of the year and we don't meet on weekends. You have to give notice of items—something done on a Wednesday evening would at the best of times not be able to be dealt with until the following Tuesday—and I'll tell you that people will be piling in. But you can't go back, so the protection is there. The Government can't say, 'Oh by the way, we want to take more tax off you.' So, I think amendment 3—the minimum one—really does meet what we asked for as a matter of urgency during Stage 1.

Thank you very much, Mike. I'll then call on the Minister to reply.

Thank you, and I would just agree with Mike really that amendment 1 does very much respond to the concerns that have been raised by both committees, and I think is a good example of how scrutiny does really genuinely strengthen Bills. And the Bill, I think, will be much stronger as a result of amendment 1, should it be passed today in respect of retrospectivity and so on. So, I think that this is a really important amendment that we're debating at the moment.

And then, just to be clear really on the policy statement: that is primarily a document for use by tax advisers and the public. It's something that tax practitioners would expect of us in terms of being able to provide useful information to guide them in the work that they do, and we've been having some good discussions through officials with tax practitioners in terms of what would be a useful document for them. But as I say, we will look to share that also with committee to take your views on it. So, I'm just grateful to colleagues for their remarks on this group and I would ask Members to support the Government amendment, which arises directly from the Finance Committee's and the Legislation, Justice and Constitution Committee's Stage 1 reports.

Thank you, Minister. The question is that amendment 1 be agreed. Does any Member object? [Objection.] Okay. So, we proceed to a vote. The question is that amendment 1 be agreed. Those in favour. Those against. And those abstaining. So, that is two in favour and two abstentions. Therefore, the amendment is agreed.

And because amendment 1 is agreed, amendment 14 therefore falls.

So, we move on to—. It would be amendment 15, but Peter has stated that he doesn't want to move that one, so we will move on to amendment 16.

Peter, do you wish to move 16?

Yes, I do.

The question is that amendment 16 be agreed. Does any Member object? [Objection.] Okay. The question is that amendment 16 be agreed. Those in favour, two. Those against, two. Therefore, that's two in favour, two against. Therefore, I use my casting vote in the negative, according to Standing Order 6.20. Therefore, the amendment is not agreed.

We move on to amendment 2.

I move amendment 2 in the name of the Minister. The question is that amendment 2 be agreed. Does any Member object? [Objection.] Okay, the question is that amendment 2 be agreed. Those in favour: two in favour. Those against. And those abstaining. So, that's two in favour and two abstentions. Therefore, the amendment 2 is agreed.

So, we move on to group 4, the expiry of the power under section 1. The lead amendment in this group is amendment 11.

I move amendment 11 in the name of Llyr Gruffydd, and call on Llyr to speak to the lead amendment and the other amendment in this group.

Diolch, Llyr. Mike.

I have some sympathy with what Llyr has said and some sympathy with what the Minister has put forward. Can I just put forward a suggestion that isn't here, that it's looked at within 12 months of it first being used? The possibility is, whether we're dealing with it after five years or two years, it will not have been used within those two or five years. I think that when it's first used really is the time that you want to look at it. Taking it out when it's not been used, I mean, we won't know whether it works or not because it won't have been used. We don't know how often it's going to be used. We think/hope that it will not be very often. We think/hope that it will be a very unusual event. This is a bit like having the second parachute when you're coming out of a plane. You hope and think you'll never need it there, but you're really pleased it's there if the first parachute, by some mischance, fails.

I'd like to say to you and the Minister—again, to the Minister—to look at doing something after it's first been used, so that we, as a Senedd and as a Finance Committee, can actually look at has it worked effectively, are we happy with it; rather than doing it at a time when, in two years' time or five years' time, it won't have been used. How can you criticise an Act that has been brought in and then hasn't been used, any more than you can criticise it today?

Diolch, Mike. Does anybody else wish to speak?

I only want to echo—and I'm not going to go over it—what Llyr said. He captured it very well for his amendment 11, and I will be fully supporting that position.

Thank you. I'll ask the Minister to speak to this amendment.

The Government amendment in this group is related to the insertion of a sunset clause. Amendment 6 inserts a new section limiting the lifespan of the power provided by section 1 of this Bill. The amendment sets out that no new regulations may be made using the regulation-making power within section 1 five years after the Bill comes into force, around September 2027.

However, I think it is important to provide the next Senedd with the opportunity to extend the life of the Act by up to a further five years if that Senedd considers it appropriate. That extension is a once-only opportunity; it will not be a rolling renewal and is intended to permit that Senedd to ensure, if they wish, that the longer term arrangements are fully in place before removing the flexibility provided by this Bill. 

The extension will only be achieved by Members voting to approve regulations made by the Welsh Ministers. This will allow sufficient time to ensure that any future arrangements, including potentially new primary legislation, will be in place by the end of this period. I agree with the principles set out in Llyr Gruffydd's amendment 11, and recognise that that amendment and my amendment 6 achieve broadly the same aim. I recognise that with amendment 11 there is a desire to shorten the time that the extension of the sunset clause may operate. I should stress here, however, that amendment 6 provides a maximum extension of five years, and may be shorter if the Senedd considers it appropriate.

I am of course prepared to work with Llyr Gruffydd or any other Members towards a Stage 3 amendment to my Stage 2 amendment that reduces the extension to not beyond the end of the next Senedd, a period of, say, four years. That would leave all decision-making on confirming the new architecture and the ending of this Bill's effective operation to the next Senedd, and that seems like an appropriate outcome and in keeping with the collaborative way in which I'm seeking to approach the legislation.

However, I cannot agree with the inclusion in amendment 11 of a minimum 60-day period between the laying of the draft regulations and any Senedd vote. This will likely set an unhelpful precedent for future regulations and create a very long period between the date of laying and the earliest possible vote. I don't really understand why there is a desire for such a long period, or why it's thought that such a long period will be required.

The matter before the Senedd will be to either agree the extension of the power in section 1 or not. If amendment 11 were accepted, and assuming that the Bill receives Royal Assent on 20 September, it will mean—using this year’s recess dates as a guide—that the latest date the regulations could be laid would be 20 May to permit a vote in time, well over 100 days before the date of expiry. This would create a lengthy period of uncertainty for a matter that I would contend is unlikely to merit such a considerable period of time for Members to consider and reach their decision. I therefore ask that Members agree my amendment 6, and do not agree amendment 11 in the name of Llyr Gruffydd.

Diolch, Minister. I call on—. Oh, Rhianon.

It's just for clarification in regard to amendment 6. So, to underscore that it's a period of up to five years, and therefore it could be within two years, as in the proposed amount.

Yes, absolutely. It's up to five years.

Thank you.

Thank you. I call on Llyr to reply to the debate.

Yes, but it could be five years as well. But I'm hearing what the Minister is saying in relation to effectively guaranteeing that it won't extend beyond the end of the next Senedd. Yes. Well, if that's the case, then I welcome that very much. I'd happily take the Minister's word on that and look to amend appropriately at Stage 3, meaning, Chair, that I wouldn't wish to pursue my amendment on that understanding.

Okay. Thank you very much. So, does any Member object to the withdrawal of amendment 11? I don't see any objections. So, therefore, the amendment is withdrawn.

Therefore, we'll move to amendment 17. Do you wish to move amendment 17, Peter?

Yes, please.

Thank you. The question is that amendment 17 be agreed. Does any Member object? [Objection.] The question is that amendment 17 be agreed. Those in favour, please indicate—two. And those against, two. Therefore, it's two in favour, two against, therefore I cast my casting vote in the negative according to Standing Order 6.20(ii).

I then move on to group 5. The fifth group of amendments relates to the made affirmative procedure, the minimum period for scrutiny. The lead amendment in this group is amendment 3. 

I move the amendment in the name of the Minister, and call on the Minister to speak to the lead amendment and other amendments in the group. Minister.

Thank you. Amendments 3 and 4 have been tabled in my name to ensure that a minimum period will be allowed before a vote is held on any made affirmative procedure regulations made using the power in the Bill.

Amendment 3 details that regulations laid before the Senedd using the power within section 1 of the Bill, and subject to the made affirmative procedure, must be laid for a minimum period of 28 days after making before they are voted upon by the Senedd. This amendment is to provide sufficient time for the Senedd to scrutinise regulations before the motion to approve is heard and voted upon.

Amendment 4 is consequential to amendment 3. It is necessary due to the changes made by amendment 3, and provides that the calculation of the days for the Senedd's debate on the made affirmative regulations will be made in the same way for both the minimum 28-day period before the motion can be heard, and the maximum 60-day period before which the motion must be heard, before the regulations cease to have effect. That is that no account is taken of any time during which the Senedd is either dissolved or in recess for more than four days.

Thank you, Minister. Llyr, did you wish to speak to this?

Thank you very much—very grateful to Llyr for his comments.

Okay. Thank you very much. So, Minister, do you wish to proceed to a vote on amendment 3?

Yes, please.

The question is that amendment 3 be agreed. Does any Member object? No. Therefore, amendment 3 is agreed in accordance with Standing Order 17.34(i). 

Excellent. So, we'll move on to amendment 4.

I move the amendment in the name of the Minister. The question is that amendment 4 be agreed. Does any Member object? No objections. Therefore, amendment 4 is agreed in accordance with Standing Order 17.34(i).

We therefore move on to amendment 18, but you've indicated that you don't wish to move it.

There we are. So, we'll move on. And 19.

The same.

The same. Thank you.

So, we'll move on to group 6. The final group of amendments relates to review of the Act. The lead and only amendment in this group is amendment 5. 

I move the amendment in the name of the Minister, and call on the Minister to speak to the amendment. Minister.

Amendment 5 addresses the recommendation of both committees that a duty should be placed on the Welsh Ministers to publish the conclusions of a review on the operation and effect of the Act. This amendment inserts a new section on this review, which must be completed no later than four years after the Bill comes into force.

The timing of this review is intended to ensure that enough time has passed to make the review meaningful, but also so that the outcome of the review will be able to inform the development of the future architecture early in the next Senedd term. This is close to the timing proposed by the Finance Committee in their Stage 1 report and is also informed by the inclusion of the sunset provision in amendment 6. It can take a long time for such reviews to be conducted if they are undertaken in a meaningful way. If the review were set at two years after Royal Assent, we would likely need to start work not long after the Bill came into force. And, of course, the closer we are to the date the Bill came into force, the less likely it is that it will have been used by Welsh Ministers. 

Of course, if this committee is committed to a review of the use of the power at an earlier date, then it is open to the committee to carry out that review and to report. And I imagine that the committee might wish to make reference to the Bill in its end of term report and provide its recommendations to the Senedd's next finance committee.

Thank you, Minister. Does anybody wish to speak to the amendment?

Thank you very much. I would just like to move the amendment as it is today, but very keen to open up another round of discussions with both Chairs of the committees, but also with colleagues, as members of committees, as we move towards Stage 3 to explore where we are now that the dust will settle after Stage 2 and think about what might need to be done further to improve the Bill at Stage 3.

Okay. Thank you very much. So, Minister, you want to go to a vote on amendment 5.

Yes, please.

Thank you. Okay. The question is that amendment 5 be agreed. Does any Member object? I don't see an objection, so, therefore, amendment 5 is agreed in accordance with Standing Order 17.34(i).

Therefore, finally, I move amendment 6 in the name of the Minister. The question is that amendment 6 be agreed. Does any Member object? [Objection.] Okay. Therefore, the question is that amendment 6 be agreed. Those in favour. Those against. And those abstaining. So, two abstentions, two in favour, therefore, the amendment is agreed.

And that is the end of the amendments. I'd like to thank the Minister, officials and Llyr for attendance here in the Finance Committee today. A draft transcript of the meeting will be sent to you for checking for factual accuracy.

That completes Stage 2 proceedings. Stage 3 will begin tomorrow. The relevant dates for Stage 3 proceedings will be published in due course. Standing Orders make provision for the Minister to prepare a revised explanatory memorandum taking account of the amendments agreed today. The revised memorandum will be laid at least five working days before Stage 3 proceedings.