Cynulliad Cenedlaethol Cymru

Note the papers. There we are. Diolch yn fawr.

Okay, we’ll move on to our substantive item this morning, which is session 11 of the evidence sessions on the Visitor Accommodation (Register and Levy) Etc. (Wales) Bill. I can’t believe that it was before Christmas that we had the first session on this, so it’s been a while, but it’s good to have the Cabinet Secretary here, with your officials. Would you mind introducing yourself and your officials for the record, please?

Thank you very much for coming in. Your time is appreciated. So, we'll move on this morning and we'll start by reflecting on some of the evidence that we've heard, and I'm sure you and your team have been following some of the evidence and the body of evidence that's come forward. One of the opinions that we've heard, and part of the evidence that we've received, is that the tourism economy has still not recovered from the pandemic and other economic challenges such as high energy costs. Do you remain of the view that it's the right time to introduce this Bill?

Diolch, Cadeirydd. You’re right that I have been following the evidence sessions that the committee has undertaken. I wanted to recognise from the outset that you will have heard from some individuals and some organisations who are simply opposed to the visitor levy. They just don’t agree with the policy. And of course that’s absolutely fine, and they’ve been given a voice on the floor of the Senedd by the Welsh Conservative Party, and that’s absolutely right and proper as well. But I do think that when some organisations have said to you, ‘Oh, not now’, what they really mean is ‘not ever’, because they’re opposed to the policy. They make an argument about timing, but what they’re really arguing is that they don’t think the Bill is the right Bill at all.

I explained, I think the last time I was in front of the committee, the long prehistory to this Bill. The first time this idea was discussed in front of the National Assembly, as it was then, was as far back as 2009, because it was there in the Holtham commission. It was in the manifesto of my party and other parties. It was in the programme for government. It was in the co-operation agreement. There’s a long lead-in. This is not an idea that has suddenly been put in front of the sector. And there’s a long path in front of us as well.

This is not a Bill that is going to lead to immediate change on the ground. Local authorities will have to consult. There will be a lead-in time. The earliest we think any local authority could use the powers that the Bill provides will be April 2027. So, I myself don’t accept the argument that this is a uniquely difficult time, the wrong moment to do it. There will always be challenging circumstances in an industry that relies on factors that are beyond its own control, such as the weather, and I feel like there’s been plenty of time for the sector to get to know this idea and there’ll be plenty of time for them to adjust to it, should the Bill succeed.

One of the other arguments that have been made in this committee and through some of the evidence is not the timing, but the cumulative effect of the other taxes and other levies and through things like the 182-night occupancy rule, the implementation of national insurance, and then the abolition of the furnished holiday lets relief on the tourism sector. How do you respond to that?

Well, I suppose we're familiar with the argument about comparing apples and pears, but that list, I think, is probably the full fruit salad, really, because they're all completely different issues and they do not collide across the whole of the sector. Some of those things will have an impact on some parts of the sector, and some of them will not at all. The 182-day occupancy rule was a very deliberate policy, designed to address over-supply in the industry, designed to support legitimate businesses rather than hobbyists who were undercutting them and making the sector less stable and viable.

Tourism in Wales has a very large number of very micro businesses. They will be no worse-off as a result of the national insurance changes. Indeed, the employability allowance changes will make some of them better off than they are now. So, it's not a decision in the hands of the Welsh Government, but it's not a decision that will have an impact right across the sector or the same impact everywhere. 

And the furnished holiday lets relief, as I recall it, was abolished by the last Government, and their arguments for doing so were arguments of fairness across the sector. The sector has many different sorts of accommodation providers, from campsites to luxury hotels, and this was a relief that appeared to advantage just one strand in the wider sector. So, yes, there are lots of changes that go on in the industry. The idea that they're accumulating quite the way that may have been suggested to you, I think, doesn't bear examination when you get below the headlines and start to look at how those different changes impact in different ways in different parts of the industry.

Okay. Thank you. Moving on from that, some evidence that we've received has looked at and questioned why an overnight levy as opposed to day visitors and the fairness of that aspect. I suppose some of the questioning backwards and forwards was that it becomes complicated and how you would potentially do it—you know where the accommodation is, therefore, you're able to measure it. Is that the overriding issue when it comes to design? Is it more of a complexity or is it something else that we need to be aware of that made the decision to go for an overnight-stay levy as opposed to a day-visitor levy?

Well, Chair, in the formative stages of the Bill, what I didn’t want to see was the search for the perfect driving out the possible. So, I’m sympathetic to the argument that if there were a practical way of capturing day visitors, then there’s quite a strong case for doing that. And we have looked around the world to see where there are successful examples, and there aren’t many of them. Where they do exist, they tend to be places that have very hard borders, where it’s very easy to see whether people are coming for the day or not. Cruise liners are often the example given of how a day-visitor levy can be made to work.

We’re not in that position in Wales. We have a very open and very porous border. It’s much harder for us to identify day visitors. Didn’t we discuss it last time I was here with you, as to how, if you were a resident of Tenby, would somebody know whether you were a day visitor or someone who lived there all year round? So, you're right—it is the practicalities of being able to capture day visitors within the compass of this Bill that led us to decide not to try to include them. As I say, I got to the point where I was afraid that trying to find a way of doing something was going to drive out the ability to do the things we can do in the search for the perfect that we couldn't accomplish.

Okay. So, the driver behind the levy is to be able to support the tourism sector across Wales, and to be able to do that on a local authority basis, to be able to do that. One thing that was suggested to us was that this might shift patterns of behaviour, from people staying overnight to coming for a day, or might curtail somebody being here for fewer days because it will cost more. Did that factor into any of the thinking? I think I recall from one evidence session that we were talking about maybe applying it for five days and, therefore, people would stay longer because they've already paid for five, so they might as well stay for seven—that type of argument. I'm just wondering if you'd given that any consideration in some of the evidence that's come through, to see what your thoughts are on that.

Well, I think the way that we have constructed the Bill does provide an answer to that anxiety, because you know that what we have gone for is a very broad tax base, with very low—by international standards—costs per day. I don't think we were able to find any economic evidence that a charge at the level that this Bill provides would lead people to change their whole holiday plans. As we said last time, you're talking about less than the cost of a cup of coffee each day, and the idea that you would up-end the whole of your holiday plans on that basis doesn't seem to be anything than a very marginal argument and have a very marginal impact. So, yes, we did think about it. I don't believe that the evidence is there to suggest that costs at the level pitched in the Bill would have that sort of impact on people's decision making.

Okay. Mike, did you want to come in?

Aren't the costs overtaken by volatility? I've mentioned Taylor Swift more times than I ever thought I would in this meeting, but the prices doubled, trebled when Taylor Swift came to Cardiff. Those who could come for a day did. But the fact that you had this huge volatility did not affect take-up rate. In fact, there was still a shortage of accommodation in Swansea, in Newport, as well as in Cardiff.

Well, I agree completely with Mike Hedges, Chair, that there are so many other factors that will have an impact both on costs and people's decision making, which will loom far larger in that than the visitor levy will do. On the whole, what we hear from the continent, where this is commonplace, is that visitor levies are broadly invisible to the end user—they're just there in the bill, you don't really identify them in your own mind. There are other things that will have a much bigger impact on your decision—whether that is, as Mike was saying, other things that make costs more volatile, or just simple things like whether it's a good summer or not. Those things, I think, are much more likely to influence people's behaviour than the marginal costs that the visitor levy will introduce.

And following on from that, I suppose the fact that it's a set amount rather than a percentage does smooth out what Mike was talking about there, in that the levy doesn't become volatile because the accommodation price becomes volatile.

There are a series of trade-offs in designing the levy, which I'm sure we'll explore during the morning. One of them is the issue of stability. So, we've designed the levy to be stable. That's why it's a fixed cost. I've heard arguments—I'm very aware of them—that a percentage would be fairer in some ways. Percentages do play into Mike's argument, and they do make—. The simplicity and stability of the levy undermines those objectives. So, there are trade-offs all the time in the way you design it. We have decided that broad-based, low-cost, simple to administer, stable in its impact is the best way for a new tax, which, in a modest way, provides a power to a local authority to attend to the circumstances of tourism in their own area.

Thank you. Mick.

Just a few questions, really, on the issue of funding, the allocation of funding and so on. One of the things councils already do, local authorities do, is that they do already budget and provide funding for support for tourism in their particular areas. I suppose one of the concerns that has been raised is how do you ensure, then, that the councils won't simply use the moneys that are raised in this particular way to replace existing funding, because the objective, obviously, is to increase the overall funding that's available. I wonder what your thoughts are on how the Bill addresses that particular concern.

Thank you. Chair, the Bill doesn't start from a point of suspicion of our local authority partners. It doesn't start by asking ourselves, 'How can we make sure that these people don't try not to do the right thing?' So, it is based on a high-trust relationship with our local authority partners, who are elected and have their own democratic mandate, and so on. Nevertheless, there is a process that local authorities have to follow that shines the light of external scrutiny on the way they conduct themselves. So, you will know that the Bill requires local authorities to consult on whether or not to adopt a visitor levy in the first place. If they do decide to adopt a levy, they will have to deposit the money that they collect in a separate account so that everybody can see. The idea that you could easily just, you know, slide a bit of that money away for something else, I don't think will be easy in this Bill because there will be an account and you will be able to see the money, and then you will have to report annually to the public and to businesses in your locality as to how you have deployed those funds for the purposes that the Bill lays down. And the Bill is clear that it must be used for destination management and for creating the conditions of future success for the industry. So, I don't start from the belief that local authorities will be trying to find a way of siphoning money off for purposes that are not legitimate, but if that ever were the case, they would be doing it in plain sight because the conditions of the Bill require them to report in that very public way, and people would be able to call them out, I suppose, if they were to do so.

Section 23 of the Bill provides the spending areas within which they operate, and, presumably, the same points you made there with regard to my question, actually apply to the issues of the spending areas. Perhaps just some comments from you, really, on the consideration to those spending areas and how they've been designed, in order to achieve exactly what you've been talking about, and the transparency of that.

Well, Chair, this is a local tax for local authorities to decide on. The Bill takes the path of soft hypothecation because, you know, we do set the parameters within which spending decisions can be made. But it does seem to me that the nature and needs of tourism, let us say, on the Llŷn peninsula will be very different to the nature of the industry and the needs in a city like Swansea or Cardiff. So, if you'd gone for hard hypothecation, if you'd set out in detail a very specific list of purposes and that these are the only things that the levy money could be spent on, I think you would erode one of the strengths of the Bill, which is that it's a power to allow local authorities to respond to circumstances in their own localities, where I think they are more likely to know best, than we who may be sitting here in Cardiff Bay. So, I think soft hypothecation does defend the Bill against the argument that money could be spent on anything—it can't; it's got to be within those parameters—but how you do that is for that local authority, to respond to the needs on the ground, the nature of the industry in their locality. And they are better placed to do that, I think, than a nationally, closely-confined set of purposes would be.

There have been suggestions about delivery models as well. The model here is obviously the primacy of local authorities, and, of course, that is local democracy; that’s what councils are elected for and are accountable to. But was consideration given to alternative delivery models for the allocation of funds?

Not to any great extent, because I think my view and the view of the Government is, and the commitment we made in our manifesto and programme for government was, that this would be a local power. It is a devolutionary power. It moves decision making from the Senedd to the local authority. And in the end, our local authorities are elected by their populations, they’re accountable to the populations, they can be dismissed by those populations if populations don’t like the way that they do things, and I believe that that was the right way for decision making to be derived.

There is a guaranteed voice for the industry in all of this, because, in the consultation, they are a mandatory consultee. Councils in the Bill are—. There are a list of organisations and groups who have to be consulted, and the industry is very clearly set out on that list as organisations that have to be allowed a voice in that decision making. So, it’s not an untrammelled power for local authorities. I could ask Anna, who probably has more to hand than I have what the Bill requires in that regard.

Happy to. So, I think it's section 25, and then it's (4). Section 25(4) talks about the mandatory consultees, and (g) says 

'organisations that—

'(i) represent businesses that work in tourism, or are engaged in activities related to tourism, in the principal council’s area;

'(ii) promote or facilitate tourism in the council’s area.'

So, that’s how we’ve ensured that they must be consulted by the local authority, as they consider whether they should go for a levy or not, and also how they will use the revenue proceeds. So, we are hoping that that makes sure, that it ensures, that their voice is heard by the local authority, and that, therefore, they have a voice in determining how the revenues are spent.

Scotland, of course, has legislated, now, in this area as well, obviously, designed for a particular Scottish model, which is obviously going to have differences to our specific interests. Just to make the point, as well, with regard to other countries, I’m driving off to Ukraine next week, going across five or six different countries—every single one of them has a levy, which I’m not aware has caused any concern whatsoever.

But on the basis that this is also being looked at within and across the UK as well—so, Wales isn’t unique in this—I’m just wondering, in terms of the Scottish model, about any lessons there may be, any common lessons, from the approaches being adopted. Scotland has a visitor levy forum. Is that how you see, really, the consultation process working, or—? As I understand it, it’s been discounted by Welsh Government. Perhaps just some explanation and clarification as to the approach that’s been adopted by Welsh Government with regard to that aspect.

Well, Chair, this is an area where I’m looking forward to seeing what the committee conclude, and I’m open to hearing if there is a strong case for a forum of the sort that is required in Scotland.

At the outset, I was influenced by my memories of the Williams commission, which showed us that very tangled web of consultative arrangements that we have in a very small country, where the same people turn up to meetings with fractionally different agendas, and turn up again the following week to discharge another fractionally different agenda. And Williams was very clear, wasn’t he, that this was not a good use of people’s time.

So, we already have a visitor economy forum. It meets every quarter nationally. It’s attended, if not chaired, by the Cabinet Secretary. That oversees four regional forums that meet, and then there are local forums as well. Pembrokeshire, for example, has its own Visit Pembrokeshire organisation. Do we need another one? That was the question in my mind. Given that there are already places where the industry gets together, which meet with representatives of Government at different levels, is it not more sensible for this aspect of tourism to be accommodated within the existing structures, rather than to introduce a wholly new forum just for this purpose? Because I suspect it'll be the same people in the room now having another meeting to get into their diaries, whereas adding this to an agenda of an existing meeting would be a more straightforward, more cost-effective in terms of people's time way of making sure that the voice of the industry is heard. If the committee feel differently and think that there is a strong case for a new forum to be established for this, then I will look very carefully at what the committee conclude.

I think part of that is—. And I'd agree with you on creating places for people to talk just for the sake of it is counterproductive, but I think in the Bill—and Anna might be able to correct me if I stray from the point here—the consultation is more about adopting and about setting the levy, rather than having a voice within that sort of, as it's been described in this committee, additionality, to do some of the work, what you were saying, at the beginning, where those trusted partnerships happen. And I think Visit Pembrokeshire, or one of the evidence sessions, talked about how they work together, and they could foresee that as a vehicle to be able to have those discussions on a local basis to say, 'Well, actually, keeping those toilets open longer', or, 'Cleaning the high street after a particularly busy weekend', or whatever it might be, would have a place. I'm just wondering whether or not we need, either in the Bill or in guidance, to be able to nod to those existing structures and, where they don't exist, encourage that local collaboration to be able to facilitate some of those conversations, not on the consultation at the beginning, but the ongoing building the industry, building cohesive fora for that to happen, and maybe adopting some of the things that are already there. Maybe that's more where some of the evidence was taking us in that sense. 

Chair, thank you. I think those are persuasive arguments. I would certainly want to make sure that the voice of the industry continues to be heard, not just on the decision itself, but on how money that is collected is then deployed for the purposes set out in the Bill. We'll give some further thought and look carefully at what you conclude in the end as to whether or not that requires an amendment to the Bill, or whether it can be done through guidance or whatever. But I think we will—. I'm sympathetic to the points that have been made and the way you've set them out.

The strong sense that I got from the evidence was that additionality was something that people were concerned about, and I think it would go some way to help with that, to making the case that this isn't just a way of getting more money in to prop everything else up; it is directed at that industry. And I think that's an important aspect. Mick, did you have anything further?

Perhaps just one final thing, just with regard to the issue that's always raised. There is a cost to raising taxation, to administering it and so on, and it's the relationship between that cost, how that is managed, how it is potentially capped, if at all, to ensure that there's the maximum benefit from the amounts that have been raised going to where they're supposed to, and just, really, your thoughts on how that has been addressed, any concerns that there might be, and how that will be managed.

So, our estimates are that if every local authority in Wales were to adopt a visitor levy in today's conditions there would be about £33 million raised through it across Wales on the basis that the Bill sets out, with its broad base and its low unit cost. I think you heard evidence from the leader of Cardiff Council that their estimates would be that this would be about £4 million in any one year. I agree that it's got to be worth the local authorities' while. If the money you raise is so modest that it makes no difference then it's not a very attractive proposition.

In terms of the costs for local authorities, there are only two sorts of costs that local authorities will incur in the Bill in its early stages: one is the consultation costs at the beginning and the second is the sorts of costs that will be there to keep the system running. Because most of the costs will be met by the Welsh Revenue Authority, and we've constructed the Bill so that if, as I probably expect, the number of early adopters is modest, and over time more local authorities will decide to adopt it based on the experience of others, then in the beginning most of the costs will be borne by the WRA and then, as more councils join, we will share out those costs a bit more evenly. So, the Bill is designed so that councils don't feel that it's such an onerous thing to get the system going that they won't try, but we do have to make sure that there's enough in it. I think £4 million for Cardiff over a five-year term is £20 million. I think you can do something with £20 million. That is a worthwhile sum. If we erode the sum in different ways, the point will come when a local authority will think, ‘No, the effort involved in all of this is just not commensurate with the benefits that the Bill will provide.'

So, with regard to that, and funding the WRA, and this is the Finance Committee as well, so it's more about looking at that, is there a commitment, then, from the Government to make sure that that is funded and that local authority colleagues won't—? For example, the leader of Cardiff raising £4 million and then £3.5 million of it going to administer a Wales-wide system wouldn't be fair. But how would that mechanism work? Have you given any thought to what it would look like? Because this is going to be in 2027, potentially, or just before then, doing the consultations. How does that actually work?

So, it is a commitment of the Government that the Government will fund the WRA for those costs in the early years. I can imagine in the very beginning the Government may have to provide for almost the whole of those costs. We haven't put a cost apportionment formula on the face of the Bill because there are many different ways in which, as more local authorities join, you could apportion the costs so that the costs begin to be shared out amongst local authorities and the Government's contribution begins to diminish. But that is the basic arc that the Bill assumes. In the early stages, in order to make sure local authorities don't end up with almost everything they raise being spent on the administration, the Government will step in. Over time, those costs will be shared more equally, and if every local authority in Wales were participating I would expect the whole of the costs to be reasonably enough accommodatable by local authorities. But we haven't put a formula on the face of the Bill because there are so many different choices you might make, and we do need to leave some scope to learn through the experience of it. David could probably tell you some of the choices that would be there if you were interested to hear them.

Yes, that would be useful, because I think some questions have been asked, and I'm not sure if we'll cover them later, as to whether or not, for example, two and a half full-time equivalents would be enough to be able to administer some of the aspects of this, and the concern of it becoming a very large part of what the WRA does and therefore costs spiralling—it’s just that concern as to how that is managed, and then the impact that might have on the stuff that we're trying to do with the levy in the first place. 

Yes, of course. There's a regulation-making power in Schedule 1 being inserted into the Tax Collection and Management (Wales) Act 2016—24A it will be—that allows Welsh Ministers to effectively determine what that formula looks like. We did have some really good conversations, actually, with local authority officers to talk through what that formula may look like, and there are lots of different permutations, as discussed, whereby you can do that. It could be as very simple as just saying it's a straight percentage of the amount of revenues collected; that's the straightforward option to start off with, or up to that certain percentage that you'd set in the Bill. Alternatively, you've got the more complicated end where you could prescribe the costs depending on the amount of effort or apportionment of effort WRA is undertaking per area. So, there are lots of different ways in which you can concoct that formula effectively so that it's fair but also gives that leg room, a bit of leeway, to start with the local authorities that want to opt in earlier on.

Okay, thank you very much. Mick, anything further?

No more questions. 

Okay, thank you. 

I think Anna might want to—

Sorry, yes, Anna. 

I just wanted to say, as you're considering the draft budget at the moment, some of the start-up costs for the WRA are also included for the visitor levy, and the registration is included in the draft budget. So, partly, some of it is capital costs, some of it is building the teams to be able to effectuate the start. So, you can see that already built into the budget process. And then, obviously, as future years' budgets come through, you'll see that in the WRA's budget as you consider that. 

Okay, thank you very much. If we could move on to looking at the financial implications of the legislation—Sam might have some questions on this but I'll kick off. We've heard concerns about the reliability of data and looking at some of the data that's been used to assess the policy proposed by the Bill. How confident are you in the impact and cost data associated with the proposals? And then, the Welsh Local Government Association noted that the estimated costs to an individual council wishing to introduce the levy seems a bit low—so it's going on from what we were just talking about, really—and require further thought and refinement with all the costs being considered. Do you believe that the cost assessment in the regulatory impact assessment is realistic based on the evidence that you've gathered?

Chair, thank you. One of the things that quite certainly the production of the Bill exposed was the paucity of reliable data and the volatility of data as well. At one end of the spectrum, the bedstock survey, as it's called, suggests that there are about 16,000 visitor accommodation providers in Wales, but if you look at other sources of data—Office for National Statistics data, for example—that could be as many as 50,000, three times the starting point. So, the question, if it's pointing to the fact that the current state of data in the industry is not what you would need it to be, and I think that's been part of what officials have been wrestling with in producing the documentation to support the Bill—. But, of course, the Bill solves that problem, because the Bill creates the register, and once the register is in place we will have accurate, comprehensive and up-to-date information, far, far better than we've had up until now.

I'm not denying that we've had to use range data in some of the RIA and so on, because of the lack of absolute precise data. But I think the bigger issue is the fact that we've put the register into this Bill and that means that, in the future, and for local authorities making decisions in the future, they will have a much, much finer-grained and reliable set of information about the nature of the industry in their areas. 

I saw the evidence that the WLGA have provided to the committee. I was mildly surprised by it because the figures that we have used in the production of the Bill are the figures that we have taken from local authorities. There is a wide range here, depending on how many local authorities decide to take up the power, and over what period they take up the power. And there was quite a large variation between local authorities in the costs that a local authority said that they would incur through consultation, for example. Now, that's completely understandable—our local authorities are very different in size, and they're quite different in nature. How you carry out a consultation in a densely packed urban area may be different to if you were carrying out the consultation in Powys. So, I understand why there was a variation in costs. What I'm happy to say today, though, Chair, is that we will be producing an updated RIA as part of the Bill's process, we'll have further discussions with the WLGA on this point, and if they do have further, more detailed information about the additional costs, we'll make sure that those are reflected in the updated documentation.

One of the comments that was made—I think it was in a session last week—was, 'Well, why not bring the register in first, get the data, and then implement the levy?' I suppose it goes back to your comment right at the beginning of the nature of what the outcome is likely to be. There is merit in getting better data, to better design, and that's something—. What would you say to timings, I suppose—you could bring the register in first, get a wholesome amount, but it would delay the levy coming in?

It would, yes; exactly that, Chair. So, in some ways, these are, in the end, just pragmatic decisions, and they're influenced by where we are in the Senedd term and chances of getting legislation in front of and through the Senedd. By the time any local authority comes to implement a visitor levy, they will have the register. So, I took a decision quite early on, in becoming finance Secretary again, to move the register out of the second Bill, which we still intend to bring forward to the Senedd—the licensing Bill—I took the decision to move registration into this Bill, to try to get an early start on it. Our commitment is to undertake the practical work of registration first in those areas most likely to take up the levy. So, by the time local authorities further down the pipeline make their decision, they will have the data. So, it's not ideal. I can see, in an ideal world, having the register first and the—. But we weren't in that position. But what we have done, by putting the register in this Bill, is to try to close that gap as much as we can, and for many local authorities, the gap will be closed completely.

Is there a risk of doing it piecemeal, though, in that you then create unintended consequences across the country?

Well, you could describe it as that, or you could describe it as making sure that we don't try a one-size-fits-all approach to an industry that is very different in different local authorities, and allowing local authorities to make decisions that best reflect their own circumstances in this particular area of economic activity.

Okay. Thank you. During the scrutiny, the economic impact assessment undertaken by Professor Calvin Jones estimated gross employment losses of between 250 and 750 full-time equivalents in the private sector, based on the optimistic and pessimistic scenarios, with a loss of approximately £16 million to £47 million to the Welsh economy. He went into some detail as to how those models were derived, and to understand what—. He went into quite a lot of detail on that. But what was your take on that, and how do you respond to those figures and maybe context around them?

Thank you, Chair. So, as you say, I remember saying some of this last time. Professor Jones's report deals with a set of complex considerations. It has, inevitably, to make a series of assumptions and deal with a series of uncertainties. It assumes, for example, that all 22 local authorities have adopted the levy from day one. It assumes that all the costs are passed directly to the visitor, and we know that that won't be the case—some accommodation providers will make different choices. I did think that there were some witnesses who came in front of you who presented Professor Jones's report as though it was a set of predictions rather than a range of possibilities. It's not a set of predictions. It's very clear, it's not—. It wasn't asked to do that, doesn't attempt to do that, and, within the report, there are three different scenarios. There is a scenario where there's a weak response by consumers to these changes, where there's a neutral response and where there's a strong response. There were some of your witnesses who exclusively used the figures that assumed that there would be a strong response, and then presented those figures to you as those were things that the report said were going to happen, and, really, that's not what the report does. It sort of takes me back to my very first point, that if you're against the levy, then you're going to focus in on those bits of evidence that appear to undermine the case for the levy. I don't think the report does that. Let's not forget that it also deals with an outcome in which the money collected by local authorities leads to more jobs and greater economic activity as well.

Mick.

I was literally just going to ask you about that particular aspect. I'm obviously new to some of the evidence on this committee, but, presumably, the funds that are raised will actually be invested in areas that will themselves have a leverage effect on the local economies. I think it's the point you've just made, so I perhaps won't labour it. 

I think Mick is right, Chair. I can't remember exactly, but it's about 350 jobs that the report says is a possible outcome of local authorities using the money that they will have collected. I think some of your witnesses sort of said, 'Well, these are jobs being created in the public sector while jobs are being lost in the private sector', but I don't think that's a fair characterisation of what will happen either, because local authorities will be able to use the money in ways—. There will be some public sector jobs, I hope, because I don't take the view that a public sector job is a bad thing and a private sector job is a good thing, but they will use the money to support third sector organisations, to support businesses as well. The levy will create jobs as well as, in some marginal way, having impact on jobs in the industry.

Well, computer models are always wrong. How wrong are they going to be? I speak as somebody who earned my living, at one time, by writing and creating computer models and actually understanding that. I could give you a computer model where the effect would be zero. I think Professor Jones comes at it from one political point of view; I come at it from a different political point of view. Do you think that's a fair assessment?

Well, I certainly agree that the way you construct the model will give you different outcomes. One of the things I think I would say, on behalf of the work that was done, is that there is a model there that allows people to put different assumptions into it, and, as Mike says, the assumptions that you start from undoubtedly lead to different outcomes, when the model has done its work.

As Mike says, all models are incorrect, because they're an approximation.

Yes, by their nature.

But, again, it's how correct or incorrect they are when you put live data into it. The beauty is that there's something to start off with that you can refine over time, and that's the aspect there.

I just think, just to put it into context, even if you took the maximum end, the range of possibilities, even if the impact was at the top end, you are talking about a few hundred jobs in an industry that employs over a million people [correction: over 10 per cent of total employment in Wales], where those jobs are often seasonal, where those jobs are elastic in terms of the number of hours that people work, where there is a large amount of churn in the industry from one year to the next. You know, this is not an industry, I think, that will struggle to accommodate the impact of the levy, even if it were to be at the more impactful end of the spectrum.

Finally, before I bring Mike in on this section, going back to the WLGA and some of the concerns around having to find money to run the consultations themselves on this, is that something that you would work with them on, as a Government, to help support that, or will they be needing, if they are intending to bring this forward, to find the budget to help run the consultation to see if it's feasible or not? Because it's something that you would want to be working in partnership with, is there something there that could be done to help with those costs of consultation?

I don't think myself, Chair, that it is unreasonable to ask local authorities to bear the cost of consultation on a measure that is going to lead to a new income stream for them; councils do this all the time, don't they? My local council has been consulting on whether to raise the charges for car parking in its local car parks. It does so because it's going to get more money as a result of the changes it intends to make, and it will have estimated the cost of consulting as part of the overall economic impact. As I've said already, we are going to be providing significant sums of money from the Government through the WRA to help local authorities to make a good start on all of this; the costs of consultation, I think, are—

Are reasonable.

—reasonable and absorbable by local authorities, who consult their local populations all the time and who, in this case, have the prospect of a revenue stream coming their way as a result of it.

Thank you for that. I'll bring Mike in at this point.

Diolch, Cadeirydd. Opinions that we've heard focused on the legislation placing an increased administrative burden on accommodation providers, with witnesses highlighting that the majority of providers are small businesses and microbusinesses. I also know, from personal experience, most bookings are done by Trivago, Booking.com, and others are available, and they just give you a price. I mean, why would this put any burden on the providers?

Well, I suppose any new system that people have to get used to and haven't done before will have some impact on them, but I think the Bill does do its best to provide for that. As Mike says, many of these businesses don't do this directly themselves, but we designed the system to make sure that the burden on the smallest providers is the least it can be. If you take in less than £1,000 through the levy in a single year, you've only got to make one return in the year. You don't have to make that return yourself, you can do it through an agent or an accountant or however you manage your business normally. And we've chosen the WRA to be the main component of all of this because of the record that it has established in the nearly a decade now that it has been operating. Because the WRA does have a very particular operating model that is designed to help the person using the system to get it right first time.

It's not a system that, maybe a bit unfairly, I might characterise HMRC as having, which is a sort of 'have a go at it yourself' system, and if you fail, you'll have penalties imposed on you for having failed. The WRA, by contrast, puts its effort upfront to try to get it right the first time and to help the user of the system. And, you know, the figures that they are able to provide, I think, are remarkable in this way: 97.6 per cent of taxpayers in Wales dealing with the WRA pay the right amount of tax the first time; 98 per cent of cases are filed on time; 98 per cent of the money that's owed to the WRA is paid within 90 days. And in their consumer satisfaction surveys—you know, given that paying tax is not necessarily something that people get out of bed looking forward to in the morning—93 per cent of respondents in their consumer satisfaction survey say they find dealing with the WRA an easy thing to do. So, I expect the WRA to take exactly the same cultural approach to this new customer base as they have with their existing customer base, but they will design the system and go about their business in a way to help people who now have to comply with the new tax to do it as easily as they can, to get it right the first time.

We've introduced a points system, which I think we discussed the last time I was here—

Yes.

—which is designed to be proportionate, so people who make mistakes don't find themselves clobbered with punitive amounts of money, but are allowed the time they will need to get used to the new system. That's particularly with those microbusinesses in mind, to make sure that this is as easy and straightforward a system and a process that we can make.

I think you've hit the nail on the head there with their customer base. Obviously, their customer base, currently, are accountants, solicitors, people who deal with tax on a daily basis. Mrs Jones with a couple of rooms rented out for maybe a month over the summer is a different customer. And I just wonder what sort of—. We had this conversation with the WRA to see how they would go about dealing with customers who are different, going forward. And my impression was that there might well be a spike in hand-holding and demand for that first part, and things will settle down. It's just how much support and capacity building that the Government can do with WRA, to work through that, bearing in mind also the nature of it happening in different parts of the country at different times. There's a bit of a 'go through the pain all at once rather than in piecemeal' as well. So, there are a few moving factors there. I'm just wondering if you'd given that any thought, as to, possibly, the capacity issue with the WRA, but also the financial burden, potentially, on Welsh Government to help support that through those initial stages.

Well, all of that has quite certainly been part of our discussions with the WRA. I think they are confident that the cultural approach that they have developed is transferable to this different sort of customer. Absolutely, you are quite right, they will be dealing with different people than the ones they have mostly dealt with up until now. But by adopting the approach that they do, which is to get alongside the user and to help them to get it right, the fact that we tried to design the system so that we're going to give people time to adjust to it, to get used to it, the fact that actually, even in this industry, lots and lots of people do deal through agents and accountants and so on, we're confident that the agreement we've come to with the WRA does provide them with the resources they will need. We’re absolutely going to be open to keeping that under review and to seeing how this works out on the ground. But the arrangements we've come to have been thought through in that way, and taking into account lots of the issues, Chair, that you've identified. Anna might say—

I just wanted to say, I think the WRA may have mentioned, but they have already done quite a lot of discovery work with the sector, including designing some prototypes of what the returns will look like, making sure that they've talked that through with visitor accommodation providers, so that they understand how they can adapt the returns to make sure that they suit the visitor accommodation providers, and to understand a little bit more about the sector, so that they are making it as easy to use as possible. The intention is to make it straightforward and simple to comply with. The Cabinet Secretary already mentioned that one of the WRA's key strengths is that they help people to comply with the tax responsibilities. And so this will be no different.

I think also the fact that they will be registering these accommodation providers first, they will build a relationship, so that there's an opportunity—. Part of the value of having the Welsh Revenue Authority doing the registration and the levy is it allows that seamless front door, so that a provider doesn't have to go through multiple steps. The data will be in the system. It enables much more smooth compliance through digital systems. But the WRA is also very aware of how, currently, the accommodation sector uses digital systems and how much training they will need to do, and guidance, and that's part of the work they've been doing over the last two years, in terms of their discovery work.

And with maintaining the register, what provision is within the Bill about how often it needs to be maintained? Where does that aspect lie? Whose responsibility is it to make sure that, if a new hotel, a new B&B opens, or indeed if it’s something that pops up, is there an aspect there that—? That would be an interesting thing just to bottom out.

Yes, David will come in on that. 

Yes, I don’t mind coming in on that. So, ultimately, there’ll be things that you’ll be reliant on a provider to tell the WRA, because, otherwise, they’re not going to have that information to hand. But there are other things that the WRA would be able to access that are in the public domain, where they’ll know that they’ll be able identify someone who’s clearly providing accommodation who is not on the register. So, there’s a mix of things at play there. Ultimately, the burden of proof is going to have to rely on the provider to be telling the WRA information about their premises, so it all comes back to them.

Thank you for that. Mike.

Talking about unregulated accommodation, we know that you have a number of pop-up campsites that occur. We know that they can open up for 30 days, or 28 days, without anything happening. So, there’s a difficulty in that.

And can I just talk about somewhere not in Wales: Wimbledon? When Wimbledon is taking place, a large number of people living in that part of London rent out part of their houses to people. And I have no evidence of this, but I would imagine there would have been some renting out of accommodation during—I go back to Taylor Swift again—any one of these major concerts, which can get very large numbers coming from all over, I was going to say Britain, but probably from all over the world. How are you going to capture those?

And I’ll just mention Airbnb, because one of the things in this Bill that does need dealing with is actually capturing the provision of Airbnb, and actually regulating it, because that seems to be the wild west of accommodation at the moment.

Well, Chair, I’ll ask colleagues to, maybe, particularly comment on the last part of what Mike Hedges said. But in the way that David explained, it will be for the provider of accommodation to do. Whether that is pop-up accommodation or accommodation that’s only used when there are large events, those people will still be required to register, and they will still be required to collect the levy to make a return.

The nature of some accommodation is helpful. A pop-up campsite or caravan site is visible, isn’t it? It’s there for anyone to see. And a lot of the work that we have been doing as a Government in this whole area is about trying to make sure that we support legitimate businesses who do all the right things, pay all the things you expect them to, and, if you don’t have proper regulation and oversight, can then get undercut by people who don’t do the right things. So, I would expect legitimate businesses to be alerting the system to the fact that there are, very clearly, people operating in a way that’s outside the new law. It is more complicated, I agree, when people just let out a room in the house a few times in the year, but the law will still require them to register and to pay.

On the broader Airbnb, David?

Yes. So, most successful businesses will have a digital footprint. There’ll be that full record online when someone has booked with them. So, you’ll be able to easily pick those up, like I say, if they’re already in the public domain. The WRA will be able to identify them and recognise where they’re operating. I think we’ll also look to ensure that the WRA can request information from those booking platforms as well. So, for example, for an Airbnb, say someone's used it historically, but you can’t get that data anymore from the public domain, the WRA would be able to request that from Airbnb about any operators who’ve been on the system. That’s the intent.

Thank you. Moving on to the WRA’s approach to enforcement, they said it’s under development. Do you have any further information?

Well, it’s under development in the way that Anna described through that sort of discussion and dialogue with the sector itself. I expect the WRA to take the same approach that we are familiar with from other public services who have an enforcement role. And we became very familiar, or I certainly did, during COVID, in my many discussions with police forces, where they would always tell me that the three Es were the way in which they approached it. They relied on education and—

Engagement. 

Engagement. Sorry, that was the one. So, education and engagement before you get to enforcement, and that will be the basic approach that I would expect the WRA to take with a new tax where everybody is having to get used to new things. They will not take a heavy-handed approach to enforcement. The first thing is just to make sure that people have understood and know what the right thing is. There comes a point at which, if you know that people are persistently and knowingly evading the responsibilities that they have, enforcement action will be required. But that's the approach I expect the WRA to take, particularly in the early stages of something that's new. 

And, of course, they've got experience from landfill disposals tax, which is a tax that did have difficulties in being collected. And I'm sure that you, like me, were surprised at how much it actually went up when they started having a good enforcement regime.

Chair, I very recently met with the enforcement team of the WRA in relation to landfill disposals tax, and that's a much harder tax to enforce because of the practices we know there are in that industry, and it's much easier to disguise what you're doing than it would be if you're setting up a pop-up campsite. But, they have developed very rapidly and effectively techniques, and they will do the same here. 

Okay. Thank you.

Talking about enforcement and that aspect, is it still the Government's intention to bring forward a registration and licensing scheme at a later date? Is that something that would take it forward, then, to making sure that we're stamping out those who are unregulated and cleaning up the industry, for want of a better word?

So, this is the first of a pair of Bills, Chair, exactly like that. The register is now in this Bill, so the next Bill will be the licensing Bill, and the licensing Bill will require accommodation providers to acquire a licence to operate, and the current intention is to start with an approach where it will be those basic safety-type issues, where you have a legitimate expectation that if you go to some self-contained accommodation it will have those safety licences and requirements in place. So, yes, there will be another Bill, currently expected to be introduced in the autumn, that will deal with that. 

Okay.

It's a pair. These Bills go together. 

And going back to pop-up sites, arguably, the National Eisteddfod, the Royal Welsh Show, potentially, and the Urdd Eisteddfod are pop-ups.

Yes.

They're very big and you can't miss them, depending on where they would be in the country. But, on a smaller scale, when you look at the Scouts using a field for a Scout camp, or that sort of thing, how do you envisage the registration and then the administration working for smaller ad-hoc things that might just happen—'Well, actually, we'll just go and do this next week'? No real money may be changing hands, but maybe somebody saying, 'Use the field', and somebody then says, 'Well, actually, we'll just make a contribution towards the cost', or something. How does that work within the Bill? There are a couple of aspects there, obviously.

Yes. Well, I think that the first thing to say is that, when you are working with recognised organisations, there will be an opportunity for us to discuss these things with them, to make sure that they understand the rules, and so on. In the way that I recognised that there are going to be some challenges for individual householders who do some things on a very small and very occasional scale, so, for completely unregulated groups of people who just get together and do something, that is going to be more of a challenge, isn't it? These things will be at the margins of the Bill, but they will be more of a challenge.

The intention is that they would have to still register. All visitor accommodation will have to be registered. I think, as the Cabinet Secretary has already said, if it's something like the Scouts, the Scouts will already understand—the WRA will have spent time with them—they will understand what they need to do to make sure that all of their accommodation is on the register.

Let me give you a different example, then, I suppose: a church hall and pilgrims going on a walk. They stay in the church hall overnight, they make a contribution towards the electric. Would that, in that sort of scenario, be considered as needing to register and would the levy apply, I suppose? It's one that I've been asked to raise.

I can cover the levy and maybe Emma can come in on the registration aspect. It's not as straightforward as you might imagine, because a lot would fall on whether it's in the course of trade or business, whether that is being provided. So, there's 'a contribution' and then there's a 'you have to pay this contribution', and those are two very different scenarios.

I was going to say that you'd also question if there was a contract as well in place. If you are talking about a purely informal, which I think you were suggesting, Chair, voluntary arrangement, then there's arguably no contract in place. So, there's a number, as you were saying, David, a number of—

And with 'in the course of business', does that mean the course of the business that they're doing? You know, church halls are in the religion business rather than in the tourism business. So, I'm just thinking, is there something there that probably needs to just be fleshed out when it comes to guidance, I suppose?

I think, yes, there'll be a lot for guidance, but I think, just on the example of the church hall and the pilgrims, it's very unlikely that they would be captured by the levy's provisions, as we envisage it—if there's not an exchange of consideration, there's no regularity of trade, they're not advertising to other members of the public and things like that. But I can't give you a definitive on that—

No.

—because it would always rest on the nature of each contract, essentially.

A voluntary contribution, for example, for electricity would seem to suggest that it's not going to be a contractual arrangement—that would seem to suggest that something is purely being offered as a goodwill gesture rather than as a formal arrangement.

[Inaudible.]

A little bit of that, yes. [Laughter.] But 'pawb â'i fys lle bo'i ddolur', I suppose is the Welsh term—'Would this apply to us?' And people have approached, asking, 'How does it work?'

With regard to the registration, then, rather than the levy itself—.

It's a similar principle, but the issue with the levy is that you're looking at the individual stay, whereas, with the register, you'd be looking at that provider and that visitor accommodation more broadly. So, if they ever enter into the course of a trade or business, then they would be registrable, even if sometimes they're also doing things that would fall short of being in the course of a trade and business.

So, as a one-off, they wouldn't need to register, but if it was something that happened every summer, for example, even though the money didn't change hands but they had somebody staying there potentially, they would need to take advice as to whether or not they'd need to register?

Yes, anything that tips over into that being a visitor accommodation and being a provider, as set out in the Bill—that's section 3 of the Bill—then they would need to register. And then, in terms of the levy, each individual contract would be what would be considered as to whether it attracts the levy or not.

Thank you very much. Mike, did you have any further questions at this point?

No, they've all been answered, mostly when other people have asked questions. [Laughter.]

Yes, sorry, Mike.

No problem. It wasn't a complaint.

There we are. So, looking at penalties and that aspect of the Bill, why did you take the fixed-penalty approach to registration, and could a sliding scale be a bit more proportionate?

Well, for reasons of simplicity, Chair. If you want a system that's easy to understand and easy to administer and if you are a micro-trader who's having to do all of this for themselves, in this system, you know it's a fixed sum, you know what it's going to be. If you had to deal with a sliding scale or a percentage charge, then it inevitably adds new costs into the system and new complexity into the system. It's a blunt instrument—I can see that about the Bill. The fact that the Bill has opted for broad-based, simple solutions does mean that it can be a bit blunt in applying to individual circumstances. For a tax of this sort, its modest nature and so on, then the conclusion I came to was that I’d rather err on the side of clarity, simplicity, stability and ease of administration than trying to fine-tune it in lots of different aspects, because every time you go for a bit of fine tuning you add complexity. Every time you add complexity you add costs, every time you add costs you have new enforcement anxieties to deal with.

So, I see the argument both ways, but the nature of this particular tax I think argues for—. The more straightforward you can make it, the easier it will be for everybody to understand and cope with it.

And with regard to transparency there, the clause—I think it’s in section 7D—allows Welsh Ministers to reduce, waive or suspend penalties in special circumstances. I wonder what you’re trying to capture with that from a transparency point of view, because there were some witnesses thinking, ‘Well, what does that mean?’

I’ll probably ask Nick to answer this, because, as I understood it, this is a normal clause in tax legislation.

Okay. Thanks, Nick.

So, it’s designed to create a sort of safety valve, if you will, so if there are situations where an absurdity may arise, or something that would be undesirable. So, there’s no particular sort of consideration of personal circumstances; it’s something that’s to avoid a particularly adverse outcome, so, as the Cabinet Secretary said, it’s a fairly normal part of—. I think it’s in the Tax Collection and Management (Wales) Act 2016 that a similar provision exists, so it’s designed to replicate the effect of that.

Okay, thank you for that. So, do you anticipate, then, the visitor accommodation providers being charged a fee to register?

No.

That's something that’s off the table completely.

There’ll be no fee for registration.

And does the Bill allow for it to come in at a future date? 

I don't believe so, no.

You don't think so, no.

There's no provision to allow us to charge a fee.

Fine. Okay. Thank you. And it’s good to have that on—. That’s probably the shortest answer we’re going to get today, and that’s good.

And then some concerns have been reported to us by visitor accommodation providers about dealing with underreporting of visitors to avoid paying the levy, and many providers do not physically attend their accommodation to check who’s in, who’s there, turning up, and we’ll probably come on to other aspects of that in a bit. But it's that trusting people and enforcement, again, and how do you find a balance, really, within that, I suppose. If you take the Eisteddfod Genedlaethol, for example, how many people are in an awning overnight? It’s that sort of—.[Laughter.] Who’s going round and checking? It's that sort of thing. Do you take it on face value, what’s on the application? Do you count them in and count them out? The burden, then, of trying to understand.

Well, I suppose my first thought is that this will not be an issue, that you need to visit to levy. If you’re an accommodation provider and you’ve let a chalet for three people, you charge for three people to be there; you don’t visit it. There will be ways in which—. You have to have some systems for knowing that there aren’t six people staying there, and I very much doubt that it will be the cost of a visitor levy that would tip people into underreporting occupation. So, this is something the industry has to deal with all the time—it’s the Eisteddfod and there are so many people meant to be in a place; there’ll be other reasons why you’ll need to know that that is true. The visitor levy will be a very marginal part of all of that, so I imagine that the normal ways that the industry deals with making sure that the right number of people turn up at a venue or at a facility now will continue to be the things that they will use when the visitor levy is also at play. But I doubt very much that the visitor levy will be what will be in people’s minds if they decide to try and sneak an extra person into the awning, rather than not. [Laughter.]

I see, yes. Mick, I'll come to you.

Just a few questions about the issue of a visitor levy premium. I suppose, to start with, there already are premiums in bookings because of algorithmic influences. We all know the example: you look at a hotel booking several times, and the price rises the more your interest develops in it. That seems to be a built-in premium already. But, in terms of this legislation, looking at particular events that may take place, and we can see, for example, for Scotland, the interest might be the Edinburgh festival, Glastonbury might be another, but, of course, there are events that take place that place particular demands and pressures on areas. One of the issues raised, of course, is that there has been no consultation over this. I'm just wondering what your thoughts are about that, representations being made, but also what your thoughts are generally on the issue of a premium levy, how it might operate and the capacity for it to work.

I saw that a number of witnesses said that they were taken by surprise that there was a premium provided for in the legislation. I wasn't quite sure that I thought that was the whole of the story, because one of the big debates in the whole of the consultation was whether or not this should be a national scheme, and I think you wrote to me once, Chair, to say that the weight of opinion was in favour of a national scheme. But there were a solid number of voices in the consultation that argued that it should be left to individual local authorities to decide, and the premium is a way of trying to square that circle, really, to offer something to those two different points of view that were very much expressed. So, the basic debate as to whether there should be some local discretion in the levy—I can't promise you that the word 'premium' was used, but the debate was certainly there. In fact, the Bill comes down pretty heavily in favour of a national approach, and the premium is the only example in the Bill where there is some local discretion as to how you would charge visitors.

I am giving some thought with officials in advance of Stage 2 as to whether the Bill needs to provide for a stronger framework for how premiums could be introduced and when they could be introduced and I'll be very interested in what the committee concludes in that regard. There will be the same trade-off here, Chair. I suppose the way I have thought of premiums up until now has been that they would be, again, fixed amounts on a whole local authority footprint, very easy for everybody to see, very easy for people to understand, they would apply throughout the whole of the year—again, at the blunter end of policy making, because that is consistent with the principles that I've been trying to set out during this session.

The Scottish system is different, as we rehearsed last time. The Scottish system will allow local authorities to charge premiums that are different at different times of the year, they will have sub-areas within local authorities that will be able to charge different premiums, that will allow one-off events to attract premiums and so on. The Scottish Government decided that was the preferable course of action. What I worry about there, of course, is complexity and ease of understanding. If you are an accommodation provider and you're operating within one county, and a different part of the county has a different premium—. This is certainly going to add to the administrative burden that's on the provider. It'll be harder for users to understand, and if you get down to a level—and I know the leader of Cardiff, and I understand why, argued that that's what he was looking for—if you get down to specific weekends having different premiums to other parts of the year, then the person who is running the business is certainly going to have to be more alert to all of this than they would if there was just one sum at any point in the year and so on.

So, the trade-off is there. At the moment, the Bill prefers the more straightforward set of possibilities, and we would probably look to translate that into the way that premiums operate. I'm open to hearing what the committee says about that, so long—if I could put it this way; I don't want to trespass on the committee at all, but I think—. You have to deal directly with the trade-off. If the committee were to decide that more of the Scottish model were preferable, I think some recognition would have to be given to the fact that this now intrudes into some of the questions I think you've asked me already about how we make it easy for the provider to understand and how we don't create new burdens on them that are difficult for them to discharge.

I'll come back on that in a second, but I think Mike wanted to come in on this.

Just two very quick points. If Scotland bring it in and Edinburgh has it, Edinburgh will enforce it for the Edinburgh festival.

Yes.

Cardiff will look to enforce it, I would imagine, on major events that are taking place, and if the Champions League comes back to Cardiff again, which many of us hope it will, it will almost certainly want to raise the charge more, as hotels and other accommodation providers are charging substantially more. I think this additional charge is very much a Cardiff charge, much more than—I can't imagine that Blaenau Gwent will be looking to have an additional charge, for example, and I can't imagine Torfaen wanting an additional charge. So, I think it really will be based around major activities.

Now, there may be, when you have—sorry, I keep on mentioning Taylor Swift because it was a major event—when you have that, then both Swansea and Newport, probably, would want to have a premium, because they're seeing very sharp increases in accommodation demand during that time. I think we overcomplicate it sometimes, don't we, because, really, when something big is happening, lots of people want to come, the prices shoot up. Should we charge an additional levy as well, because that's going to create more work and more activity for the local authority?

Yes.

Yes. I tend to agree with Mike, and it will be interesting to see what work that you are looking to do around that. I've been reflecting a little bit on the words here, and using the word 'premium' suggests something, it's an additionality and it's something above and beyond, whereas, an 'additional levy' is—. Different words mean different things and—

'Supplementary,' maybe.

'Supplementary,' yes. And maybe a consideration could be that the word 'premium' is a bit more problematic than a 'subsequent' levy or an 'additional' levy. So, I think words can cause issues and maybe, in this instance, the word 'premium' suggests, you know, we're putting it on a five star, or whatever that might be. But I think the point Mike was making around having the flexibility to support the tourist industry in a certain area when there are peaks of visitors could be argued that, actually, yes, there's a lot more work for the local authority to do, therefore, there needs to be recompense, in a way, to be able to support some of that, even if it's just street cleaning. So, maybe the wording could have been better drafted, which would not have got a similar response and maybe that's something that could be reflected on and whether—. What is the intention of the premium? You've laid it out there; I think others have taken the view of a premium as being something else. So, it's the perception of a word, basically.

I'm very happy to reflect on language and whether the term conveys the intended meaning, so thank you for that. The substantive issue would remain behind the terminology, wouldn't it? If you are going to allow local authorities a wide flexibility to differentiate for times of the year and particular events, or geographically within the local authority area, all of that is going to add to the complexity of a system that set out to be as straightforward and simple as possible.

Yes.

And you may conclude—and some people would conclude—that the bargain is better struck in that direction, but I think it is a bargain; you are giving up some things in order to achieve others.

And it's that further devolution down to local level; it's for them to make the decisions without—. So, it goes to that argument, as well, doesn't it? It's how much flexibility you give within a framework that actually works.

Chair, you heard that there were critical voices on the floor of the Senedd on introduction that said, 'So, local authorities could be consulting on a premium at the same time as they're consulting on introduction, and they could introduce a premium on the day that the levy comes in.' So, all my arguments about it being £1.25 and 75p might turn out to be untrue. There are voices, clearly, on the other side of this argument that are arguing for a more confined set of flexibilities for local authorities.

Thank you for that. Did you have any further questions, Mick? No. There we are. Thank you. So, one of the things that we've had quite a lot of consensus around—or it feels like it, and my colleagues will correct me if I'm wrong—is the issue of under-18s being charged the levy or not. Quite a body of evidence, and a body of opinion, has come back about whether or not it's fair, and whether or not it's in the spirit of the way that the levy is done in other parts of the world.

Whether or not you've heard the evidence and you've gone through the transcripts, have you reflected on that, and in your thinking, where are you now? Have you changed your mind at all, or are you still considering that it needs to be a babe in arms or a 90-year-old paying the same? 

Well, Chair, you're right. I've been following the evidence that the committee has taken. I see that you have heard from a range of voices who argue that particular groups ought to be excluded from the levy—that charities should be excluded from the levy, that educational establishments ought to be excluded from the levy, that children ought to be excluded from the levy.

We're back to one of those basic trade-offs and bargains. I said to you at the very beginning that this is a broad-based tax with a low charge, at the lower end of what you would find anywhere else. If you narrow the base, the only way that you can sustain the take from the tax is to put the charge up. You asked me questions earlier as to whether or not the tax take is worth a local authority pursuing this tax. If you can’t collect enough money to make it worthwhile, you're not going to decide to use the power.

So, what I can’t envisage is a situation in which you took, for example—. I think that our figures show that if you took all of those under 16, of compulsory school age and below, out of the levy, the £33.3 million that our modelling suggests that you would collect goes down to £21.3 million. So, there's a very significant fall in the tax take if you were to exclude children in the way that some people have argued in front of the committee.

Well, I think that if you could only, across the whole of Wales, collect £21 million, you've eroded the chances that the levy would be of any use to any local authority. So, you'd have to find another way of keeping that tax take at least at that £33 million. The only way that you can do that is to charge the people who are left paying the charge more than they would pay in the way that the Bill is currently constructed.

So, that’s a bargain, you know. All I would say to the committee is that you've got to take the bargain in the round. If the committee wants to argue for excluding children from the levy, you are arguing for a higher charge on the people who are left. You can’t have both. You can’t exclude children and keep it at £1.25.

But do you agree with, or do you recognise, the argument about taxes on under-16s—that it's something that doesn't necessarily happen in the majority of taxes?

Well, children are not excluded from all taxes, are they? Children buying sweets pay value added tax. Children are not excluded, by the virtue of being children, from the taxation system. So, I would not agree to that as a first principle. We have included children here in order to keep the cost as low as possible to individuals. Take them out and—. The case has been made. I don't—

You don't necessarily agree with it, but—

But there is a case there to be made, and people have made it here. And different parts of the world resolve this in different ways. But I’m just wanting to say to the committee that what you can’t argue for is for taking children out and keeping the levy where it is envisaged to be, because that would depress the revenues taken by the tax to a level where it probably wouldn’t operate.

With regard to that, you’ve obviously crunched the numbers, then. To take it from £21 million to £33 million, if you were to exclude 16-year-olds, where would the levy need to be set?

I have seen some figures—

Just for us to understand whether or not it's—

One of my colleagues would be able to—

There are different—

Of course, there are lots of ways, but as a—

—permutations that you could do it, but I think, roughly, it would be about £1 on the lower rate and then £2 on the higher rate.

An extra £1?

No, a £1 and a £2 rate.

So, rather than 75p, it would be £1, and the levy would then be at £2 an adult, effectively.

Yes, roughly.

Rather than the £1.25.

Yes—that's for under-16s, not under-18s. I'm not saying that that isn't a bargain that the committee could say, 'We'd rather it was done that way.'

It's good to have those figures on—I know that they are broad, but it's good to understand the trade-off. Then, the arguments can be made. Not to have them would make it difficult to understand. Mick, did you want to come in on that?

Presumably, there are enormous administrative complications on this as well. You have the whole thing, don't you, with public transport, 'How old is your child?' My kids forever kept embarrassing me over this by telling their genuine age as opposed to the travelling age when they were younger. [Laughter.] I presume the same thing would apply here, wouldn't it? It would add to the administrative burden in a way that is probably undesirable.

But it falls back to the trust aspect with the consumer. When you're filling out a form, how many people are—? Your argument is, 'Well, are they really going to fiddle the numbers to actually make it work?' Again, using the same argument as to, 'Well, is it actually going to make a material difference?' Probably not. So, it goes back to those arguments, I suppose.

It does, absolutely, but the committee has asked me a number of questions this morning about that. How will accommodation providers who don’t visit places know that—? How will they know that the person who is claimed to be a 14-year-old is really 14? Now, I’m not going to argue myself, I am more in the area that, Chair, you just articulated that most people will tell the truth. But of course, the higher the cost you incur, the more incentive there will be for you to have the equivalent of a travelling age—a holiday age—here.

But it goes to the crux of—what you're saying is, 'Well, those trade-offs happen.'

Most people will tell the truth, I believe.

Yes. Mike, did you want to come in? No, sorry. You've mentioned again there about—. We’re going into the different arguments as to exclusions, potentially, of different things. We’ve had—. The YMCA, I think, have been in, and we’ve heard from the Urdd, and from other educational types of accommodation, that the purpose of them visiting somewhere would be to enhance their education rather than necessarily add to a burden on the local authority from the visitors. You’ve heard some of the arguments. Is there merit in the argument that an educational setting should be excluded or an educational visit should be excluded?

Yes, there are merits in the argument, Chair, definitely. We’re thinking of them as we’ve been following the evidence that you’ve taken. We’ll attend carefully to the conclusions that you draw. The basic principle that we’ve just discussed would apply here too. Every time you take a group of people out of the levy, you erode the base, and that has an impact on the amounts of money that will be raised, and that has an impact on the amount of money that those who are left paying the levy are charged. So, you can’t escape that dilemma. Even when it's educational establishments, there will be definitional issues, you can be quite sure. I won't task colleagues to entertain us with how do you know whether an educational institution is an educational institution—who's in and who's out, and all of that. Again, all of that erodes one of those principles of simplicity, clarity and stability. But there is the case, and you've heard it and we've been following it.

And I suppose the cumulative effect is virtually the same as if you were not to charge under-16s. I know there's a set, obviously, between 16 and possibly 25 that would be in that, but if we were to assume that you excluded under-16s you'd take out a vast swathe of educational establishments from being—. So, you could—.

If you had no 16-year-olds paying the charge, it would solve the problem—

On this issue, and then it becomes adults. So, there would be a quid-pro-quo type of aspect there as well. Fine. Okay.

We've also heard that consideration should be given to exempting organisations with a charitable status. We heard this again—that they are excluded from certain taxes, like business rates and that aspect. Without repeating the same—

We are, and I'm afraid the same arguments apply, don't they?

—argument, are there any other considerations that need to be made in those settings?

Well, I don't think there are additional considerations beyond the ones that we've been rehearsing. Every time you make an exception, you erode the strength of some of the underpinning foundations of the Bill. It adds to complexity, it reduces clarity, it makes the system harder to understand and to administer, it reduces the amount of money that you take in. Now, there may be cases where the strength of the argument overcomes all of those arguments, but I think what you're doing all the time is trying to weigh up that bargain. With some arguments, the boundary issues that we talked about in educational establishments become even more difficult: charities—it's a catch-all term for a very, very diverse sector with different legal bases and so on. It can sound straightforward and it can become very complicated when you actually have to, in legal terms, define who you mean.

So, you're not, at this point in time, minded to heed those arguments, and you're more convinced that you've got it right in the Bill?

I'll put it just slightly less black and white than that. Of the different arguments that you have heard for exemptions, I think some cases are stronger than others. Those are the ones that we are most actively weighing up. I don't say today that any one of them would get to the threshold where we would have an exemption, but I think some of the cases have been stronger than others.

Fine. Okay. That's good to understand where your thinking is at this point in time anyway, and obviously we can rehearse this at the general principles debate and then into Stage 2, when and if it passes.

We've heard also that charging visitors for every night—we've rehearsed a little bit of this earlier; I just want to go into it in a little bit more detail—would discourage longer stays. So, whether or not a reduction in those 31 days would make—. I suppose, what is your thought process on 31 days, and whether or not it needs to be shifted around?

Thirty-one days is the length of time that's used for other purposes—analogous purposes in tax legislation. We wanted to distinguish between people who were not really visitors in the sense that the Bill is meant to capture. I think we may have rehearsed here before that Cardiff, particularly, has quite a large number of people—possibly Senedd Members amongst them—who spend periods of time, for work reasons, in the city. They're not visitors in the sense that the Bill is intended to capture, and 31 days we thought was a reasonable break point to demarcate people who are using accommodation for work reasons.

I think myself, if you can afford to stay longer, then you can probably manage the £1.25 as well, and it's not going to be a thing that decides whether or not you'll stay another few days, is it? I doubt it's a thing that will tip your decision. And actually, the nature of the industry is very different isn't it, even than it was 20 years ago? My fortnight in Kiln Park as a child, in Tenby, which is where we always went, was part of the pattern of the time. You went for a week or you went for a fortnight. Now, people go for two days, three days, weekends, five days. That pattern of accommodation in the tourism industry has changed a great deal, and I very much doubt that this very marginal addition is going to be what makes people change their minds and decide to stay for five days rather than three or for 14 days rather than seven.

Thank you. Mike. 

We know Bluestone charge over £1,000 for a cottage where four people can stay in February, which I don't think is one of the peak periods of going into Pembrokeshire; I may be wrong. But why would that levy have an effect on them? They seemed quite animated about it.

And also, Wales compared to English providers: now, we already know that Tenby is more expensive than Blackpool; we already know that Cornwall is more expensive than Tenby and Blackpool. I just don't understand—everybody talks about these costs—why the traffic on the M5 and the M6 is not going up to Blackpool rather than going down to Cornwall, because it's cheaper to do that.

Well, Mike, thank you. I think Mike is making a point that I've made less vividly than that, which is that cost is only one consideration that people take into account when they're making decisions about where to visit and how long to stay. People already make decisions that are clearly not driven entirely by cost, otherwise people would all be flocking to the cheapest destinations, and actually people flock in very different directions and the marginal additional cost of the levy is not going to be determinative. It's not determinative in other parts of the world; we know that perfectly well. People don't make decisions in the way that some witnesses in front of the committee have suggested, and in practice I think they will find that the Bill—where local authorities choose to introduce it—will succeed. The Bill will create a pool of money to invest in the success of the industry for the future in ways that people who pay the levy will just take in their stride, as part of what it costs to go on holiday somewhere. 

We know we've got a problem with unauthorised camping. We know we've got a problem with mobile homes staying in lay-bys. We know we have a problem of people going down onto beaches, and going there. I'm not sure this is going to make more of them do it, but will there be money available from the levy in order to enforce, or help whoever is doing the enforcement enforce it? Because it is a problem, not least of which is the mess that gets left behind when you've had this happening. Now, it's not my constituency, it's Rebecca Evans's—parts of her constituency have substantial amounts of people parking overnight, parking in lots of places, even though it says, ‘No overnight parking'. This is for the people who can't read. 

Well, I think Mike’s is a very good example. I would have used it myself. Local authorities already have powers to use to tackle such instances. What they don't have is the resources to be able to do it. Now, if they were to choose the levy, to use the levy, for those purposes, then I think, for destination management purposes, they would be able to do just that. So, far from making the problem worse, I think the levy probably gives local authorities more scope to tackle the problem. 

And finally from me, we've had written evidence expressing serious concerns about extending the levy to recreational boating. I think they mean those big boats that park in the marinas around Wales. Do you remain of the view that it's appropriate for the Welsh Ministers to take a regulation-making power to extend the Bill to berths and moorings? 

I do, Chair. So, in any Bill, you come to a point where you haven't been able to work your way through all the policy implications of a particular course of action, which is why this Bill doesn't propose, at this point, extending the levy to those forms of activity, but provides Welsh Ministers with the power to do so in the future, should Ministers decide to do so, when more policy work has been concluded and further conversations with the industry have been carried out. 

Do I think, in principle, that it is right that people coming on a coach to stay somewhere will be charged the levy and somebody coming on a cruise liner to somewhere doesn't pay the levy? No, I don't. Do I think that people spending a night in a campsite somewhere should pay the levy and someone moored up in their yacht should not? No, I don't. But there are genuine complexities in how you create regulation around all of this. There are conversations that need to be had with the industry. We will do that and if Welsh Ministers are in a position to bring forward sensible regulation to capture the people we think, in a fairness sense, should be captured without unintended consequences, then the Bill allows Ministers to do that. But there are more conversations to be had and more policy work to be done before we're in a position to do that. But the principle, I definitely do not concede the principle that it is wrong in principle that this sort of activity shouldn't be captured. 

And it's the inland waterways as well and the canals, and that aspect that needs to go into—. Not just people turning up on the coast, but it's all the other aspects of a very vibrant industry that could then have a complexity of their own in the nature of, 'Well, you can move it around', in the same way you can move a caravan in that example.

Just coming back on your last answer, I find it difficult to believe that somebody could pay £100,000 for a boat yet can't pay a £2 a night levy. The other thing is that we know, certainly in the marinas and on rivers, because they have to be booked in on those, so, collecting the data in that respect is no more difficult, is it, than collecting data of people staying in hotels and guesthouses?  

If I thought this was impossible to do, there wouldn't be a power in the Bill. I do think the problem is capable of solution. It's just that we weren't in the position when the Bill was introduced to have worked our way through those complexities and to have had the discussions with the industry that we will need to have. 

Thank you very much. I think that brings us to the end of our questions, anyway. Is there anything further that you wanted to put on the record that we haven't covered this morning that you've heard during evidence and think you need to address? 

No, Chair, I think you've covered all the things that we are continuing to think about as a result of the scrutiny sessions in advance of Stage 2. How we navigate our way through premiums, whether 'premiums' is the right word—that's certainly one thing that we are giving thought to. We are giving thought to how we can make sure that the industry is continuously involved in the levy beyond the initial consultation period. And probably the trickiest of all are the arguments that you have heard for excluding different groups and how, if anything were to be done in that area, we then compensate for that so that the take from the levy doesn't fall to a level where the levy no longer becomes attractive to any local authority. So, I think those are some of the dilemmas we have been thinking about. They're all the things that you've heard about already, and—

Yes, and we'll present in our report the evidence that we've heard, and pose some of those questions to you as either recommendations or conclusions, and then you're able to respond to those. 

Well, we'll look forward to that, and, particularly, if you do feel that the weight of argument comes down on one side or other of these dilemmas, that will be particularly useful to know. 

Okay, thank you very much. Diolch yn fawr iawn. 

Diolch yn fawr.