For each of the devolved nations, it is essential that they set their own Budgets and that we know the details of them...
For payroll professionals, it is important that we have a Budget and a Welsh Rate Resolution so that we know the Welsh Rates of Income Tax (WRIT) that will apply from April 2021. This applies probably more so to software developer professionals who have to implement this information in our payroll systems.
For individuals, it is important that we have a Budget so that the money available and planned initiatives are known for Welsh public services, businesses and communities. This is vital given that these are devolved responsibilities, outside of Westminster’s control. Further, Local Authorities are required to set their own budgets and Council Tax rates by 11 March.
The Budget 2020/21
The Welsh Budget is usually set as final after the UK has presented its own Budget statement. One of the reasons for this is that the UK Budget details the monies that will come from Westminster in the form of the Block Grant, thereby allowing the devolved nations to know how much money it has to work with.
In Wales, the Budget is usually proposed as draft, which may be amended at a later date before it becomes final. The reason for this is to allow the maximum amount of time for scrutiny of the Government’s proposals by the National Assembly. Ideally, this should be an 8-week period. However, both the Government and the Assembly acknowledge that this may not always be possible, as is the case in 2019 for the 2020/21 Budget.
After a series of announcements earlier in the year and then a UK General Election, on 08 November 2019, Rebecca Evans AM, Minister for Finance and Trefnydd, provided a written statement on the 2020/21 Welsh Budget timetable:
- 16 December 2019, Welsh Government’s Draft Budget 2020-21
- 07 January 2020, statement on Draft Budget (as is required)
- 04 February 2020, Draft Budget debate after scrutiny begins in the National Assembly
- 25 February 2020, publication of the final 2020/21 Budget with final local government settlement
- 03 and 04 March 2020, final scrutiny process in the National Assembly with voting and setting of the Welsh Rate Resolution
(These dates are replicated on the Assembly’s Website).
Therefore, the publication of the final Welsh Budget is much later than last year when it was published on 18 December 2018. At this time, the Welsh Rates of Income Tax were published as 10, 10 and 10. Maybe the draft Welsh Budget published on 16 December 2019 will give software developers at least a clue as to whether there will be changes in March 2020 – remember that, unlike Scotland, the Welsh Government operates with a majority, so any announcement is relatively secure.
The 2020/21 draft Budget details how Wales will benefit from an additional £600million from the UK Government. This is as a result of funding promised to England which the UK Government is bound to replicate to the devolved nations via the Barnet Formula. It was announced by Chancellor Sajid Javid in his Spending Review in September 2019.
According to the press release, this is a ‘Budget for the future of our planet’ and details are contained in a number of documents:
- Draft Budget Proposals
- Draft Budget Narrative (over 100 pages)
- Draft Budget: a leaflet for children and young people (which is quite good!)
- Welsh Tax Policy Report 2019 (page 41 is quite interesting on how HMRC administer WRIT and how the Welsh Government consider implementation work is uncompleted)
The key announcements for professionals and individuals are:
- No changes to the Welsh Rates of Income Tax which remain at 10, 10 and 10 (‘We will not raise Welsh Rates of Income Tax in 2020’ – page 3 and page 8 of the Welsh Tax Policy Report)
- £64million towards protecting Wales from flooding and investment in ‘coastal risk management activities’
- A £140m package for low carbon transport
- A National Forest for Wales, extending the full length of the country
- £140million to support decarbonisation and environmental policies
- Increased council funding, possibly providing certainty to councils for Council Tax increase planning
- Increased funding for better mental health
- An extra £421million (£385m revenue and £36m capital) in health and social care spending in 2020/21. This includes supporting preventative health protection functions and infrastructure projects in Cwmbran and Merthyr Tydfil. Wales’ Childcare Offer will also receive additional funds
- Increased funding to tackle poverty in Wales, with funds for schemes such as the Discretionary Assistance Fund and the School Holiday Enrichment Programme
- Focusing on enhancing employability and skills, an increased investment in order to ‘provide 100,000 high quality apprenticeships for all ages’
- Additional funding for housing, including extra funding to ensure the building of 20,000 affordable homes by 2021
- Increased funding for transport initiatives, including monies for Cardiff Airport, Transport for Wales and the North Wales Metro
- More funds to education, including the improvement of school standards, reducing the sizes of infant classes and helping children with Additional Learning Needs
The Draft Budget is not definite!
However, given that Welsh Labour have a coalition Government with a majority (and they pledged not to raise Income Tax anyway until at least 2021), the news of 10, 10 and 10 may give developers some certainty in what have been uncertain times.
Of course, should the UK Government do anything with the Personal Allowance, currently set to be £12,500 in 2020/21, this may change things. I am not a political commentator, however, I would have thought that it would change the Welsh Government’s spending plans rather than the plans for the Welsh Rates of Income Tax to remain unchanged.