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Plaid call for Welsh Government to keep basic tax rate at 20p

27 Sep 2022 3 minute read
Money on a Welsh dragon.

The Welsh Government should use their tax-varying powers for the first time to maintain the basic rate at 20p from April 2023 and repurpose the extra funds to tackle the cost of living crisis, Plaid Cymru has said.  

On Friday, the Treasury announced that the basic rate of income tax will be cut to 19% from April and that the additional rate of tax, paid at 45% on incomes of over £150,000, will be scrapped.

Slamming the Treasury’s plans of tax cuts to the rich as “economic madness,” Plaid Cymru’s finance spokesperson in the Senedd Llyr Gruffydd MS said that Wales had the opportunity to reject the Tories’ “fantasy economics” by using tax-varying powers to protect the basic rate at 20p and keep tax levels as they are.

This, he said, would offer over £200m in additional funds to the Welsh Government budget which could be used to directly tackle the cost-of-living crisis.

Mr ap Gruffydd said that Wales could choose a different path of “fairness and prosperity”.

Around 1,290,000 people in Wales are on the basic rate of tax.

“Tax cuts for the rich, removing the cap on bankers’ bonuses, and trickle-down Trussonomics – the economic madness announced by the Treasury last week will do absolutely nothing to drive growth in the Welsh economy and future generations will be paying off this Tory debt for decades to come,” said Llyr.

 “We in Wales have an opportunity to make a stand and reject the Tories’ fantasy economics by using our tax-varying powers for the very first time to protect the basic rate at 20p in April 2023 and keep tax levels as they are now.

 “Doing this would offer an additional £200m a year to the Welsh Government’s budget which can be used directly to help ease the pressure of the cost-of-living crisis, protect public services and shield the vulnerable from Tory cruelty.

 “Westminster may have resigned itself to becoming an economic basket case, but we in Wales can choose another path – one of fairness and prosperity.”

Estimates from the Welsh Government in December 2021 on the impact of a 1p increase or 1p decrease to rates in Wales.

20p tax 

Andy Burnham, Labour mayor of Greater Manchester has said he would reverse cuts to both the basic and top rate of income tax – echoing calls by Labour deputy leader Angela Rayner.

However, Labour party leader Sir Keir Starmer confirmed he supported Chancellor Kwasi Kwarteng’s decision to cut the basic rate from 20p to 19p in the pound.

While Welsh Government can set the rates they cannot change the tax bands themselves, so they cannot retain the recent UK Government removal of the top/additional tax band following the recent mini budget.

If the Welsh Government were to keep the basic rate at 20p, based on the above estimated, this would keep £209 million of the Welsh Government’s budget compared to if Wales followed the lead of the UK Government.

In 2019/20, the UK Government reduced the three rates of income tax paid by Welsh taxpayers by 10p in a pound. The Welsh Government then introduced its own rate for each band of 10p meaning that Welsh taxpayers pay 10p of each income tax rate to Welsh Government and the rest to UK government.

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