Carwyn Jones suggests Wales tax and funding changes

A stamp duty holiday to boost the building industry could be introduced if control over the tax was devolved, First Minister Carwyn Jones has said.

He suggested giving the Welsh Government control of some taxes as part of proposals to change the way Wales is funded.

But he said his administration did not want powers over income tax.

In a statement to the Senedd, he said the Welsh Government should be allowed to borrow money to support the economy.

Failing to hand over borrowing powers would make Wales the only part of the UK unable to borrow money to fund investment in roads and hospitals.

"It means that we would be at a disadvantage competitively with the rest of the UK and that can't possibly be right," he said.

The Welsh Government's main demand to the UK government is to change the Barnett formula which is used by the Treasury to determine the budget of the devolved administrations.

Mr Jones suggested devolving responsibility for landfill tax, stamp duty land tax, the aggregates levy and air passenger duty which raise about £200m a year in Wales. Council tax and business rates are already set in Wales and generated more than £2.2bn last year

He told AMs: "I argue very strongly that we need a single and coherent package of measures, not a bits and pieces approach.

"I have set out the Welsh Government's position on financial reform, it is now time for the UK government to do the same."

Devolving corporation tax could potentially provide "a powerful tool to promote economic development", but could leave a "hole" in the Welsh Government's budget that could take time to recoup.

'Fundamental change'

In March, Mr Jones said control over income tax and corporation tax should not be devolved without a referendum.

But last week the Welsh Government said that although it was not actively seeking the devolution of corporation tax, it would expect the power to be offered to Wales if it was given to one of the other devolved nations.

Mr Jones told AMs his government was not seeking power to vary income tax. It would represent a "fundamental change" in the relationship between the devolved government and the public and, in his opinion, would need a referendum.

John McTernan, a Downing Street adviser to the previous Labour administration, warned that repaying borrowed money would stretch the Welsh Government's budget.

He said: "That would put pressure on a budget that's already under pressure so it will be very difficult to maintain all the free things that are there or the subsidised things."

The way Wales is funded will be examined in a UK government inquiry, similar to the Calman commission which proposed changes to Scottish devolution. But the Westminster coalition says its main priority is to deal with the UK's finances.

At a news conference in Downing Street on Tuesday, Prime Minister David Cameron said: "On Barnett, this is hugely complicated and difficult issue.

"We made some particular promises about a Calman-like process for Wales and we will be putting forward proposals for how to start that ball rolling and to start that process."

Welsh Secretary Cheryl Gillan said the UK government will put forward proposals on the inquiry.

She said: "As we do that the priority remains to bring the public finances back on a stable footing in order to support growth, help keep interest rates low and protect jobs in all parts of the UK."