Labour MP defends party stance on income tax powers

Owen Smith says Labour will tread carefully on income tax powers

A senior Labour figure has denied the party is inconsistent in its views on devolving power over income tax.

Shadow Welsh Secretary Owen Smith said claims of a Labour split were "desperate" and the idea its support for devolution had waned "nonsense".

On Wednesday, Mr Smith said letting Welsh ministers vary income tax by up to 10 pence in the pound was a "trap".

The Welsh government said its commitment to "furthering" Welsh devolution was "indisputable".

Meanwhile documents released to Plaid Cymru show ministers in Cardiff told the Treasury last year that the package of funding reforms - including a referendum on income tax - would be "widely welcomed in Wales".

Control of some smaller taxes and the ability to borrow money are being given to the Welsh government.

Powers to vary a portion of income tax would follow a referendum.

But First Minister Carwyn Jones claims the proposed restrictions on income tax rates make the powers "pretty much useless".

A so-called "lockstep" rule would stop the Welsh government altering individual tax bands.

Conservative MP Glyn Davies said Labour had "completely demolished the Silk Commission recommendations" for tax and borrowing powers for Wales and had now declared itself the "anti-devolution party".

At a meeting of the Welsh Grand Committee on Wednesday, Mr Smith spoke of his fear of "creating destructive tax competition between the nations and regions of the UK".

Writing on the Click on Wales website later, he said the income tax powers on offer "would not break those bonds tomorrow, of course it wouldn't... but there are risks in pursuing that course in Britain, especially in these times, and especially for those parts, like Wales, that currently spends far more than we earn".

Mr Smith added: "So Labour does not set its face against ever seeking income tax devolution for Wales, but we will weigh carefully the risks against the benefits we're promised.

"And when there are Tories making the promises, we'll greet them with a jaundiced eye."

The funding reforms contained in the draft Wales Bill are based on the findings of the Silk Commission.

The Welsh government has said the income tax referendum must not happen unless the Treasury changes the Barnett formula - the system that determines how much funding goes to the devolved administrations.

'Stark contrast'

Following a freedom of information request, Plaid Cymru obtained a letter to the Chief Treasury Secretary Danny Alexander written by Welsh Finance Minister Jane Hutt last June.

In it she says: "I believe the package of reforms we discussed - including the full devolution of stamp duty land tax and of landfill tax, borrowing to fund capital investment and subject to a referendum, devolved powers for income tax - would be widely welcomed in Wales."

Plaid Cymru MP Jonathan Edwards said the letter was in "stark contrast with the public comments made by the Labour Party", especially those of Mr Smith.

In a statement a Welsh government spokesman said: "Our commitment to furthering the Welsh devolution settlement is indisputable.

"As we have made clear - we want to see the Silk Commission's recommendations implemented in full. That includes the introduction of a fairer funding system.

"We also agree with the Silk Commission that the people of Wales should have the final say on whether income tax powers are devolved."