A transfer of powers from Westminster to Wales announced on Friday will remove the last barrier to the Welsh Assembly taking control of raising income tax, says the UK premier.
The devolution announcement, made by David Cameron and deputy prime minister Nick Clegg during a visit to Cardiff, is the coalition government’s response to Welsh demands for more powers to match those offered to Scotland after its vote on independence in September.
As part of the deal, the government guaranteed minimum funding each year for Wales. It also gave Cardiff bond-issuing powers, more control of energy projects, including fracking, and power to change some regulation.
The UK government and opposition agree that there must be a referendum before Cardiff can take on new tax-raising power but the Conservatives hope the offer, which Labour opposes, will appeal to Welsh voters in May’s general election.
Mr Cameron said the “agreement paves the way for a referendum that could deliver an assembly that’s not just a spending body but is actually responsible for raising more of its revenue”.
He told a news conference in Cardiff the referendum “should go ahead and I would advise people to vote Yes”.
Together with devolution of business rates, stamp duty and landfill tax, which have already been agreed, the assembly could be responsible for raising a fifth of the £15bn it spends annually on hospitals, schools and other public services. The current funding model is a block grant from London.
Carwyn Jones, the Labour first minister in the Welsh assembly government, gave a guarded welcome to the plans, describing the promise of guaranteed minimum funding as “an important step forward”.
But he said the proposals fell short in crucial areas, citing the example of policing: the government-appointed Silk commission on devolution had recommended that Cardiff take over responsibility for police and some criminal justice powers. This has not been implemented.
“Wales is still not being treated with the same respect as that being afforded to Scotland and this continuing imbalanced approach is damaging to the UK,” Mr Jones said.
Leanne Wood, leader of Plaid Cymru, the Welsh national party, said: “Wales has been left behind and that has to end and this is a missed opportunity.”
Wales will be able to issue bonds to pay for infrastructure projects and will have control of power projects up to 350MW.
The Welsh government, which owns Cardiff Airport, had been lobbying for control of air passenger duty, which has been offered to Scotland.
However, the UK coalition government said while it was prepared to “consider” such a move, it would have to “mitigate the impact on regional airports”.
Bristol Airport has said the move would give Cardiff an unfair advantage in attracting airlines and passengers.
Businesses in the west of England also worry that Welsh devolution will distort the economic links between the two regions.
Phil Smith, managing director of Business West chambers of commerce, said: “Devolution is happening too quickly and without sufficient consideration or evidence of the likely impact of these changes to businesses in England.”
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