The Welsh Government's plans to reform the country's council tax system have taken a step forward. Finance minister Rebecca Evans told the Senedd on Tuesday that she had commissioned the independent Valuation Office Agency (VOA) to revalue Wales' properties, so the government can build a new system of council tax bands.
Currently each of Wales' 1.5million properties are placed in nine tax bands, A to I, that were set on the property values as of April 1 2003. The Welsh Government added the additional tax band (Band I) for the highest value properties in April 2005 and has maintained national support for low-income households.
Wales is the only country in the UK that has updated its valuations since council tax was introduced in 1993, with council tax rates in England and Scotland still being based in 1991 evaluations. A report by the Institute for Fiscal Studies suggests house prices across Wales had increased by 150% between 2003-2022.
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This means people living in properties that have increased in value by more than the Wales average since 2003 are likely to be paying less council tax than they should, whilst others in properties whose value has not kept pace with the Wales average have been paying more than they should. The IFS said the system is "out-of-date, regressive and distortionary".
The proposed changes to council tax will be implemented by legislation in April 2025 and later this year Ms Evans will set out how to the new system will look, she told the Senedd. She explained that the VOA's revaluation will update everybody's tax band on the basis of property values of April 1 2023 - in line with legislation that there must be two years between the date of the new incoming valuation list and the changes to council tax. "People should start seeing those changes in terms of fairer council tax by the end of this Government," she said.
She told the Senedd that currently Wales's council tax was "still regressive in the way that it is designed". "It places a higher relative burden on those with lower wealth. And, even though our system is more up to date than elsewhere, it is still 20 years out of date," she said.
But she assured that the changes were "not about raising a single penny more in overall revenue" but about "ensuring that the money that we do raise is raised as fairly as possible". She added reforming council tax is one of "the most beneficial actions we can take to reduce wealth inequalities, and the benefits will be felt in the pockets of those who are most in need by the end of this Government term."
However, she admitted that there will be "winners and losers" as a result of the new system. Conservative MS Sam Rowlands expressed "scepticism" that the outcome of the proposed changes would really be revenue neutral, but Ms Evans reiterated reiterated the purpose was "not to raise a penny more in council tax from people living in Wales."
"It was a concern that was raised through the consultation process. Some people are worried that their homes have increased in value since the last revaluation 20 years ago; that's probably the case for almost all properties," she said. "But again, it's not the case that, just because your home has increased in value, you will see an increase in your council tax rates, because, actually, what matters is the relative position of your home across all properties in Wales, and also, of course, any discounts and exemptions that you might be eligible for."
Mr Rowlands also asked the finance minister "who you think those winners and losers will be". Ms Evans acknowledged that the council tax changes will "affect households and their finances in a very direct way", but said the government was "assessing the implications at the moment, and considering the options" and will outline more details alongside its next phase of consultation later on in the year.
She continued: "At the moment, we are in the process of receiving new data, which will help us to design a system. When we do have that data, and we've considered it, and done the modelling that we need to do, we'll know more then about the number of households that will benefit or be impacted adversely by the changes. We are exploring whether there is a need for transitional arrangements."
Research by the Institute for Fiscal Studies in 2019 found that undertaking revaluation and keeping the current nine bands - which is up for consideration, Ms Evans pointed out - would move 25% of properties up bands, 26% down and keep around 49% the same.
Mr Rowlands also asked for clarification that exemptions from council tax would remain the same with any reform. "We know that people who are the only adult in a property are currently given a 25 per cent discount on their council tax," he said, adding: "If this exemption or level of support is removed, it will equate to a 33 per cent council tax rise for those single-person households, which will be on top of the significant council tax rises that people across Wales are already seeing from local authorities. It will be a direct hit on a large number of vulnerable and worse-off people in Wales."
In response, Ms Evans confirmed that the reforms included "reviewing whether our system of discounts, disregards, exemptions and premiums could be improved in any way, in order to help achieve a fairer and more modernised system" and that any proposals would be subject to consultation.
She confirmed as part of the reform the government was considering a number of changes to council tax - particularly increasing the number of bands. "It might be that we have more bands at the top end and that at the bottom end, the gaps between those bands are smaller," she said.
Council tax raises more than £2bn of the £10bn needed to run local Welsh services like schools, social care, transport, housing, fire and rescue, policing and hundreds of other community services. By far the biggest area it funds is education, then social services, housing and police and fire services.
It was introduced in 1993 and has low admin costs to government and low levels of fraud. The independent Valuation Office Agency assesses property values and places each property into a band. Each band attracts a tax rate relative to the middle point, band D, and these tax rates are set out in legislation by the Welsh Government. However, the band D charge for each local area is set locally by councils as part of setting their annual budgets. Nearly half of households in Wales (48%) receive some form of support.
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