A taxing issue for rural properties

The Welsh Government’s latest consultation, A Fairer Council Tax (Phase2) which closes in February, is intended to create a “more progressive system (which) would shift the current pattern of payment away from those with the least, and require those with the most to make a greater contribution.” The proposals represent a step backwards in any progress made in rural proofing – that much-needed understanding throughout government - that rural people and businesses often find themselves victims (sometimes unintended) – of urban thought-out policy.

Let’s not be simplistic about it. Not all higher-banded properties are in rural communities, and our towns and cities certainly feature “well-off neighbourhoods.” But rural areas do include a disproportionate number of properties which might – owing to their location - be blanket-revalued at a higher level under the new proposals. Where homes are necessarily close to rural businesses there’re few options for the residents to relocate.

A premise of the proposals is that residents of perceived higher-value properties in the countryside can pay more – this is no more than a baseless political assumption.

We must accept there’s a real problem in this part of public finance. Council Tax raises around £2.4 billion in Wales. It pays not for just bin-collection, road maintenance and street-lighting, but social care, policing, schools and a whole lot more. Many rural people would point to the condition of the roads and absence of street lighting before commenting on other less-visible public services. It’s not easy running a council: multi-million pound budgeted businesses with inflexible statutory obligations run largely by committees. We’re becoming more familiar with perpetual cuts and the possibility that local authority Chief Finance Officers could become obliged to issue a Section 114 Notice – effectively declaring bankruptcy.

Apart from the higher cost of everything, a huge problem in Wales is the large number of households who are exempt from paying Council Tax – over 40 per cent of them. The Welsh Labour Government doesn’t see any opportunity to increase the number of households contributing – however little. At the same time the Government says it does “not seek to increase the amount of Council Tax raised overall from Council Tax payers.”

This is the context we see other local authority managed taxes come into the frame: existing ones, like Business Tax – or new ones, such as the proposed Visitor Levy. Arguably, those affected most are the local authorities themselves, who will have to collect and spend – aware that their performance in doing so will affect their Central Government Grant. Generally, these budgets were reduced by about 40 per cent in the decade before the pandemic – then increased to help tackle the crisis – and now central government is looking (or rather feels it has no option) to reduce again – and find new ways to improve revenues.

In this second Welsh Government Consultation on the subject, we’re offered three options from marginal, medium and more radical change – and similarly three options regarding speed of introduction. The least radical proposal is a revaluation of property using a revised version of the existing nine Council Tax bands. Secondly we’re proposed the retention of the nine bands, but a change in tax-rates within the bands to increase revenue from the higher bands. The most radical option is to increase the number of bands from nine to twelve, creating a new bottom-band but two new bands at the top. These twelve bands will be re-defined to create “consistent change” within the bands – but pushing a higher tax burden to the top.

The Consultation document acknowledges, “Any moves to make the system fairer and more progressive will unavoidably create winners and losers.” We’ll want to understand what criteria are applied – and if an appeal process exists. It raises a pertinent question: how much does it cost to undertake a fundamental review of all those properties?

Responding to the Consultation on behalf of CLA members, we have urged the Welsh Government to restrain itself from radical change and to introduce any change gradually. We call for Government and local authorities to understand the impact of the proposals on rural properties – and understand the inflexibilities of living and working in the countryside. Equally, we’d urge central and local government to reconsider and improve service provision to rural areas.

We have a sense, however, that the Welsh Government holds no qualms about where it wants to go here. The issue is unlikely to be resolved before the next Senedd elections – tax (in various forms) could become a bone of contention. Until then, we’ll continue to endure the state of the roads and ask if our local authorities’ revenues do increase, how much more will be spent on rural facilities and services.