by Elliot Keck, head of campaigns
“Change? Why do we need change? Aren’t things bad enough as they are?” This sentiment, originally expressed by the Victorian prime minister, the Marquess of Salisbury, is often shared by taxpayers whenever potential tax reforms are announced. The trend is for taxes to increase and become ever more complicated.
However, earlier this month the Welsh government announced a consultation on tax reform that looks like it could actually buck this trend. It’s early days in this process and much could go wrong. But as I told ITV’s Sharp End on 27th November, “the Welsh government deserves some praise for opening this consultation.”
There are three different proposals for Welsh council tax reform:
1. Revaluation
Welsh council tax bands, of which there are nine, are currently based on property prices as they were in 2003, or would have been in the case of newer builds. This is absurdly out of date, particularly so given the surge in house prices in Wales since then. But to credit the Welsh government, this is a decade more up-to-date than English council tax bands, which haven’t been revalued since the system of council tax was introduced, nor are there any clear plans to do so.
This proposal suggests a simple update to the council tax bands, sothat rates reflect house prices as they are now, rather than what they were 20 years ago. This is an obviously sensible measure which England should follow. According to the Institute for Fiscal Studies (IFS), this would have little impact overall on the council tax burden, with similar numbers paying more compared to those paying less.
2. Revaluation and a change to bands
As in option one, revaluation, council tax bands would be updated to reflect current house prices. But there would also be changes to the bands themselves. Lower bands would see reductions in council tax, and higher bands would see increases. The system would become more progressive as a result. The concern here, of course, is that this would be merely a fig leaf to take more from those with more valuable houses, a way to boost council tax revenues while claiming to ease the burden on those lower down the scale. That is a genuine concern, but the IFS think the result would be that 803,582 households would see lower bills, 471,160 would see higher bills and 197,440 would see little change.
While no one welcomes tax rises, if the end result is an overall reduction in the council tax burden in Wales, then this would be a positive change.
3. Revaluation and the creation of new bands
As in option one, revaluation, council tax bands would be updated to reflect current house prices. But in this case three new bands would be created, with two new bands for the most expensive properties and one for the cheapest.
The Welsh council tax system already has more bands than in England, with nine instead of eight. Adding three more would mean an even more complex system. This is generally something that should be avoided, albeit the change is minor in the broader context. Again, according to the IFS, the result is expected to be that 786,090 would see cheaper bills, while 473,543 would see higher bills and 212,000 would see no change.
In summary then, the expectation is for the council tax burden in Wales to stay the same or go down. This is positive, particularly as Wales performs well compared to the rest of the UK in terms of the burden of council tax. While it is the fourth highest as a percentage of house prices when compared to Scotland and the nine regions of England, it is the fifth lowest as a percentage of median gross pay. With any changes to taxation the question has to be: what is the overall impact on the tax burden? If as a result of these changes, it goes down, this can only be good news.