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Local Government Finance (Wales) Bill

Owain Davies
Owain Davies

The Welsh Government has published the Local Government Finance (Wales) Bill, which will reform local taxes in Wales. The Bill seeks to update how council tax and non-domestic rates are collected, aiming to make the system fairer without generating more revenue.

In 2015, non-domestic or business rates were fully devolved to Wales. Wales has maintained the same non-domestic rating since, citing many benefits such as reliable proportional tax rates. The Welsh Government plans to amend the rates regime as “current arrangements were not configured to suit our economy and priorities”. In effect, Ministers are keen to introduce more flexibility, a more progressive system that can target specific sectors.

Council tax, or domestic local taxes, are based on property valuations last updated in 2005, with those valuations being based on market data from 2003. Similarly to non-domestic rates, the Welsh Government have decided not to introduce wholesale reform. Benefits of the current system include its simplicity and high collection rate. Nonetheless, their research found a higher tax burden on less wealthy households, and they are also keen to introduce some regional variation.

Non-Domestic Rates

The Bill includes a change to the system of five-yearly to three-yearly revaluations. In addition, the Bill proposes to give Welsh Government Ministers the power to amend valuation dates in order to develop a more flexible and responsive system.

The Bill also makes technical changes about completion notices and refurbishment periods, closing what the Welsh Government see as a loophole involving removing some properties from rating lists The Bill will allow Welsh Ministers to vary multipliers applied to business rates. The ‘differential multiplier’ and a property's rateable value are used to calculate non-domestic rates for businesses.  Currently, Ministers can apply a single multiplier, which has been frozen at 0.535, but this Bill will allow for different multipliers to be set for different properties based on these factors:

Value of a property, with less valuable properties having a lower multiplier

Sector-specific multipliers

Geographic location of the property.

Council Tax

The Welsh Government has decided to retain a property-based value in preference to basing local taxes on income, arguing that properties are easier to track or measure than income and are a good determinant of household size and service demand.

The last revaluation was carried out in 2005 in Wales, with valuations in England and Scotland based on 1991 figures. The Bill allows for a five-year valuation cycle to ensure council tax reflects property values.

There are currently nine valuation bands - from A (the lowest) to I (the highest). Ministers will be able to introduce more bands and change the naming system to increase clarity.

Band D is currently a reference point for local authorities to set council tax rates for every band, but local authorities will be able to set different bands as reference points in future.

The current system allows for a 25% or 50% discount on council tax discounts if one or two adults living in the property cannot contribute to household income. The single-person deal, set at 25%, will remain in place.

The Bill will add new discount categories and rates to 25-50%. It will also remove the link between the single-person and empty property discounts. This will allow for different discount rates to be set for different situations. It will also remove the empty property discount, save for specific scenarios.

In 2013-14, the Welsh Government introduced the Council Tax Reduction Scheme, which provides reduced council tax rates to households, with roughly 261,000 households receiving a reduction last year. Local authorities currently run the scheme, but the Bill would amend the scheme to be run nationally in order to adopt a consistent approach and reduce administrative costs.

The Bill will also amend how local authorities communicate council tax decisions to residents. As it stands, the information is spread through local newspapers. It is recognised as an outdated system, so local authorities use digital publications of council tax information, using local authority websites and alternatives for those who find accessing the internet difficult.



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