New law would reform business rates and lay groundwork for council tax changes

A proposed new law would amount to the most radical and progressive reforms of local government finances in the devolution era, the Senedd heard.

The Welsh Government has introduced the Local Government Finance bill which would reform business rates and lay the groundwork for sweeping council tax changes.

Rebecca Evans told the Senedd that the bill would address many of the limitations of local taxation systems in Wales.

The finance minister said the bill will establish a five-yearly cycle of revaluations for council tax which is still based on property values from 2003.

Under the bill, ministers would have greater flexibility to set, create and make changes to council tax discounts in future.

But Ms Evans stressed that the 25% single-person council tax discount will remain in place.

Sam Rowlands, the Conservatives’ shadow minister, raised concerns that other council tax discounts could be taken away.

The former Conwy council leader said: “I am concerned that this could lead Wales towards higher taxes through the back door, further increasing the burden on working people here.”

He also cautioned that the bill could water down the role of locally elected councillors.

While the bill includes a duty to put a national council tax reduction scheme in place, Ms Evans said councils will play an important role and continue to have local discretion.

Business rates

Under the bill, property values for business rates – also known as non-domestic rates – would be revalued every three years rather than the current five.

Mr Rowlands cautioned that a move to three-yearly revaluations could reduce certainty.

Ms Evans said the business community has asked for more frequent revaluations.

She argued that three years strikes the right balance between certainty and ensuring that the taxbase is up to date. 

Labour backbencher Mike Hedges welcomed measures in the bill to tackle tax avoidance, which results in £10 million to £20m a year of lost money for local services.

Land value tax

Peredur Owen Griffiths called for council tax and business rates to eventually be replaced by a land value tax (LVT) – a more progressive tax that would fall on land owners.

The South Wales East MS highlighted research by Bangor University into the feasibility of introducing such a tax.

The Plaid Cymru politician said LVT would bring revenue to Wales from land owned by the Crown Estate rather than see it “syphoned away” to the UK Treasury.

Mr Hedges raised concerns about how a land value tax could affect social housing in high value areas such as the minister’s Gower constituency.

Ms Evans said the Welsh Government continues to explore the potential for a land value tax and ministers will bring forward a road map for potential implementation..

She said Mr Hedges’ point will need to be considered as part of long-term work on LTV, which is expected to be completed by the end of the Sixth Senedd.

Public notices

Mr Owen Griffiths raised concerns about a clause in the bill which removes a requirement for council tax changes to be published in local newspapers.

During plenary on Tuesday November 21, Ms Evans said she expects this part of the bill to be subject to scrutiny in the Senedd.

She explained that the bill replaces the requirement in the Local Government Finance Act 1992 with a duty to place a notice of tax changes on a council website.

The finance minister stressed that the bill includes a requirement to put suitable alternatives in place to ensure information is accessible to digitally excluded people.

Levies

Mr Rowlands argued that the bill is a missed opportunity to reform the fire and rescue service levy on councils into a precept shown on bills as happens with the police.

Mr Hedges agreed, suggesting all levies should be shown outside council tax because councils have no control over the money levied on them.

Ms Evans said the issue of levies has been raised by council leaders and she is interested in exploring the matter further but there are currently no plans to do so.

The bill will now be scrutinised by the Senedd’s local government committee, which will take evidence before publishing a ‘stage-one’ report by March 2024.

By Chris Haines, ICNN Senedd reporter