Wales’ most unfair tax 

It’s hard to think of a more unfair tax than Council Tax, says Victoria Winckler, Director of the Bevan Foundation  

Council Tax has become part of the irritating background of everyday life. We’ve got to pay it, the basis of how it’s charged is unclear and it’s often a lot of money to find. As I was preparing to give evidence to the Senedd Committee inquiry into Council Tax, I was reminded that it’s probably the most unfair tax in Wales. Here’s why.  

People with the greatest property assets pay disproportionately less than people with the least.  

The bizarre structure of Council Tax favours the better-off.  As the Institute for Fiscal Studies pointed out a couple of years ago, the bill for a Band I property is just 3.5 times that for a Band A property, despite Band I properties being worth at least 9.5 times as much as Band A properties in 2003.  There are also too few tax bands, even at 2003 values, to include higher tax rates for the most valuable properties: a mansion is in the same band as a 5-bed new build.  

The idea that people with higher incomes or greater wealth pay a higher rate of tax is well established – think of income tax with its basic, higher and additional rates. But for some reason this principle is not applied to Council Tax.  

People in the richest places pay less than people in the poorest.  

A second quirk of the current Council Tax system is that areas with a large number of low-value properties end up charging more than areas with a lot of higher-value properties, simply to raise the same amount of money.  The result is that people in the same value property pay more in poor areas than in prosperous ones. This is all too clear in Blaenau Gwent and Merthyr Tydfil which have amongst the highest Council Tax for a Band D property in the UK.  

Help with Council Tax costs is complex  

To offset some of the unfairness of Council Tax is a complex system of reliefs, discounts and exemptions.  The most well-known discount is the single person discount, in which someone gets 25% off their Council Tax simply for living alone or if they live with a person in one of 21 different categories ranging from student to care leaver to diplomat.   

Then there’s a scheme that reduces Council Tax liability depending on income. The number of people benefiting from CTRS has fallen sharply since it was introduced in 2013-14, and take up is now relatively low, at around 55-65% in 2018.  However, recent Welsh Government campaigns may have increased the number of people receiving it.  

To make matters worse, local authorities receive exactly the same cash to fund the CTRS now as they did in 2013-14 – some £244 million – leaving them to fund any increase in expenditure from their own resources.  

The Welsh Government is at last considering reform of the system and the Senedd Local Government and Housing Committee is scrutinising their proposals.  Regrettably the discussion has yet to excite much interest even though the reforms are likely to affect the monthly outgoings of every household in Wales.  

In the Bevan Foundation’s view, reform is long overdue and a fairer system urgently needed.  

The Bevan Foundation’s response to the Welsh Government is here and its submission to the Senedd Local Government and Housing Committee is here.