Item 8 is the Plaid Cymru debate: council tax on second homes, and I call on Siân Gwenllian to move the motion—Siân. 

Motion NDM7162 Rhun ap Iorwerth

To propose that the National Assembly for Wales calls on the Welsh Government to ensure that council tax is paid on second homes.

Motion moved.

Thank you very much, Deputy Presiding Officer. We've brought this debate forward today because we feel that we must get rid of an unacceptable injustice. I have been raising the issue of council tax on second homes for some time. The wording of our motion is deliberately open-ended. I know that the Welsh Government has been looking for a solution—I had a meeting with some of the officials of the Government back in the summer. But, unfortunately, so far there's no sign that anything is going to change. And I have to say I was very disappointed this afternoon with the response of the Finance Minister, who said that there wasn't a loophole in the system. To me, that was astonishing. Even though the motion is open-ended, I do propose a way forward and I'm looking forward eagerly to hearing the response of the Minister. 

Although owners of second homes are among the richest people in Britain, in Wales they can use the system in order to avoid paying council tax. By registering their second property as a small business, second-home owners can avoid paying council tax by transferring to the business rate system. But, given that the rateable value of their property is low, 94 per cent of them are eligible for business rate relief. That is, they don't have to pay business rates either. But they are not businesses—they’re domestic homes. So, they don’t pay council tax and they don’t pay business rates, even though the owners do use our roads, our pavements, our street lighting, our drains, our public toilets and so forth. This is unjust, and that is why I am continuing to challenge this system. It is a scandal, and that’s why we have to find solutions and act in order to get rid of this injustice. It’s an issue of equality, and I can’t understand why Welsh Labour is allowing this to continue.

It is a problem that is increasing. There are 5.2 million people in Britain who are second-home owners by now, compared with 1.6 million just a few years ago, and research shows that nine of every 10 second-home owners in the UK are among the 50 per cent of the richest people in the country. But, in Wales, the second-home owners have found a way of saving money, a legal way—I’m not arguing about that; it is a legal way—but one that does create a great injustice and unfairness.

The problem is tied to section 66 of the Local Government Finance Act 1988. That Act allows second-home owners to move their property from the council tax system if they register their property as a self-catering property for part of the year. It is a problem across Wales, but, in areas where there are many second homes, that’s where the worst effects can be felt. There are 5,000 second homes in Gwynedd, which is the county with the largest number of second homes in Wales, and probably among the regions of the UK. However, nearly 2,000 people are on the waiting list for social housing in the county. Local people are being priced out of the housing market, creating a crisis in many of our communities. Gwynedd Council is eager to mitigate this problem and second home owners need to pay an additional premium on their council tax. This is happening in other parts of Wales given the powers that came into effect in 2014. In Gwynedd, the idea is to spend the revenue that's raised in this fashion to build affordable homes and social housing, and we genuinely need those kinds of homes. But, as I've just described, an increasing number of second home owners have found a way of not paying council tax. Up to 1,000 of the 5,000 second homes in Gwynedd have found this anomaly in the system.

On the other hand, my surgeries in my constituency are full of people who live in unacceptable conditions, in private rented sector homes that are damp, too small or difficult to heat, leading to fuel poverty. Families have to share their homes with parents, other relatives or friends. There is a major problem here. There is a fundamental unfairness in a situation where 2,000 people live in unacceptable conditions while second home owners are playing the system for their own benefit and avoiding paying council tax. A total of £1.7 million per year is lost in Gwynedd alone, as well as the premium, because of this, and that money could be very useful in the council coffers, money that could contribute to the building of appropriate housing for people in the county.

You could argue, by letting this happen, that the Welsh Government is putting money in the pockets of second home owners rather than using the funding to improve the lives of local people. It's vital that we do solve this problem. In my mind, the easiest, simplest and most transparent solution is to adapt section 66 of the Local Government Finance Act 1988. The Welsh Government has the power to do that by amending the criteria for self-catering units, as described in section 66. The principle could be established that all properties that are used as domestic properties continue to be domestic properties, even if they're used occasionally to raise additional income for the owner. Making that change would get rid of that loophole and that wouldn't affect self-catering commercial properties and tourism businesses because they're not part of section 66 of this Act. That's the easy solution, in my opinion. I'm looking forward to hearing whether the Minister agrees with that.

This afternoon, we'll also be discussing the problem of second homes more generally, and Llyr Gruffydd will expand on that. It is possible to use the planning system to tackle the increasing problem of second homes in our communities and the way that local people are priced out of the housing market locally. It is possible, for example, to use new categories within the planning system and define the term 'residential' to include the category of 'second home', and you can legislate that planning permission or planning consent are needed to change the use to a second home. That would give local authorities an opportunity to maintain a better balance within communities.

We need to do much more to help families who are being priced out of the market because of the increasing number of second homes, and I am pleased to know that Gwynedd Council is doing detailed research to find solutions to the stress that second homes are placing on local communities. But, in the meantime, what about getting rid of the scandal that arises in the wake of section 66 of the Local Government Finance Act 1988, and doing that once and for all? The Welsh Local Government Association agrees with Plaid Cymru on this, under the leadership of the rural affairs forum, which includes nine Welsh councils. And Jeremy Corbyn has announced plans to impose a new levy on second homes that would mean that owners would pay twice as much council tax. He says, and I quote:

'A housing market that works for the many, needs government action to ensure everyone has a place to call home.'

UK Labour saying that; Welsh Labour failing to solve the scandal of the owners who have found a way of avoiding paying council tax on their properties. I've offered a solution. There may be other ways of creating fairness, but certainly this needs to be resolved urgently.

First of all, can I say that there are people in Welsh Labour who agree with you? I'm one of them.

There are two things we know: the rich are very good at producing schemes to avoid or reduce the amount of tax they pay—the classic is corporation tax, which has become a voluntary contribution by multinational companies; and, we need taxes, both local and national, to pay for the services we use and need. The two most hated taxes by the rich have been council tax and non-domestic rates. These have been historically unavoidable, hence the demand for rate reduction schemes continually, and the turning of second homes into holiday properties using the rate reduction scheme to avoid or substantially reduce the amount that would have been due as council tax.

I welcome that the Welsh Labour Government is currently reviewing the impact and use of the discretionary powers for local authorities to apply council tax premiums and whether the new legislation is operating as intended. As part of the review, local authorities have been asked to provide any evidence they may have that private second homes are being incorrectly listed as self-catering properties. The difficulty is that many second home owners let friends and family use them, thus technically meeting the available-for-rent criteria, because they're letting them to people—sons, daughters, cousins—but I would suggest that they're not actually charging the rate that they should be.

Owners of self-catering accommodation must provide evidence that their property meets the criteria. The Valuation Office Agency determines whether a property is categorised as domestic or non-domestic. We have no control over the Valuation Office Agency, as an executive agency sponsored by Her Majesty's Revenue and Customs. As it is non-devolved, it is independent of the Welsh Government. What I do not understand is if these people are saying that these are second homes and they're renting them out, not as properties for rent, why HMRC are not chasing them for the income. I know what rental values are and a week in most of Wales at peak periods is well in excess of £1,000. These people, if they're renting it out for the period they're saying, they should be making a minimum of £12,000 to £15,000, and therefore HMRC should be chasing them for it. And I'm disappointed that HMRC aren't chasing them, because they should be paying tax on their income.

Ratepayers must continue to satisfy the non-domestic rates criteria for each property for each 12-month period. Otherwise, unless the property falls within any other category of non-domestic property, the property is likely to be considered domestic and would be subject to an assessment of liability to council tax. Where a property is listed as non-domestic self-catering accommodation, but does not meet the statutory criteria, the owner could face a backdated council tax demand. And I wonder how many of those have been made in Wales so far.

I am told that the Welsh Government is alive to the issue of second home owners switching the status of their property from council tax to non-domestic rates in an effort to potentially benefit from rate relief schemes. Perhaps the Minister could tell us how many backdated council tax demands there have been. As I said earlier, HMRC ought to be chasing these people. If they're renting them out for up to 70 days, then that should be generating a substantial amount of money.

Second homes also reduce the number of properties available for local people. They make young people leave the area as prices are forced up and cause the closure of local schools as the number of children left to attend them decreases. We know that owners of second homes who fulfil the criteria for determining whether a property is non-domestic may be liable for non-domestic rates. They may also be eligible for small business rate relief and therefore not have any liability after the small business rate relief is applied. The small business rate relief is fully funded by the Welsh Government, so why should we worry? Because all the non-domestic rates revenue raised in Wales is pooled and distributed to local authorities. When that money doesn't come in, all the rest of us in Wales are not getting as much as we would from that pool. This means that non payment in Gwynedd affects people in Swansea.

Last week, I checked the rental prices of holiday accommodation in Gwynedd during August. I could not find a property where the annual council tax would be less than two weeks' rent with a 100 per cent surcharge, or one week's rent without a surcharge. If it's a house or flat, they should pay council tax. I'd again call on the Minister to remove the small business rate relief scheme from houses and flats. It's a different solution to the one that Siân Gwenllian has put forward, but it is another solution—whilst keeping it for hotels and guesthouses. It's the right thing to do, it's good for income, good for the area, and it's a good use of public money. I urge the Welsh Government to take action. I don't care if you take Siân Gwenllian's suggestion or mine, it's just we need to take some action and do it.

We are aware now that there are over 24,000 second homes in Wales, with almost 5,000 of them in Gwynedd, and over 4,000 are in Pembrokeshire. In 2017-18, almost 40 per cent of the homes sold in Gwynedd and a third of the homes sold on Anglesey had been sold as second homes. So, essentially, we are talking about a broader economic problem here, aren't we? Large parts of Wales, particularly those areas with the highest level of second homes, are also among the areas with the lowest levels of income and salary. So, the reality is that these are areas where the housing market doesn't represent the local economy.

Of course, local authorities have means such as sections 106 and 157 to try to control the sale of homes and put in place measures to seek to balance these elements, but it’s clear that they are inadequate or, for one thing, we wouldn't be having this debate today. And, therefore, I just want to spend some time looking at what other regions and countries have been doing and whether there are any lessons that we could learn in tackling some of these issues.

Switzerland, of course, has very strict rules. They are at the extreme end of the spectrum. There, the home has to be located in an area that is designated as a holiday area before it can be sold as a second home, and then you need permission from the canton before you can purchase that home. In addition to that, the cantons and boroughs can set their own rules. They can limit the sale of second homes to homes that are already second homes. They can restrict the size of those second homes. They can even limit the number of second homes that any one person can own. In 2012, the people of Switzerland agreed in a referendum, as they tend to do regularly in Switzerland, to set a restriction on the number of second homes that could exist within the country. So, they have chosen a particular path.

Guernsey have taken another approach. They have taken strict measures to control the housing market there. The Government there operates two housing markets: an open market for just 7 per cent of homes on the island, and the rest is restricted to local people or people who have a work permit. And there are different models in countries such as Catalonia, France, Germany, and so on and so forth.

Now, closer to home of course, there is a specific set of regulations in London.

Regulations in London since the 1970s have been different to the rest of England in relation to the management of the use of open-market housing as second homes. The regulations in London used to prevent the use of residential properties in the 32 boroughs of London as temporary holiday lets, and this was done through regulations that required planning permission to change the use. The main purpose of this, of course, was to protect the housing stock in London.

In 2005, legislation came into force to slacken those rules, and over a short period of time, there's been an enormous increase in the number of properties being let as short-term holiday lets, as you can imagine, with over 70,000 properties listed now as short-term holiday lets. That's been the subject of a discussion at the House of Commons recently, with concerns regarding the impact that has on housing stock and on local communities, et cetera. One of the issues there is the difficulty in enforcing the limit of 90 nights in a calendar year, which is something I'm sure we can relate to in the Welsh context as well.

Now, currently, the planning Bill in Scotland is proceeding through Parliament there, and it includes a proposal to reform the legislation so that the use of a house for a short-term holiday let requires planning permission, where the planning authority designates an area as a short-term holiday let management area.

So, as I'm illustrating, there are plenty of creative ways, some more extreme than others, that we could be looking at. Now, Siân Gwenllian has clearly outlined quite a straightforward answer to a very specific issue, but there is, as I say, a whole raft of approaches in dealing with the broader issues around second homes and the effect they have on communities, on housing markets and the availability of housing that we need to be looking at. I think the Welsh Government needs to show the same creativity in addressing some of the issues that have been highlighted in this debate.

During the second and third Assemblies, widespread concern about the impact on tourism businesses of the then Welsh Assembly Government proposals to change the qualifying criteria for self-catering accommodation was expressed by trade bodies including the Welsh Association of Self Catering Operators and Welsh Tourism Alliance members. Further to this, Welsh Government legislation recognised that some dwellings could be used either as second homes or as commercially let self-catering holiday accommodation.

The Non-Domestic Rating (Definition of Domestic Property) (Wales) Order 2010 stated that to qualify as self-catering accommodation, a dwelling must be available to let for at least 140 days in a 12-month period and actually let for at least 70 days. The Order was revised and strengthened in 2016. The qualification periods were retained, reflecting the public consultation responses.

As the Equality, Local Government and Communities Committee report on empty properties, yet to be debated but published last Thursday, states,

'the criteria for self-catering accommodation strike a balance'.

As our report also states,

'Dwellings which meet the criteria may be recorded on the non-domestic rating list rather than the council tax list. Dwellings which do not meet the criteria, including second homes kept mainly for private use, are liable for council tax. Valuation lists for council tax and non-domestic rating purposes are compiled and maintained by the Valuation Office Agency. The Agency is independent of the Welsh Government.

'For a property to be defined as self-catering accommodation and moved to the rating list, the owner must provide evidence to the Valuation Office Agency that the property meets the criteria...If a local authority believes a property should be listed for council tax and has evidence of this, it is obliged to share such information with the Agency and the Agency will consider the evidence. 

'Self-catering accommodation which falls below a specified rateable value may be eligible for Small Business Rates Relief...The proposals, including whether there should be any additional exceptions, were also subject to public consultation.'

Even within this criteria, I have been asked by farming families from Flintshire to Anglesey, investing to diversify their businesses, to represent their concerns that the 70-day occupancy rule is too long and inflexible for a short holiday season, especially for a new-start self-catering business.

The Housing (Wales) Act 2014 added discretionary powers for local authorities to apply premiums of up to 100 per cent to the council tax bills for long-term empty properties and second homes where authorities can set the premium at any level up to 100 per cent for either or both. The decision to apply a premium is a matter for individual local authorities. Gwynedd, with almost 5,000 second homes, introduced a 50 per cent premium on second homes as, oddly, did Flintshire. Conwy introduced a 25 per cent premium. However, Gwynedd warned that many of these properties would be subject to attempts to avoid the additional tax if second home owners decided to let out to customers for more than 70 days a year. Responding to me in committee, Gwynedd Council’s representative stated,

'I know that this idea that a lot of our empty properties are owned by people from outwith Gwynedd isn't necessarily complete, because many people within Gwynedd own these vacant homes, as you say, because they've inherited property and they want to do something with it.'

When I said to him,

'Some second homeowners are very, very wealthy, some less so', and asked

'to what extent is the circumstance you're describing genuine, where somebody might actually be letting the property for more than the eligible period during the year for affordability reasons? And to what extent is it trying to bypass the cost?', he replied,

'the transfer of domestic council tax properties into business premises in Gwynedd is significant…We're talking over 1,000 at the moment that have transferred. We're talking about hundreds every year. And what they need to do is to assure the valuation office that the property has been available for 140 days and has been let for 70 days, and they can then transfer it'.

He added that

'about 98 per cent in Gwynedd—have small business rates relief.'

So, he said the loss to the public purse in the tax take is in the millions. So, working with the valuation office, the Welsh Government must therefore give attention to this perhaps inevitable consequence of its legislation. Gwynedd did warn them. However, as I evidenced earlier, they must penalise neither the contribution made by genuine self-catering businesses to our tourism economy, nor those second home owners who feel forced to generate extra income on affordability grounds who are not super wealthy and who are playing by the rules.

Will you take an intervention?

I've just finished.

You haven't; you had a few words to add.

Literally my last words.

Carry on—quickly.

Very, very quickly, do you think that there's a loophole that needs to be closed?

Sorry, could you repeat that?

Do you think that there is a loophole that needs to be closed? I'm trying to gauge from your speech whether you think there is or not.

We have to start establishing whether this has been properly monitored and enforced, and, if so, then look at this further. But I suspect that this isn't being properly monitored and enforced, and that's where we need to begin.

Thank you.

The Local Government Finance Act 1988 section 66 is very complex. There have been all manner of changes to it, and I'm concerned that an assumption made by Plaid Members, and potentially also by Mike, is not correct. I don't believe that there is this carve-out for self-contained self-catering accommodation provided commercially. I think that comes from subsection (2), which is the hotels, B&B carve-out. So, essentially, to avoid council tax, you either have to meet subsection (2), or in Wales, subsection (2BB). And when subsection (2) says, 

'which is not self-contained self-catering accommodation provided commercially' that is a double 'not', because it goes back also to the 'property is not domestic property' at the beginning of that subsection. And I think what we're discussing here should be (2BB) rather than the hotels, B&B carve-out. Mike.

Thank you. I'll just put on the record again what I said. I said, 'Don't give domestic rate relief on residential properties, whether they're rented out or not'.

Yes, Mike, you did come up with a different solution. I accept that, but I think you did also mention the carve-out, as we'd heard earlier, before. I don't think any of us are proposing a hotel, B&B change to what subsection (2) says, and I think it's important to recognise subsection (2B) and that reference to non-self-contained self-catering accommodation provided commercially just—

Will you take an intervention?

No, I want to carry on, actually.

It just applies  to the hotels and B&Bs. The problem we have is essentially a lot of these issues go back to when council tax was introduced and there was a 50 per cent compulsory discount for second homes, and at that point, when business reliefs for small businesses were much smaller—both in Wales and England, they were the same at that time—there was a concern that second home owners were getting that 50 per cent discount instead of paying the business rates. That's now changed.

We had this Order in 2010—fine—but we updated it in 2016 and didn't take account of the changes that HMRC had made to the furnished holiday lettings regime announced at the end of 2010 and applicable for income tax from 2012 to 2013. And they made a very sensible change, which I think we should also make in Wales, and I'm perplexed as to why it hasn't been made and why Rebecca answered the question as she did earlier. Since HMRC looked at this and thought whether being let for 70 days actually was a commercial undertaking—if someone just had their second home, quite well-off, liked to have a second home, but would just let it out for 10 weeks just so they get the tax thing, was that a sufficient threshold? And they concluded 'no' and they said, 'Actually, you have to let out for at least 15 weeks', which is the 105 days. I think it's that bit we should be focusing on. It's very difficult to enforce on how much it's available for. It's very easy to say that it's available or to advertise it at a high rate, or someone asks and then you don't take the booking. How do the tax authorities know? Whereas, actually, the 10 or hopefully 15 weeks where you're renting it out to someone else as an occupation and you have to have income and payment to show it, that can be easily checked. So, what I would encourage Welsh Government to do—and I hope that Plaid Cymru would see this at least as an improvement on the status quo—is to adopt those HMRC rules for the furnished holiday lettings where they allow people to offset the interest and have other advantages that they don't allow to normal, longer term lettings.

Will you take an intervention?

I will take the intervention now.

I appreciate what you're saying and I think there's some merit in having a discussion about how to take that forward. The one other category of accommodation that we haven't yet introduced into this debate, of course, is holiday caravan accommodation. I live in an area where holiday caravan tourism is a very important part of the economy. One of the problems and challenges we have there is that, with extended seasons, many people are using those holiday caravans as their main residences, and that also is then giving rise to costs and burdens on local authorities, for which they are not recompensed.

The Member’s put his point on the record. I need to complete the point I was trying to make to conclude my argument, which is, yes, as the motion says, if it’s a second home, you should pay council tax—that’s appropriate, and you shouldn’t have an exploitation of a loophole. However, if the tax system is designed to say, actually, if it’s not a second home and you’re really having it on a holiday lettings basis and you’re genuinely doing that commercially, and, as per HMRC, it is available, genuinely, for at least 30 weeks a year, and your use is incidental for the remainder, and genuinely rent it out for at least 15 weeks, then that strikes me as a reasonable hurdle to clear to say, 'Actually, this is a holiday letting. It’s occupied for much of the year. People are there spending money in the local area. I’m paying my income tax on that according to HMRC rules. It’s fair and appropriate to say it is that rather than, actually, a second home I’m disguising to avoid council tax.' But if we are to say that, I really think we need to move to the stricter HMRC FHL rules that have applied since 2012-13. It would also make it simpler, because there’s then one system you get for both your council tax exemption and the HMRC rules. And I don’t understand why Welsh Government would continue having this much laxer thing, which I think is properly described by Plaid as a loophole.

We know what negative impact second homes can have on the housing market. It can push people out of the housing market as prices go up. We know that it can push young people out of their areas as they’re unable to purchase homes. And we know that it’s an increasing problem: one house in every 10 in Ynys Môn is either vacant or a second home, and as many as four in 10 in areas such as Rhosneigr. We have certainly, as a party, been supportive of the premium on council tax for second homes—a premium that can be used to pay for building more homes, so it works on numerous levels. But we’re talking here about a loophole that means that not only do people not pay the premium, but they also avoid paying any tax at all. We heard the finance Minister saying earlier that she doesn’t believe that there is a loophole. The First Minister, when I raised this a year ago, said that there was no loophole, but, sorry, when wealthier people who can afford a second home legally manage not to pay any tax at all, then that is a loophole, and it costs a great deal to communities and to local authorities.

We know what’s happening: the owners of second homes transfer the home from the council tax system to the business rates system. They can do that very easy, it would appear. The threshold is far too low, and I am very doubtful—. If I can just read from an article from The Telegraph—and this is the case in England, but it is just as relevant to Wales—and this is from July of this year:

'How to pay no council tax on your second home—saving thousands of pounds a year'.

I used the word 'loophole'. There is another word:

'A trick that allows second-home owners to register their properties as "holiday homes" and pay less tax—even if the properties are not let out to tourists—has soared in popularity since a rule was changed two years ago. 

'If a homeowner makes their second property available to let as a holiday home for at least 140 days a year, it can be classed as a small business.'

—and so on, and so forth. It’s a trick and it’s being encouraged here in The Telegraph, and we know that this loophole is being used by the owners of second homes. What’s very worrying for me is that the evidence demonstrates that this is on the increase. If I could just mention the figures that we’re dealing with here, in Gwynedd, up to December of last year, there were—let me find the figure—421 properties that had transferred from the council tax regime to the business rates regime. That’s 421 by December, as compared to 282 in the full financial year previously. So, the direction of travel is very clear here.

The Telegraph article and the provision mentioned there does actually only apply to England. It is (2B) and it's incredibly loose—it just says you need to intend to let it for 140 days. In Wales, at least, we then say, 'And you have to have done so—had it available for the last year—and you then actually have to do it for the 70 days.' So, it's better than the English liberalisation, but still I think the HMRC 2010 105 would be a much better and more sensible cut-off.

And I did point out that it was an England model, but I do think it is relevant to Wales, because what we are seeing is, in reality, people looking for ways of showing that they let their properties for 70 days a year, trying to look for ways to show that they are available for 140 days a year. Frankly, most people would consider you should be able to have a property available 365 days a year, if it is genuinely a property that is available for let.

The losses to local government are clearly very substantial. There is a survey that I wish to refer to relating to a survey of seven councils in Wales, which have seen losses, estimating that we are, on average, looking at band D properties—losses of £5 million in council tax in one year. On Anglesey, one of the areas where there is the highest number of second homes, it's £1 million. Now, bear in mind that £1 million accounts to 2.5 per cent on council tax in an area such as Anglesey. There is a loophole, and I very much hope that the Minister will reconsider the denials that we have heard from her, and the previous First Minister, that there isn't an issue that needs to be tackled.

What we need to see, and what I hope to hear from the Minister now, is that the Government is going to accept that there is an issue that needs to be resolved here, and whatever model we use, whether we increase the threshold, or we turn to the model described by Mike Hedges, or what we're proposing, and what was outlined by Siân Gwenllian, then the Government does have to show its intent in tackling this, because it's our communities that are suffering, and our young people particularly who are being forced out of those communities.

Thank you. I call on the Minister for Finance and the Trefnydd, Rebecca Evans. 

Diolch. I really do welcome this debate this afternoon, and I thank all Members for their comments. And I think that the contributions that we've had really speak to the complexity of the issue that we're trying to grapple with this afternoon. Welsh Government does support the motion, which recognises the vital role that council tax plays in contributing to the funding of local services here in Wales. Our local authorities have worked hard to continue to deliver the services that their communities need, despite the challenges that have been presented by a decade of austerity, and challenges that I don't seek to underestimate, and which persist, despite the Government having protected local government from the worst effects of cuts imposed on our budgets.

But it is right that all households who have the means to pay council tax do so, and make a financial contribution to the services provided to their communities. And this applies to all households, whether they own or rent their home, whether their property is their only home, or whether they live there for only part of the year. We also have to ensure that households who do not have the means to pay receive effective support and are treated with dignity and respect.

We do have a comprehensive national framework in place, to ensure that local authorities are able to collect and, if necessary, enforce the payment of council tax. And the responsibility for the collection of council tax rests with individual authorities, and they have a number of powers at their disposal to help them with this. Local authorities have well-tested procedures for ensuring they're able to collect the tax effectively and efficiently from households who can afford to pay.

The Valuation Office Agency also has a vital role to play in ensuring that all properties are accurately listed for council tax and non-domestic rates purposes. And I think Wales does have an enviable record in terms of collecting council tax. Our average collection rate is higher than that in England and Scotland, and, of course, we can't be compared with Northern Ireland where they don't have a comparable council tax.

Collection rates in Wales increased to over 97 per cent when we introduced our council tax reduction scheme in 2013-14, and they've been maintained at that high level ever since. Some authorities achieve higher collection rates than others, and those are for reasons unrelated to the nature of their council tax base or local demographics, and we've been working closely with authorities to ensure that they share good practice and learn from each other.

I think the publication of the council tax protocol earlier this year, which was developed in partnership with local government, was a key step in terms of our efforts to make council tax fairer. The powers to charge council tax premiums on second homes and long-term empty properties are discretionary powers, and they were introduced to assist local authorities in managing issues within their local housing supply. It's important to note that Wales is the only part of the UK that has given authorities these powers in relation to second homes.

They're intended to be used by local authorities in conjunction with other powers and responsibilities for housing, planning and economic development, amongst others, to take account of local issues and variations. It's for individual authorities to decide whether to apply the powers, and they're best placed to understand the local patterns of housing supply and demand, and how these fit with their local planning and development priorities.

In deciding whether to introduce a premium, each authority needs to make a full assessment of all of the possible impacts. The national framework for the collection of council tax strikes a balance between the interests of individual householders, local communities and our economy. It provides a framework within which each authority can take account of its local circumstances and the needs of different stakeholders, and reflects factors that may be significant in one area but not another.

It's important to note that we did consult widely before introducing the powers, and we also consulted widely on the exceptions to the premiums and the exceptions to our permanent small business rates relief scheme before introducing the new legislation for each scheme. The idea that Mike Hedges has described about removing the ability to access the small business rates relief scheme from any residential properties was one of those ideas that was considered during the putting together of this permanent small business rates relief scheme. But it was discounted at that time because it was thought that it would be burdensome and, potentially, have unintended consequences.

I do want to get this right. This is one of the reasons why, in the tax policy work plan, which I launched at the end of last year, I did make very clear that the work plan for the year ahead would be to consider new approaches to deterring tax evasion and artificial avoidance, and improving compliance across all of the Welsh taxes, including measures to tackle evasion and avoidance of non-domestic rates and monitoring the implementation of new legislation to ensure that it's operating as intended and doesn't create opportunities for avoidance.

Rather than simply focusing on evasion and avoidance, isn't the issue one of 'What's a second home?' versus 'What is a genuine commercial lettings business?' If we don't want to tax that on the same basis, why allow that to be one if people are only letting it for 10 weeks a year? Why do you think that's sufficient, or at least why did the Order think it sufficient in 2016?

Well, these are issues that we're exploring, in terms of the work that we are doing with local authorities to explore how they have been using premiums and what their experience is of houses moving onto the rating list for access to small business rates relief and so on. Part of that work is involving asking local authorities for the individual experiences that they've had. Potentially, a response might be to give local authorities the power to decide how many days are appropriate for them to apply in their local areas, because we know that this picture varies very much across Wales. We've heard about some of the specific challenges in Ynys Môn and in Gwynedd, whereas those challenges just don't manifest themselves so much in other parts of Wales. So, it's an idea that I'm actively exploring at the moment as we look towards the future of local taxes in the round, so both non-domestic rates and council tax—we're exploring the short, medium and long-term future for both of those taxes.

The distribution of second homes, as I say, in Wales is very varied. So, even within local authorities with a higher than average number of second homes, or percentage of second homes, the presence can be very much focused and highly localised in particular communities. We do recognise the challenge that those second homes and empty homes can present to the supply of affordable housing within our communities, and that's why we're working closely with local authorities and other partners to meet our target of delivering 20,000 more affordable homes and to deliver the recommendations from the recent independent affordable housing supply review.

Our efforts are supported by our social housing grant programme, and we're investing £138 million this year to provide grant funding for affordable housing to build new properties or renovate existing properties. We're investing a further £127 million in our housing support grant to help address the housing and housing-related support needs of individuals, and alongside that we're also investing £90 million over three years in our innovative housing programme, to test how we can build the homes of the future more quickly and with high standards of design and performance. And we've established an empty property enforcement team, which is supporting local authorities to tackle empty homes. So, council tax premiums were never introduced as a way of raising revenue, but almost 18,000 long-term empty properties and second homes are now paying premiums this year, and this is generating millions in additional revenue for these authorities. We haven't prescribed how they should be using this extra funding, but we are encouraged to see that a number of them are using it to help meet their local housing needs.

A very small number of local authorities have suggested that second home owners are avoiding paying council tax premiums by being listed as self-catering accommodation, and I do understand those concerns. We've heard those concerns described this afternoon. The reality is that transferring to the rating list is not avoidance, and local authorities do benefit from non-domestic rates income as well as council tax, and, of course, where a business is eligible for small business rate relief, the Government does fund that rate relief in full, to the benefit of local authorities. So, it can't just be a case of switching to one list by choice; there are some criteria that must be met, and the question that we have to grapple with is, 'Have we got those criteria right?' So, those are the things we're thinking about in terms of whether or not our legislation is operating as intended.

I've described earlier on today the role of the VOA, during questions this afternoon, and the fact that I'm very keen that local authorities alert the VOA if there are cases where they believe that a property is incorrectly being allocated to that list. But I recognise the local tax system isn't perfect. No tax system is, and that's why we are working through that programme of short, medium and longer term reforms to improve the effectiveness and fairness of local taxes and the wider local government finance system. I look forward to bringing forward a statement to the Chamber in November that sets out the work that we're undertaking in that regard. I think we've made some really significant strides recently in terms of making council tax fairer, and I'll be providing a further update on that. But I'd just like to thank colleagues for what has been an important debate, and I think that there's plenty for us to continue discussing as we move forward.

Thank you. Can I call Siân Gwenllian to reply to the debate?

Thank you very much, and thanks to everybody who has contributed to this debate. I think it was Llyr Gruffydd who tried to move us away from this specific issue in question, and thank you for doing that. There are broader issues, of course, than the ones that we have been discussing today, and it is possible to use the planning system in an effective way in order to create a better balance within our communities, and to allow communities to work against a situation where there are too many second homes pushing local people out because the prices are going through the roof. You only need to look at some of the communities in Gwynedd and Anglesey to see the reality of that situation, and there are other countries—Switzerland, Denmark, Northern Ireland as well, and then Guernsey and London—where there are rules within the planning system that can be used to tackle the broader problem. And I am looking forward to seeing the fruit of the labours by Gwynedd Council into this situation.

In terms of the specific issue that we’ve been discussing today, I do thank two contributors for their ideas. I'm very happy to be discussing other solutions, different to the one that we’ve proposed here today—removing business rates relief from second homes, and, yes, that’s one way ahead, or using HMRC rules. I’m very open to that, but I’m not the Minister. The Minister needs to take this issue seriously, and, unfortunately, I do feel this afternoon that we haven’t been convinced at all that there is an understanding of the complexity of the situation, and an understanding of what exactly is going on, and an understanding of this specific loophole that exists in the system. I’m very disappointed about that. I was hoping that today we would be able to have at least some kind of indication that there was a solution that was going to be found. The only chink of light that I could see is that there was a description there somewhere of artificial avoidance. Now, to me, that’s a loophole, that’s another term for ‘loophole’—that’s what artificial avoidance is. I greatly hope that this issue does get some attention from the Government.

The trick that Rhun ap Iorwerth referred to—the premium itself is what has caused this, to a certain extent. Yes, people are trying to find a way of not having to pay the premium and then looking for tricks in order to avoid paying any tax at all. The former First Minister talked about a radio advertisement that he heard about a company that was trying to provide advice to second-home owners about how to avoid paying council tax. It’s terrible when we reach a situation of that kind, because the funding or the money that’s lost from the system is very valuable funds for the local authorities, which could be used to create affordable homes, social housing, homes that are needed within our communities.

So, I do greatly hope that there will be a rethink on this and that there will be some serious consideration of how we resolve this problem. What we got from the Minister, unfortunately, was a description of the council tax collection framework and a description of what’s happening, and I have no confidence this afternoon that the Government is going to try and tackle this, despite the contributions of everyone in this room today.

Thank you. The proposal is to agree the motion. Does any Member object? No. The motion is therefore agreed in accordance with Standing Order 12.36.

Motion agreed in accordance with Standing Order 12.36.