1. Questions to the Minister for Finance and Local Government – in the Senedd on 23 June 2021.
2. What principles will the Welsh Government follow in developing tax policy in Wales? OQ56635
Our tax principles, published in our tax policy framework, bring consistency and coherence to our wider tax system by ensuring that Welsh taxes raise revenue fairly, support wider policy objectives, are clear, stable and simple, and encourage wide engagement, to create a more equal Wales for future generations, and I am currently reviewing the principles.
Minister, there is far too much inequality within the UK, and far too much inequality within Wales. When we travel around our constituencies as Senedd Members, we see great differences in quality of life, wealth and income between various areas of our constituencies. So, there is much work to be done. Some of the levers rest with UK Government in terms of tax and benefits, but Welsh Government does have significant levers, and, after income tax, one of the most significant is council tax. The Institute for Fiscal Studies' report last year said that council tax in Wales is out of date, regressive and distortionary, and needs be revalued and reformed, and, indeed, there was a pledge in the Labour manifesto for these Senedd elections to reform council tax. So, reforming council tax could make a significant difference in making Wales a fairer country. So, could you tell us today, Minister, whether work will be taken forward urgently to look at the council tax system in Wales and how it might be reformed to make it much more progressive and fair? And will that work also look at alternatives such as a land valuation tax?
I thank you for that important question. There are two things I'd like to offer in my response, with the first being that I'm really pleased with what we were able to achieve over the course of the last Senedd term in terms of making council tax fairer. We removed the punishment of imprisonment for the non-payment of council tax because we know that struggling to pay your bills shouldn't be a crime. We also ensured that care leavers up to the age of 25 were removed from the burden of council tax, and we also worked really closely with MoneySavingExpert and Martin Lewis to ensure that people with severe mental impairments were able to access the range of support available to them in terms of support for council tax payments particularly. So, we did a lot in terms of making council tax fairer, but John Griffiths is absolutely right that the system, in and of itself, is not a progressive system; it's a regressive system, as the IFS said in that report, which was commissioned by the Welsh Government.
Over the course of the last Senedd, we undertook and commissioned a suite of research, including the work from the IFS, but also work from Bangor University, Cardiff University, and others, to explore what a fairer system might look like in future. Those options included a land value tax, local income tax, and keeping our current system but with a revaluation and potentially additional bands within the system. So, all of those pieces of work were collated in a summary of findings, which we published in February, and the job now for the Welsh Government, and, hopefully, working with partners across the Chamber, is to determine which of those options, if any, we take forward and how we go about that. So, there's certainly an exciting road for us, I think, over the course of this Senedd term in terms of the reforming of local taxation to make it fairer.
Minister, many people in Brecon and Radnorshire commute to work out of the constituency to Cardiff, Swansea, Newport and beyond, and the only way those people can go to their place of work is by driving due to the rurality of my constituency and the lack of public transport. During the last term of the Senedd, the Welsh Government floated the idea of a potential road tax and, if imposed, this could hit the hard-working people of my constituency who are already paying their taxes to fund our public services and to keep growing the economy of Wales. Minister, can you confirm today that the Welsh Government is not looking to impose a road tax, as this would have a big impact on the pockets of the hard-working people of Brecon and Radnorshire? Diolch, Llywydd.
So, the work to which you refer was a piece of work undertaken by the economy Minister in the last Senedd term to explore what a road tax might look like, and this isn't one of the taxes that we're currently actively considering taking forward at the moment in the immediate term. However, it is something that we're interested in exploring, to understand the merits or the demerits of it. So, it's certainly not an active proposal at the moment, but one of a wide variety of areas that we're looking at just to understand what the opportunities or the risks might be. So, there are no current immediate proposals, however, clearly interested in ideas.