Item 6 this afternoon is a motion to annul the Non-Domestic Rating (Amendment of Definition of Domestic Property) (Wales) Order 2022, and I call on Tom Giffard to move the motion.

Motion NDM8031 Tom Giffard

To propose that the Senedd, in accordance with Standing Order 27.2:

Agrees that The Non-Domestic Rating (Amendment of Definition of Domestic Property) (Wales) Order 2022, laid before the Senedd on 24 May 2022, be annulled.

Motion moved.

Diolch yn fawr iawn ichi, Dirprwy Lywydd. I'd like to formally move this motion by emphasising my party's continued opposition to this arbitrary increase to the non-domestic rating of self-catering businesses across Wales. And we do side with the industry on this issue. We believe that an increase from 70 to 105 days to bring them in line with HM Revenue and Customs requirements would be far more appropriate than what is being proposed. This change in legislation has the potential to have a hugely profound impact on the self-catering industry across our country. The Wales Tourism Alliance, the Professional Association of Self-Caterers UK and UK Hospitality Cymru have warned that the tax changes could force as many as 30 per cent of self-catering businesses to close or sell up.

To give some context to these changes: currently, self-catering properties in Wales must be available to be let for a minimum of 140 days in any 12-month period and actually be let for 70 to qualify for business rates rather than council tax; under the new proposals, properties must be available to be let for at least 252 days and actually let for 182 days to qualify for business rates—an increase of a massive 160 per cent. This will have a hugely damaging impact on the businesses being able to operate within Wales and damage our economy, with many businesses that will simply just be forced to close. This, alongside a potential tourism tax and giving councils the ability to increase council tax rates up to 300 per cent on these businesses that do not qualify, leaves them facing a triple whammy of measures, which, to me, will stifle the industry and our economy in Wales as a result.

Instead, the Welsh Government has opted to press on with tax plans, despite receiving a sea of overwhelming evidence of damaging impacts from the Wales Tourism Alliance, the Professional Association of Self-Caterers UK and UK Hospitality Cymru, who surveyed more than 1,500 self-catering businesses across Wales. They said that,

'This all-Wales, one size fits all approach takes no account of the different kinds of businesses that operate in a seasonal Welsh tourism year. Nor does it respond to the fact that the problem this proposes to solve does not affect the whole of Wales, something the Welsh Government has, itself, recognised.'

During the consultation on this issue, which I'm sorry to say, Minister, seemed like a box-ticking exercise, the tourism industry supported the principle of raising the number of days that a property must (a) be available and (b) be occupied in order to qualify as a business. The majority response to the Welsh Government's consultation, which ran from the end of last year, was to raise the occupancy threshold from 70 days to 105 days, in line with those HMRC requirements—that was a 50 per cent rise, suggested by members of a professional sector that understands booking trends, marketing and customer behaviour. So, I'd like to hear in the Minister's response about why they didn't listen to their own consultation, which clearly backed a move to 105 days.

Instead, this rise of 160 per cent was suggested by just nine respondents, less than 1 per cent of the total. This has come as a complete shock to the whole industry, not just the self-catering sector. Whilst the Government isn't bound to follow exactly what a consultation tells it to do, it certainly has a duty to explain why it has totally ignored one. That still hasn't been adequately answered or explained and shows a lack of respect for the people across the country who deserve explanations, not just diktats.

Ashford Price, the secretary of the Welsh Association of Visitor Attractions believes around 1,400 businesses would go under due to the changes and many thousands of workers in Wales would have to be made redundant. He added,

'Rural areas will also be the poorer as when genuine self-catering operators cease to operate there will be fewer tourists spending money in their area during the tourist season. This "summer tourist money" helps the local shops, garages, and pubs survive the long quiet winters in many rural locations.'

That's why it's surprising to see the Minister quoted as saying that

'The purpose of the change is to help ensure property owners are making a fair contribution to local communities, for example by increasing their contribution to the local economy'.

That will be such a bitter blow to those within the industry who support local jobs, produce and local supply chains. They invest in our communities, and increasing the threshold through this punitive change will hammer economies up and down the country. We need to back the industry, after being one of the most adversely impacted industries throughout the pandemic, and not marginalise them and punish them for the Welsh Government's historic shortcomings when it comes to house building.

Finally, Llywydd, a high number of these self-catering properties will, due to this Government action, be put up for sale. However, these properties would not be available for most locals to buy as the asking price would be, in all likelihood, beyond their reach. So, I urge Members across the Chamber to vote to annul today, to show that we stand with the industry and value the contribution that they make to our economy the length and breadth of Wales. Thank you.

Can I thank my colleague Tom Giffard for submitting today's motion to annul, because, as outlined in opening today's motion, and the evidence I've heard as chairman of the tourism cross-party group, this Order would be detrimental to the tourism industry and will simply see many legitimate, hard-working Welsh businesses go bust?

To start with today, I'd like to outline how important the tourism industry is to Wales, as it's really clear to me that Welsh Government simply do not understand this. To be fair to the Minister here today, there should be the Minister for Economy here as well, who should be supporting these businesses here in Wales, rather than hiding away. But as we know, tens of millions of visitors spend their money, which contributes around £6 billion to our economy every single year and supports around 12 per cent of jobs here in Wales, boosting livelihoods and local communities, more importantly.

I'd like to focus on three key areas about why today's motion needs to be supported. Firstly, as outlined by Tom Giffard, these self-catering properties will now be required to be let for 182 days—that 160 per cent increase that Tom Giffard outlined—which is a stark difference to where they were in most recent times. As we know from the mass of evidence that's already been alluded to today, many will not be able to meet this demand. And what will happen if they don't? They're going to face around a £6,000 tax bill every year, possibly, that currently they do not have to face, and that's going to hit their bottom line and will certainly affect their ability to function. It's clear that this simply won't be possible for many, and Welsh Government actions will be putting people out of business and out of work.

The second point is that, as we know, we continue to see many people now tightening their belts. Now is not the time to make these businesses struggle. We need to support them, to see them thrive and survive. It's clear that this Order has sent absolute shockwaves through the industry, with many legitimate businesses not knowing what to do. We've heard today that their mental health and well-being has taken a huge hit.

The third point, and the most disappointing part, which Tom Giffard outlined already, is that the industry would have accepted an increase in occupancy. They're willing to work with Government to make this happen. It's ridiculous that these self-catering businesses will now have to meet these changes with no transition available whatsoever—a 160 per cent increase with no transition. So, what's going to happen to those who can't meet this? How are we going to encourage these businesses to come into Wales and thrive in our country?

In closing, Deputy Presiding Officer, it's clear that this Order is ill thought out, leaving more questions than there are answers. The Welsh Government is here and should be here to support businesses to allow them to thrive and not damage them. Today, we have an opportunity to rectify these detrimental changes and work with the tourism industry to see, yes, an increase in occupancy rates, but one that is fair, one that works for them, and won't see people lose their jobs and their livelihoods. So, Members from across the Chamber, there are thriving tourism businesses in many of your regions and constituencies. They are there, they support your communities and they offer and contribute so much to the places where we work and live. Today is an opportunity to think about those communities and those businesses, support them, and vote to annul this damaging Order. Thank you very much.

It's disappointing, but not unexpected, to see the Conservatives jumping at the first opportunity they have to try and dismantle one of the first steps of the package of measures published to tackle the housing crisis, specifically the second homes crisis.

We're already in the vanguard here in Wales, taking steps to allow increasing council tax premium on second homes and vacant properties since 2014, with Gwynedd Council investing the additional income in its plans to provide more social housing for local people. Now, after 10 years of complaining, the Conservatives want to adopt a council tax premium scheme in England too. It's a matter of time before they emulate the other policies there too.

But, the early experience of implementing the premium demonstrated that some second home owners had found a way of playing the system, avoiding paying either the premium or a penny in tax on their property. The impact of this was the loss of millions of pounds of revenue from public coffers in many areas—[Interruption.]

Will you take an intervention?

Of course. 

Will you recognise that this isn't about second home owners who won't register their home with the Valuation Office Agency and dodge council tax, that this is about Welsh local businesses? Will you recognise that every business that's contacted me—and there's been hundreds of them now—is a local Welsh person, except one, who was born in Gwynedd, is a Welsh language speaker, but is away with the army and has kept his home to come back to when he leaves the army and during his holidays?

Thank you for that contribution. No, I don't accept that. This policy aims to close the loophole; that's the point. The intention of this Order that you as Conservatives are seeking to annul today is to close that loophole, as I mentioned, in the law.

I think most rational people would agree that there is something fundamentally wrong about a situation where thousands of my constituents—key workers, nurses, firefighters, shop workers, council workers—live in unacceptable conditions or can't access a home at all locally, whilst those who can afford a second home in those communities can play the system for their own benefit whilst more and more homes in residential areas are lost, to be used as Airbnbs and so on. It's Airbnbs and those platforms that are threatening the sustainability of the holiday rental sector. Mature businesses that have been contributing to the economy are now seeing their existence at stake because of the huge increase, with a large number of homes being bought as assets to be let on platforms such as Airbnb. This undermines well-established businesses.

In addition to this, there is no kind of regulation on these new platforms. To all intents and purposes, anyone can let property on these platforms whilst well-established companies using responsible providers who have a social conscience, like Dioni, have to reach particular standards before being let. So, we shouldn't look at the 182-day policy in isolation; this policy of 182 days is part of a broader package—in this case specifically, the announcement on Monday on the establishment of a new statutory licensing system for holiday lets. The sector has been calling for this for years, and now, as part of the co-operation agreement with Plaid Cymru, we are seeing this being delivered at last.

I welcome the commitment that the Minister has already given in her written statement on 24 May in introducing the Order to retain the package in its entirety under review, including how these latest measures can be used as they're implemented to deliver the objective most effectively. As Adam Price said, co-operation between parties and the need to take action swiftly in order to make a practical difference and to introduce immediate solutions to failings that have been in place for decades in the housing market does require compromise and pragmatism—compromise on using subordinate legislation in order to act quickly, whilst recognising the broader restrictions in terms of council tax, and pragmatism in term of continuing to refine as we move forward, including before this Order comes into force next April.

I also welcome the commitment from the Government to (1) look at specific exemptions for real holiday accommodation before the Order comes into force next April, and (2) to reform the guidance in order to confirm that councils can remove the council tax liability in some circumstances. This all can be done without throwing everything through the window and before the changes come into force. I therefore call on Members to reject the motion today. 

Can I thank my colleague the Member for South Wales West for bringing this forward, this motion? It's safe to say that the tourist sector is fundamental to so many of our communities, so hard hit by the pandemic and deeply concerned about the potential impact of these regulations, as Tom Giffard and Sam Rowlands have eloquently shared. Indeed, as pointed out in evidence provided by a number of tourism bodies in Wales, only nine responses to the Welsh Government's original consultation on these proposals were in support of an increase in the occupancy threshold, and I despair at the lack of understanding of our important economy in Wales that these issues of house ownership and businesses are being conflated without enough due thought on that.

It's not that the industry is against the increase in occupancy threshold, but the concern is that such a large increase in the threshold, as proposed by the Government, will subject far more self-catering businesses to council tax, possibly 300 per cent of the usual rates within those communities, something that many of those businesses, which are still recovering from the effects of the pandemic, cannot afford. There are also concerns about the impact that the cost-of-living crisis may have on the tourism sector, which may further impede the ability of business to meet the new threshold. In fact, the Wales Tourism Alliance, UKHospitality Cymru and others have warned that as many as, as we've already heard, 30 per cent of self-catering businesses may close or sell as a result of these changes. Clearly, this would not only harm our tourism sector, but it would obviously put livelihoods and jobs at risk. As such, Deputy Llywydd, I do believe that these regulations must not be implemented and that Government should reassess its position.

However, if the Government and Plaid are wedded to their current position, then I fully support calls for exemptions to be introduced in line with the current petition submitted to the Senedd by a number of tourism organisations. In particular, there must be an appropriate appeals process as well as an exemption for lets limited by planning permission. This final aspect is something that has been of concern to a number of my constituents. Is it really fair that rural businesses, who have been encouraged to diversify into the tourism sector, will be hamstrung by planning rules so that they wouldn't be able to change the use of their accommodation should they wish to no longer continue in the tourism sector as a result of these rules?

To conclude, Deputy Llywydd, I urge Members to vote in favour of the motion and against these regulations, which are clearly ill thought out.  

Before I get going, let me be very clear; we all know across this Chamber that there is an issue with second homes in Wales and stopping our local young people and our key workers, as Mabon ap Gwynfor has said, getting on the property ladder. But I do not believe that attacking genuine holiday businesses is the right way to address the problem. I've been inundated with correspondence from tourism businesses in my constituency since the Welsh Government announced their non-domestic rating Order 2022. The increase in number of days occupied to 182 is a massive jump from the current threshold, and a significant increase on the HMRC level of 105 days a year. Many holiday let businesses fear the threshold of 182 days a year is not achievable and will force many to cease trading. I think it's worth reiterating again what Tom Giffard said. The Welsh Tourism Alliance, the Professional Association of Self Caterers UK and UKHospitality Cymru have warned that tax changes could force as many as 30 per cent of self-catering businesses to close or sell up. Thirty per cent. That will have a huge detrimental impact to a local economy, costing jobs and people's livelihoods, and that is something—[Interruption.] I will take an intervention, Mr Kurtz.

Thank you, James. That's one of the really concerning parts of this—that a lot of these properties that will be hamstrung by this have never been residential properties. They are developed outbuildings on farms, for example, which have never housed people full time, but provide such an important part of the local economy.

That's totally correct, and that's what we must get here. That's why the Welsh Government exemptions are going to be very key, and I want to hear more from the Minister on that. The Welsh Government have opted here to press on with their tax plans despite receiving evidence about the damaging impact to the sector. The organisations that were with us today surveyed more than 1,500 self-catering businesses across Wales, and it seems the Welsh Government has chosen to ignore those. I note the Welsh Government are looking at—[Interruption.] I will take an intervention, yes. 

Do you not accept that the licensing scheme will actually help the sector, the indigenous sector that's been working for decades in our communities, and also that the biggest problem facing that sector is the huge mushrooming in Airbnbs, and those are the people that are impacting on the number of nights that people are staying in the accommodation in Wales at the moment?

I do believe that Airbnbs are a problem, but there are genuine hospitality businesses that are going to be affected by these changes.

I note that the Welsh Government are looking at exemptions, but I don't think they go far enough. What about holiday lets that are not in holiday hotspots, that only have very short tourism seasons? How are we going to cope with that? What about the businesses that can't operate all year round? Because some of them don't have adequate heating in the cold winter months. Welsh Government encouraged farm businesses to diversity and now Welsh Government have pulled the rug from under them without—. What about the holiday lets that are used for charity groups? Have you thought about that? I don't think the Welsh Government have. Your list of exemptions, as others are muttering by my side, could go on and on. 

The fundamental problem here is we're putting genuine holiday businesses and livelihoods under threat, and they are being punished—punished—by this Government for this Government not building enough houses. That is the problem here, and I have seen in my constituency holiday lets coming back on the market as people are offloading them for £400,000. I'd like to know how the Minister can think that local young people can magic up £400,000, because I can assure you that people in my constituency can't. 

We use HMRC figures in many other areas, like for our mileage rate allowance. Why can we not use the 105-day threshold for holiday businesses? This non-domestic rating is death by a thousand cuts to our hospitality industry. The announcement this week from the First Minister and Adam Price to put more regulation, more bureaucracy, more costs on our businesses, hurting the industry when it needs to be getting more support from this Government, not less—. So, in your co-operation agreement, when you're working together, I think it's about time that you both stepped up, supported our businesses, supported our hospitality industry, because that's what our country wants, and it doesn't need this Government taxing our tourism sector to death. Diolch, Dirprwy Lywydd.

I call on the Minister for Finance and Local Government, Rebecca Evans. 

Diolch, Dirprwy Lywydd. I welcome the opportunity to respond to the motion today. 

On 2 March, more than 12 months before the changes take practical effect, I announced the outcome of our consultation on local taxes for second homes and self-catering accommodation. Since then, I've answered questions from Members in the Chamber and elsewhere, I've responded to an opposition debate on the subject of today's motion, and I've also had discussions with stakeholders. Throughout this period I've been clear about the Welsh Government's decisions, and about the timing of changes. I've explained the reasons behind our decision to increase the letting thresholds for self-catering accommodation to be classified as non-domestic for local taxation purposes. Our approach will ensure that the properties concerned are classed as non-domestic only if they're occupied for business purposes for the majority of the year, and if they're let on a less frequent basis, they will be liable for council tax. This is about property owners making a fair contribution to the communities where they have homes or run businesses. Self-catering operators—[Interruption.] Yes, I will.

Would you accept and concede that a fair contribution to the community looks often like a thriving businesses supporting people's livelihoods and putting bread on their tables? If those businesses don't exist in our communities, then that fair contribution to our communities doesn't exist.

I think that the fair contribution to communities has to be made within the context of sustainable communities, where we have a balance of businesses and a balance of residents there. We know there are communities in Wales where 40 per cent of properties are second homes, sometimes being let out as holiday lets. And we know that for large parts of the year, in some areas, the lights will be out. So, we need to be supporting these businesses to become—[Interruption.]

I ask Members to allow the Minister to answer the question and to finish her contribution. 

I think that the issue that Mabon ap Gwynfor referred to in his contribution, about striking that balance between those in the more casual end of the sector and those that are established businesses, is important and that work on registration will be important in doing that, so that we can move people towards the more established businesses and support them to have those properties let for a larger number of nights of the year. But I'll come to some further points on that, because, as we've said, self-catering operators above the thresholds will be making their contributions to the community through the higher economic activity that they support, and those below the threshold will make their contribution through council tax in the same way as those who do not meet the current thresholds. And this, in turn, is part of our three-pronged approach to addressing the impact that large numbers of second homes and holiday lets can have on communities. And that, as you know, is the work being undertaken in partnership through the co-operation agreement with Plaid Cymru. And I do recognise the strength of feeling amongst operators, and I've heard those representations from individuals and from industry representatives. 

In the context of the wider policy priority, to support those sustainable communities and affordable housing, there's a limit to the evidence available in relation to the impact of any option, that's true, but that also includes doing nothing. The evidence that is available has been considered and it's published for all Members to see in the regulatory impact assessment that accompanies the Order. And I do recognise that the stronger criteria might be challenging for some operators, but it's important to recognise that there is evidence that average occupancy of self-catering properties exceeded 50 per cent over the three years prior to the pandemic. So, many operators in all parts of Wales are already meeting the new criteria. And I think it is reasonable to expect businesses to adopt an operating model that maximises the use of their property and the benefit that it brings to local communities. [Interruption.] I'm happy to take an intervention, Llywydd. 

You've got time to take an intervention if you wish. 

I'll happily make an intervention. Most operators would absolutely love for their properties to be occupied for more than 50 per cent of the year, but that is simply not the reality in many parts of Wales. And I don't think that you imposing this arbitrary 50 per cent occupancy rule throughout the year is very fair, Minister. I'd love you to come to meet with some of the very small businesses in my constituency who rely on this income to put that food on the table who will now face potential financial ruin as a result of your decision. 

Well, as I said, average occupancy has exceeded 50 per cent over the three years prior to the pandemic, so many of those businesses are reaching that threshold, and I've already mentioned the point about the regulation system, which will help push tourists and visitors towards those established businesses and away from the more casual end of the market, which is having an impact, I think, on businesses. 

Of course, there will be a number of possible behavioural changes that will occur amongst owners of second homes and self-catering accommodation in response to the changes, and of course it's for individual owners to consider the approach that they take. But, and a number of colleagues have referred to this, I do recognise that some self-catering properties are restricted by planning conditions that prevent the permanent occupation as somebody's main residence. An exception from a council tax premium already is provided for one type of planning condition and, as I've said many times now in this Chamber, I'm exploring whether an exception should apply to other planning conditions. My intention is that any necessary changes are brought in with effect from 1 April 2023, alongside the increased thresholds. 

Will you take an intervention?

The Minister is almost out of time. 

A very quick one. 

No, the Minister is out of time. She is now going into an area that I'm allowing because of previous interventions. 

Okay, I'll try to conclude. I'll also be issuing that revised guidance that we've heard of in relation to the additional options that are available if self-catering properties restricted by planning permission conditions don't meet those thresholds. These options do include discretion to reduce or even remove the standard rate of council tax liability for certain properties where considered appropriate by the local authority—and it is for local authorities to decide whether to apply a premium and at what level to apply it. But we shouldn't assume that all local authorities will adopt the increased maximum council tax premium of 300 per cent that will be allowed from 1 April of next year. The powers have been available to increase it by 100 per cent since 2016, and only three local authorities are currently applying that maximum. 

So, to conclude, as part of the co-operation agreement with Plaid Cymru, we're taking immediate action to address the impact of second homes and unaffordable housing in communities across Wales, using the planning, property and taxation systems. We do recognise that these are complex issues that require a multifaceted and integrated response, and changes to the local taxes alone won't provide the solution, which is why we're developing that package of interventions. As such, Dirprwy Lywydd, I would urge Members to vote against the motion today. 

I call on Tom Giffard to reply to the debate. 

Diolch, Dirprwy Lywydd. Can I thank Members for their valuable contributions to my annulment motion today? We've heard from a range of Members across the Chamber, and I'll just cap off very quickly some of their remarks. Sam Rowlands kicked off by talking about the economic impact—that £6,000 additional tax bill that some of these businesses now are going to be forced to pay. Peter Fox talked about this is the wrong time for it. We're just coming out of a pandemic, we're facing a cost-of-living crisis—this is absolutely not the right time, if ever there was one, to enact these changes in the first place. And James Evans also spoke a lot about that blanket approach across the country to these measures. If we want to encourage tourism across Wales and in different parts of Wales, we can't have one uniform rule of 182 days across the country. It simply doesn't work. Sam Kurtz also mentioned that it just totally misses the mark, this policy. Properties that were never available for residential use are going to be caught up in these changes as well.

Can I just talk about Mabon ap Gwynfor's very important—[Interruption.] 

Carry on. 

Can I just talk very quickly about Mabon ap Gwynfor's contribution as well, when he talked about over-tourism? I think the tourism industry wants to help solve the problems of over-tourism—it has said that it does—in those areas where the numbers of second homes are higher. But as Mark Isherwood said, that is a conflation of two different issues here, and, as a result, these businesses have been stifled with a huge increased tax burden to pay instead. 

And finally from the Minister, I noted you talked a lot about a fair contribution, and as Sam Rowlands said, there was no recognition, I think, from the Minister that a fair contribution to a local area is a thriving economy in that area—those local businesses being open. And that's what tourists expect when they visit an area—they want a thriving local community as well, and without these businesses in that area, that simply may not happen. 

And finally, I want to talk about the exemptions as well. We're doing this entirely the wrong way, Minister. We're being asked to vote to support this Bill today without knowing the exemptions that are going to follow. It's totally the wrong way round. [Interruption.] Absolutely. 

Thank you. The Minister talks about exemptions being in place, but doesn't this just confirm that this whole policy in the first place is back to front, and this is the wrong policy, an unfair policy, because the exemptions should have been considered at a much earlier stage, not now? 

Yes. I think this policy has been rushed, quite frankly, to satisfy the demands and the needs of Plaid Cymru and the co-operation agreement. 

So, to conclude—. Well, the one thing I will say in addition to that to Russell, it was notable—

Will you take an intervention? 

Oh, happily from the deputy First Minister. 

Will you take an intervention? 

Yes. 

Do you realise that the reason that we are introducing this package of measures urgently is because we are facing a housing crisis in these communities? And we make no apology for recognising the urgency of the crisis that young people, in particular, in our communities are facing. 

I think what you fail to recognise is that these people are based in these communities. They run and operate businesses in places like Carmarthenshire. They absolutely are part of those communities and help them run. To penalise them in this way by your party and the Labour Party is totally unfair—[Interruption.]—and I think it is notable that not one single Labour backbencher got up to support these—

Can I ask all Members please to keep quiet, because I want to actually hear the contribution from the Member?  

Not one single Labour backbencher got up to defend your plans today, Minister. I think that is a notable point to make as well. And so I would urge Members to vote to annul this Bill today—vote to save Welsh tourism before this triple whammy of announcements and policies from Welsh Government leave us with no sector left to save. 

The proposal is to agree the motion. Does any Member object? [Objection.] There are objections. I will therefore defer voting on the motion until voting time.

Voting deferred until voting time.