Item 3 this afternoon is a statement by the Minister for Finance and Local Government: a fairer council tax. I call on the Minister, Rebecca Evans.

Diolch. Our programme for government and co-operation agreement with Plaid Cymru commit to making reforms to council tax to make it fairer and more progressive. In December, I announced that I would be consulting this year on an ambitious package of reforms as the starting point on a journey towards meeting those aims. Our published work last year concluded that to meet those aims in the shorter term, we would need to consider a revaluation to allow us to change the bands and tax rates. It also highlighted the need for us to improve our national support scheme and examine the framework for discounts and exemptions. In parallel to this work, we will continue to work on alternative ways to raise local taxes that may share the burden more fairly in future, such as a local land value tax.

I am taking a phased approach to designing a new system because I am keen that everyone has the opportunity to contribute to this work. The consultation I have launched today sets out a road map. It represents phase 1 of a multistage conversation, seeking views in an open and collaborative way. I will take into account everything we learn from this phase, and I hope to be in a position to launch a consultation on detailed proposals in phase 2 next year. The consultation I am launching today aims for a fair and progressive system that rebalances the tax burden on households, funds services that benefit everyone, is a tax that connects people with communities, and has regular updates built in it to keep it fair in future.

I have worked closely with the Plaid Cymru designated Member, Cefin Campbell MS, on this shared priority. I have continued to meet local government leaders to gather views from across Wales. I have established governance arrangements, through which we are engaging with partners who are key to delivering what we set out to achieve. These include practitioners in local authorities, the Valuation Office Agency and the Valuation Tribunal for Wales. We have continued working with respected expert institutions in this field, including the Institute for Fiscal Studies.

There are a great deal of positives about the council tax system that we shouldn't lose sight of. It has stood the test of time since the 1990s and it represents local democracy in action. Overall, it is a very efficient and stable tax, raising £2 billion every year for essential services like schools and social care—services that we can't do without. It also has low administrative costs, is well understood by taxpayers, and its underlying basis, property value, is a good broad indicator of people's wealth relative to one another. However, I do recognise that it is not perfect. The system we currently have places a higher tax burden proportionately on people with lower levels of wealth. As Members will know, all properties in Wales liable for council tax are placed in one of nine bands, based on property values from April 2003. This means the tax is nearly 20 years out of date, and what we pay no longer reflects our circumstances. The amount of council tax charged for band I properties is three and a half times as much as band A, yet homes in the top band could be worth more than nine times as much as those in the bottom band. It is this Government’s view that a revaluation should take place, and we should aim to implement a new structure for council tax based on up-to-date values. If we were to do this, the consultation seeks views on doing so from April 2025.

While house prices in Wales have grown significantly since 2003, I want to be clear this does not mean that everyone's council tax will increase. The system we design will remain a relative one. Previous research suggests up to 75 per cent of households would either be unaffected or would see their bills reduce. I also want to be clear that the purpose of revaluation is not to increase the total amount raised from taxpayers, but to redistribute the burden to ensure the fairness and integrity of the system. This exercise would open up an opportunity to add bands to the top or bottom ends of the scale, which might help create tax rates that are more progressive. There will be further points when we can consider how best to redesign the system. From 2025 onwards, and for the first time in the history of council tax, we want to deliver rolling revaluations to avoid the distortions in bills that we know can occur when updates are postponed over many years. We want to introduce a cycle of revaluations to not only provide clarity for taxpayers and delivery bodies, but to ensure the council tax burden is redistributed fairly on a regular basis. 

Moving on to our system of council tax support for low-income households, from today I am seeking views on improving our national council tax reduction scheme. I am proud that we have continued to maintain entitlements to reductions for around 270,000 vulnerable and low-income households. As the cost-of-living crisis worsens, support of this kind is even more vital to thousands of struggling households. But take-up of the scheme could be improved. The regulations are complex, and we are prevented from making in-year changes where needed. As the roll-out of universal credit scales up, it introduces further complexity into the way that people apply for support and the way their entitlement is calculated. I am keen to generate views from practitioners and others about how we can simplify or modernise the scheme to make it as easy as possible to access.

Another key element of the consultation focuses on council tax discounts and exemptions. Many of the current arrangements have been in existence since 1993. Some help to recognise household circumstances and people's ability to pay, and some make practical sense from a tax-collection perspective. I want to ensure our decisions are fair and fit for a modern system. It needs to be easy for practitioners to administer and clear for people to understand. I look forward to hearing ideas about this through our consultation. The consultation I have launched today seeks views on a path to ambitious change. This is why these reforms need to be part of a national, civic conversation with the people of Wales. I'd like to reassure Members and the public today that if we undertake the reforms that we are seeking views on, we would consider targeted transitional arrangements for those who may need time to adapt to any changes.

Finally, I want to be very clear: individuals will see no immediate changes to their bills as a result of the consultation I am publishing today. We have a great deal of work to do before reforms can be introduced. These reforms will be significant undertakings that will need legislative time and the support of Members from across this Senedd. I welcome all comments on phase 1 of our consultation, and I will keep Members informed of developments.

The Conservative spokesperson, Sam Rowlands. 

Thank you, Deputy Presiding Officer, and can I thank you, Minister, for bringing forward today's statement on a fairer council tax, one that I've been looking forward to and I'm sure many of us have been looking forward to as well? Can I also welcome your balance of comments in terms of recognising some of the positive elements of council tax as it currently stands? I think you said that there are a great deal of positives about the council tax system that we should not lose sight of, that it has stood the test of time since the 1990s and represents local democracy in action, which I'm sure we'd both want to continue seeing take place. I also acknowledge where you've pointed out some improvements in the system that could and should take place as well.

In responding to your statement today, Minister, I'd like to also welcome the fact that you're going out to consultation on the future of council tax here in Wales. As we know, council tax impacts every household up and down Wales, and it's vitally important that we encourage as many people as possible to engage with any process of change, including one around council tax. It's even more important when we know many people are facing uncertainty with the future cost of living that we're all looking at at the moment. But, one concern I have with consultations, Minister, which I'm sure you may share from time to time, is that we often don't receive a big enough response, with many parts of our community missed out. So, in light of this, I wonder what assurances you can give that this consultation will ensure people from all walks of life are included and listened to. 

Secondly, Minister, as we know from your statement today, the council tax proposal will see a complete revaluation of all 1.5 million properties in Wales, with the aim of ensuring valuations are up to date and people are paying the appropriate amount of council tax. Certainly, we'd want to see as up-to-date information as possible. I agree with that. Of course, this revaluation will be the first since 2003 in Wales, which was controversial at the time, because one in three households received a higher bill than they were used to paying. It's vitally important that any change leads to a fair transition for council tax payers and will not force anyone to fall off a financial cliff edge. So, in addition to this, it's crucial that those on fixed incomes, such as pensioners, who may not have significant income in proportion to their house value, are properly considered as well. So, Minister, how will you ensure that any revaluation won't see the same mistakes of 2003, and that hard-working families and those on fixed incomes won't be hit with those higher bills? 

And finally, Minister, I note from today's statement that you're now using the term 'a fairer council tax', which I'm sure we'll all be positive about, but you were previously talking about council tax reform, perhaps a stronger statement previously. And I wonder if this is because Welsh Government now believe that your proposals are not sufficient enough reform to be calling it true reform. Minister, I can certainly accept that the current system for council tax does need some review. However, I'm not sure that your current proposals are real reform. So, in light of your consultation, I'm wondering whether you foresee any alternatives to a revaluation, and a few extra bands being proposed as well. For example, in the consultation, we could see suggestions such as a proportional property tax, which I know some Members in this Chamber would support, or a local income tax, for example, or even perhaps a council tax linked to the energy efficiency of your home to help incentivise people to make their houses more energy efficient.

So, in light of this, what assessment have you made of genuine alternatives that may be raised from the consultation, and if so, would you commit to explore these further so that consultation can be as open as possible? And I'm sure, Minister, you'll know on this side of the benches, we have some great ideas for reform—you may not always agree with those—and I am, of course, happy to work with you in considering these, and look forward to that continued engagement. Thank you very much.

I'm very grateful to Sam Rowlands for his contribution this afternoon, and his keenness to work collaboratively on what is such an important agenda in terms of making council tax fairer. I suppose the reason why we've referred to our consultation as making council tax fairer, rather than council tax reform in itself, is because 'fairer' is the outcome that we want from this, and the 'reform', if you like, is the how we get there. 

I'll start where you ended, really, in terms of looking at other ways in which we can achieve an improvement in fairness of council tax. Of course, over the last Senedd term, we undertook a great deal of research that looked at exactly that, really, in terms of different options for reform. We engaged experts in the field through the Institute for Fiscal Studies, Bangor University, Cardiff University and others, and looked at a number of ways in which we could take this agenda forward. One was the local income tax to which you referred, and we discounted that because it didn't have some of the benefits that Sam Rowlands began his contribution talking about, in the sense that council tax is based on property, which is a fixed asset, it's simple to understand, it's difficult to hide your property and so on. So, I think there are definitely some benefits through a property-based system. 

We also looked at a potential land value tax, and Bangor University undertook some research for us on that. We're committed to continuing to look at that idea, not only as a replacement for council tax but also for non-domestic rates, although I think that it's well recognised it's more difficult to do so for non-domestic rates. But we're continuing that work, exploring what a potential longer term programme of reform could look like, in parallel with the work that we're undertaking in the immediate term in terms of the council tax reform agenda. 

We've also been very mindful of the revaluation and the impact of it. As Sam Rowlands says, there are around 1.5 million domestic dwellings in Wales that are currently liable for council tax, and each is placed into one of those nine bands. A revaluation will provide an update to everybody's tax band, but I think it's important for people who are taking an interest in this already to recognise that just because the value of your property has gone up since the last revaluation, it doesn't necessarily mean that your council tax will go up, because the overall take from council tax is not to be increased; that's not the purpose of this exercise—it's about redistributing that more fairly across the bands. 

I think, again, Sam Rowlands is right in terms of recognising the impact of transitional arrangements. I think it is fair to say that at the last revaluation, when it came into force in 2005, we did introduce the idea of transitional arrangements probably too late. We're doing this right from the outset now to explore what those transitional arrangements should look like, because that was one of the lessons that we learned certainly from the last revaluation exercise. 

I think the fact that we are considering additions to bands and we're undertaking the revaluation exercise is important, but I don't think that we should lose sight of the importance of the work that we're doing in terms of reviewing our disregards and exemptions, because they will be critical in ensuring that we provide the right level of support to those who need it, alongside the review of our council tax reduction scheme, because we're keen that we continue to support those households that do need that support.

In terms of the previous revaluation, Sam Rowlands gave us the figures in terms of how properties were previously affected. We know from the work that the Institute for Fiscal Studies has done that if we were to revalue keeping the nine current bands, around a quarter would move up bands, a quarter would move down bands and around half would stay the same. But that research was undertaken prior to the pandemic, so we've asked the IFS to do another piece of research to update that so that we do get a better understanding of the implications in this particular regard.

Plaid Cymru spokesperson, Llyr Gruffydd. 

Thank you very much, Dirprwy Lywydd, and may I thank the Minister for her statement? It's good to see in it a number of the main elements of Plaid Cymru's council tax reform plans, which we set out in our manifesto, particularly around revaluation; increasing the number of bands, particularly at the higher end of home valuations; and ensuring that council tax is more proportionate to the value of property.

The motive for reform is clear. The current system is dated; to all intents and purposes, it's a legacy of the Thatcher era. This is the most regressive tax on these isles, which levies almost four times as much on the poor as those who are richer, so it's about time that we redistributed that burden more fairly across society and ensure that those who have the broadest shoulders carry a little more of that weight.

Just to pick up on some of the points already made, it's good to see the emphasis on improving the national support scheme and looking at the framework for the discounts and exemptions, because many people will be concerned, particularly older people, that the value of their property doesn't necessarily reflect their ability to pay. So, the first question from me is: what assurance can you give to those people that their circumstances will be fully taken into account as part of this consultation? Also, of course, on the other hand, what's your message to local authorities where there is depopulation and a population that's growing older, which is a factor that could have a significant impact on the tax gathered in those areas? Whilst accepting that this is an exercise that will be revenue neutral, as you said, we also need to ensure that individual local authorities don't lose out when it comes to ensuring the revenue to maintain key services that we all want to see.

People complain that the current system is unfair, and that's quite right, and people also see clear differences in council tax rates across Wales, and the system is inconsistent. I've previously referred in this Chamber to villages such as Ystradowen and Cwmllynfell, around 100 yards from each other but there are hundreds of pounds of difference in terms of their council tax bills. So, one is aware that there are inconsistencies and some unfairness. To what extent do you anticipate that this process will possibly tackle some of those issues, whilst protecting the integrity of local authorities in raising the revenue that they need? There's no getting away from the fact that there are tensions in terms of the divergence between certain parts of the country and others.

Of course, the policy and the proposed change are more timely than ever as we face a cost-of-living crisis. The council tax bill, of course, is one of the most significant bills faced by households every year, and these reforms could be a radical step in helping many households to cope better with what they are currently facing, and we know that council tax payments have been one of the greatest issues in terms of household debt. 

You mentioned targeted transitional arrangements, and you've responded to issues around that already, but how will you deal with council tax debt, particularly in moving from one system to another? In the longer term, to what extent can any new plans or new approach to council tax avoid situations where these debts do build up to such an extent in the first instance?

I'm very grateful to Llyr Gruffydd for his comments today, and just through Llyr I'd like to thank Cefin Campbell for the excellent work, which we've done, I think, together, on this particular area of our co-operation agreement, and for his really constructive approach and the ideas and challenge that he's brought to the work so far. I know there's a lot more for us to be doing on this, because, as I say, this is just stage 1 of our consultations, which is why it's so important that we do look across a broad range of issues, which Llyr Gruffydd has described today, the first being the council tax reduction scheme and exploring what our plans are for improving that. I think that making the wider council tax scheme more progressive might reduce the demand for support through our council tax reduction scheme, but we still expect that there will be the continued need to support low-income households with their council tax bills, which is one of the reasons why we're exploring what changes we might need to make to the scheme in the future.

Our aim, of course, is to support those who need it, and we have to take into account the wider conditions, such as the roll-out of universal credit, which has had a big impact on council tax and the eligibility for support, and also, of course, changes to the wider economy. We want to take the opportunity to improve the design of the scheme to make it easier to administer and obviously simpler for people to access the support to which they're entitled in the first instance. Our council tax reduction scheme is currently supporting 270,000 households with their bills and over 210,000 pay no council tax at all because of the support that we're able to invest in it. Around 20 per cent of households, that means, receive some help with their bills, but we know that the landscape here is continuing to change, so we need to explore this as part of our consultation. There are some specific questions on this in the consultation, which will help us understand the best way forward. 

Then, also, there was a reference to discounts and exemptions. The current landscape there is extremely complex, and the discounts and exemptions have grown incrementally since the inception of council tax in 1993, so I think that the review that we're doing of these is more than timely, I think, in terms of understanding what changes we might wish to make. I think it's probably too early at the moment to say what those changes might be. We have to undertake the work. We have to listen to people through the consultation. But we have established an expert-led working group of officials and local authority practitioners to help consider this specific aspect and to consider the review of the existing arrangements. Around 37 per cent of dwellings are currently subject to one or more discounts, and 4 per cent of dwellings are exempt, so that's a total of almost 600,000 of our 1.5 million properties, so obviously there is lots of work for us to do to make sure that the exemptions are the right ones and the discounts are the right ones in the future. Some of these changes will require primary legislation; for example, were we to make any changes to the one-adult discount, that would require primary legislation, for example.

I think the points about debt and arrears were also really well made. We've introduced the council tax protocol for Wales, which is a way in which we can try and build that good practice in the collection of council tax amongst local government. It was made in collaboration with local government and has been jointly endorsed by the Welsh Government and the Welsh Local Government Association and signed up to by all of those 22 authorities. But we have begun, now, a review and evaluation of some of the key actions that we took in the last Senedd term to try and ensure that people are able to deal with debt and have the support that they need. So, that's an important part of the consultation, and, again, there are questions in relation to debt and arrears. 

Finally, I think the points about local authorities and the impact on them are really, really important, because, of course, the nature of the tax base differs across Wales, and our consultation does recognise that and considers it. So, we will be analysing the impacts of a revaluation on local authorities once we have that further information, which I referred to, about the IFS updating the figures, which they did before the pandemic, and that will help us have a much more granular look across Wales at what the implications might be. But it is the case, I think, that the reforms outlined would inevitably change the nature of the tax base in each area, and so the consultation then proposes that funding for authorities through the revenue support grant would be reallocated according to the latest tax base. I think that's the fairest way to do it. But, again, we need to consider what transitional arrangements might be needed for local government in this respect.

So, another important area of the consultation where we're keen to hear from local government and others, and I think I didn't respond to the point that Sam Rowlands made earlier about the importance of consulting widely, so local government will obviously have a strong view on that particular element of the consultation, but then Llyr Gruffydd referred to potentially older people, so older people's organisations will want to contribute as well, and there'll be people across the spectrum who will have an interest in this, obviously, because council tax affects us all.

But I want to make it clear that people don't have to answer all of the questions, so if a resident has a strong view and wants to share it with us they don't feel obliged to answer the questions about local government and so on—just engage with us at the level at which people want to, so that we can hear as many diverse voices as we can.

I thank the Minister for her statement. We know we need more regular revaluations. Every 20 years is not acceptable. We know two other things: a local income tax is preferred by the rich because it will save them money via tax reduction schemes. But we also know that, under the current system, those with the least ability to pay spend a greater portion of their wealth on council tax. Someone living in a property worth £100,000 pays around five times as much council tax relative to the property value as someone living in a property worth £1 million. A £420,000 house only pays twice as much as a £120,000 house. To me, this is unfair, because payment is not proportional to the value of the property and value of property is a good indicator of personal wealth.

My recommendation is that an additional band is added at the bottom and at least two higher bands are added at the top, followed by adjustments on the multipliers being used to ensure fairness. Questions are: should single people on band G and above have a single person's discount? Who benefits from the student discount, students or landlords? And finally, should the bands be split in two, therefore making it much closer to the value of the property?

I'm very grateful to Mike Hedges for those contributions and for his ongoing engagement on the issue of council tax, and I share his concern about the importance of more regular revaluations. I think that it has been far too long since the last revaluation. Painful though I understand them to be, I think it is more important that we do it more regularly, and then the changes won't be so extreme in some cases. So, I think that that kind of regular revaluation is important and that's something that we're consulting on in our consultation that is launched today—so, keen to have those views formally expressed through the consultation as well.

And then, looking to the future, we can consider what technology might be available to us. Can we do rolling revaluations? What would we do with information as it comes through in terms of house sales? How can we be sure that we're not picking up a spike in house sales at that moment in time? So, there are lots and lots of different things for us to be considering in terms of the regularity of revaluations. But that's absolutely our intention, to make revaluation much more frequent.

I think Mike Hedges described perfectly how council tax is a regressive tax; it's not a progressive tax, as we would normally want a tax to be. It very much means that people who have the least and who are least able to contribute are ending up being asked to contribute a larger share. So, this is one of the things that our approach to making council tax fairer is aiming to deal with as well—rebalancing the council tax that local authorities collect.

And I've heard Mike's arguments in terms of the way in which he would like to see the additional bands, and potentially the splitting of the bands to have that much more nuanced size of band as well, so, obviously, we'll be considering that as part of our overall consultation. I think we also need to consider as part of that the appeals system and to what extent we create a system where we get the balance right in terms of not creating too much confusion or likelihood of appeals, but having appeals where they are genuinely, in a sense, ones that are likely or potentially to be changing the band that people are in. So, lots for us to consider. I think the contributions so far have been really helpful and I think have started to kick off our consultation very well.

Finally, Carolyn Thomas.

The benefits of a land value tax are quite clear—it could replace a regressive council tax system, which has no relation to household income, with a system that creates a far greater equality in the distribution of wealth, lowering housing costs for many households across Wales. A land value tax would also help to end land speculation, encourage more efficient allocation of land and provide a sustainable and enhanced source of local government finance. I understand one of the main impediments to the introduction of an LVT is the lack of cadastral mapping. A cadastral database would not only be beneficial for the purpose of taxation, but also in regards to planning and agriculture. So, I was wondering if any progress has been made by the Welsh Government in establishing a cadastral database for Wales? Thank you.

I'm grateful for that contribution, and just want to reassure Carolyn Thomas that we are very much continuing to work on the idea of a local land value tax. The main underlying objective for local tax is to raise that stable revenue for local services in the fairest possible way. And where we can have other advantages, such as the better use of land, I think we should definitely be looking to squeeze as much value out of these things as we possibly can.

The Welsh Government has published the research by Bangor University, and that assesses the feasibility of a land value tax as a possible replacement for council tax and non-domestic rates. And they did conclude that a local land value tax in Wales could raise sufficient revenue to replace the current local taxes, and also that the distribution of liability could be substantially more progressive. So, I think the research has been very positive in that sense, but it does underline that we have to undertake some further work to assess more fully whether or not a land value tax would be evidently better than our existing arrangements, or the arrangements that we will put in place following the work of reform, which is current.

So, within the scope of the research, Bangor University was able to construct a preliminary statistical model to estimate a set of land values. We have never attempted that kind of work in Wales before, and it did enable Bangor then to determine potential tax rates at which a local land value tax would need to be levied to raise revenues broadly equal to the current system. So, it's really exciting work. But I think one of the key lessons that we learned from it was that it's much more challenging to estimate the land values for non-domestic uses than it is for domestic property. So, we're currently continuing the work exploring this, but the point about having that cadastral database is absolutely key. We couldn't introduce a land value tax without one. 

I know that elsewhere in Welsh Government there's important work going on in terms of DataMapWales, and that is very much about collecting information across Wales in a useable format. And I do have some really interesting discussions with the Welsh Revenue Authority as well, because they're taking a lead on many of the exciting ways in which we're thinking about the potential ways to use digital and data, and so this is another area where we're doing some interesting work. Because having that kind of database would help us with lots of other policies, in fact. It would help us potentially in future with local rates of land transaction tax. So, we would need that kind of database. So, work is definitely ongoing. I'm more than happy to update Carolyn at any opportunity we have.

Thank you, Minister.