The last two editions of the Chronicle have featured ‘shock, horror’ reports that a “12 band proportional system” could lead to a 28% rise in council tax in Monmouthshire. You should clarify that this option is not one proposed by the Welsh Government, but introduced by the IFS as a means of comparing the three govt options to (in the opinion of the IFS), a truly ‘fair’ system. I suspect the proportional system may be the govt’s ultimate goal, but at the moment they have categorically ruled it out.

For the avoidance of doubt, I agree the council tax system is well overdue revision but am not happy with the govt proposals. I am a pensioner living in an expensive house in rural Monmouthshire and these proposals will likely cost me a lot of money despite only receiving minimal services from MCC for my council tax.

My reason for writing to you is I believe these proposed changes are far reaching and probably a step towards even more radical change. The consultation document issued by the Welsh Government is disingenuous almost to the point of dishonesty. For example, it uses the council tax charged as the basis of comparison between the top and bottom council tax bands. This ignores the fact that 20% of council tax payers get discounts amounting to £287m via the Council Tax Reduction Scheme. Assuming the £287m were to be concentrated on the lowest bands, then no-one currently in band ‘A’ would pay any council tax at all. Other than acknowledging there will be winners and losers, the document does nothing to describe the extent and geography of the changes. 

The Govt has used the well-tried technique of hiding contentious issues in the detail. You need to read the 118 page IFS report to discover the true extent of impact on Monmouthshire. In effect, Monmouthshire council tax is providing support for other Welsh councils. I think people need to be made aware of this and hope some of the following information is of use to you.

The consultation form invites residents to select which of the three proposed options they support. It stresses that the amount of tax raised will be the same as today and claims that: “ About 7 out of 10 households would see bills reduced or experience minimal change.” I am sure this is true but hides a large redistribution between the richest to poorer counties in Wales. 

The detail is contained in the IFS report (page 36 et seq) which shows that council tax will rise by 17% in Monmouthshire and fall by 14% in the neighbouring Blaenau Gwent; Monmouthshire will have its govt grant cut by £134 per capita (the highest cut in Wales) whilst Blaenau Gwent will see its grant increased by £67 per capita (the highest rise in Wales). A double whammy!

I expected the consultation paper to provide some clue to what my actual council tax would be under each option that can only be achieved if you know: your property band, the tax for that band, and the govt grant. None of this information is available and the IFS stress their bands/tax rates are examples only. Anyone voting for an option is giving the govt a blank cheque.

When council tax changes are analysed by household type (page 11), older households will pay above average  amounts; 26% of Monmouthshire residents are pensioners, the highest in Wales and growing (source Census 2021).

The IFS appraisal estimates that the council tax changes will affect house prices (page 94 et seq). The highest fall is estimated to be 4.2% in Monmouthshire with the second highest rise in Blaenau Gwent. I suspect the falls in Monmouthshire are understated as it borders Gloucestershire and Herefordshire making comparison between English and Welsh council tax and stamp duty charges very obvious. Why live in Wales and pay more tax? The reduction in property wealth inequality seems to be a key part of the Welsh Govt’s proposals.

 It is hinted at in the consultation paper which states: “There are many ways in which we can make the system fairer withoutmaking it more progressive, but a more progressive system would have a greater impact in addressing the inequalities in property wealth”. This is confirmed by the IFS comment on page 95: “If council tax were also made less regressive, the effects would be significantly greater, and would narrow gaps in property values between high-price and low-price parts of Wales, acting to reduce geographical wealth inequality”.

However, reducing the value of houses at the top end would do nothing to help lower income households (was that not the original objective?) and could in fact increase their council tax charges in the long term as less money will be available from the better off as their property may drop down a band. The expected house price rises in poorer areas are likely to make it more difficult for first time buyers to gain access to the housing market. 

The Resolution Foundation considers increased home ownership to be a driver in reducing property wealth inequality; increasing the barriers to house ownership does not help.

Although the objective is to design a fairer council tax system, both the govt and IFS concede using property value as a proxy to income is flawed and that the banding system introduces unfairness for properties close to band boundaries. Despite this, the alternative of a local income tax system (arguably far more fair) has been dismissed in the consultation paper as: “..... taxes based on income can have far higher levels of tax avoidance as some sources of income are more easily hidden or moved by those with the means to do so, whereas property is a fixed asset to a local area. The research found that this avoidance risk was unknown and unquantifiable”.

However, the following document from the House of Commons Library: “https://commonslibrary.parliament.uk/research-briefings/cbp-7948/ “ does quantify these tax losses and shows the vast majority of tax avoidance is done by businesses. Individual/wealthy tax avoidance accounts for only 11% of total avoidance and it is individuals who would be liable for local income tax. HMRC produce more detailed reports on tax avoidance at regular intervals. If I were a cynic I might suppose that introducing a Mansion Tax has more bragging rights than boring old Local Income Tax.

Although the reforms suggested meet the objective of reducing the council tax burden on the poorest, it does nothing to address the root causes of poverty. This is depressing given the current situation where the UK has a large number of job vacancies and record numbers of people who are economically inactive. To make things worse, a recent report shows that those people who are in work are now working fewer hours. Work seems to be becoming ‘optional’. These reforms merely redistribute from an ever reducing pot rather than finding ways of increasing economic activity.