WALES has an opportunity to tackle unfairness in the council tax system and set the agenda for other nations and regions of the UK to follow with its council tax reforms, says Centre for Cities.

Centre for Cities, a research organisation dedicated to improving the economies of cities and large towns, says the majority of houses in Wales could see a real-terms tax cut of almost £400 on average if council tax rates better reflected current house prices.

But the council tax reforms would need to go beyond the scope of the Welsh government’s current proposals to achieve this, by devolving rate-setting powers to local councils, which would enable councils to change how council tax is calculated.

Centre for Cities proposes:

  • Ending the anchoring of tax rates around Band D
  • Revaluing properties annually
  • Giving local councils responsibility for setting proportional tax rates for each council tax band in line with annual revaluations.

The current council tax system is unfair. It ensures that more expensive local properties face lower council tax rates as a percentage of their property’s value whilst residents of the least expensive properties face the highest tax rates.

Fiscal devolution would allow councils to turn council tax from a regressive tax into a progressive tax, with each council adapting bills to suit their local economy. This broader tax base could give 66 per cent of Wales, including a majority in every council area of Wales, a tax cut in the first year of the policy, according to Centre for Cities’ analysis.

For example, almost 115,000 houses in Cardiff, or 71 per cent of the total, could see an average council tax cut of £364 a year under a progressive system of council tax. Across Wales, 955,000 dwellings would see a cut in their council tax, with 500,000 houses would see increase.

Andrew Carter, Chief Executive of Centre for Cities, says: “Council tax is long overdue for reform across Britain. Currently, the highest tax rates apply to the least affluent dwellings. Wales is to be commended for confronting this issue head-on. It has a real opportunity to set the agenda for the rest of the UK to follow.

“Going further than the current set of proposals could mean delivering lower bills for nearly a million households in Wales and addressing long-standing flaws in a system that was never designed with fairness in mind – giving a much-needed boost to household incomes during a cost of living squeeze.

“An adjusted version of these reforms could also apply to local government in England and Scotland.”

* Read: How Wales can reform council tax to boost growth and reduce inequality here.

* Source: Centre for Cities