'I am grateful to the Institute of Revenues, Rating and Valuation for giving me the opportunity to talk to you today about our plans for the future shape of local taxation in Wales.
This Assembly Government policy statement illustrated the wide areas in which the Assembly can make a difference. We are developing a relationship with local government which suits our circumstances in Wales so that people in Wales will get better services and have a better local democracy.
Nevertheless we should be clear and honest with each other about those matters where the Welsh Assembly is quite rightly constrained by the national policies of the British Government.
Essentially there are only two taxes available for local government - the tax on domestic property and the tax on business property.
The Assembly can and will tailor those tax regimes to the circumstances in Wales. However, we cannot invent new local taxes or seek to add to the narrow tax base for local government. We cannot therefore make local government substantially less reliant of grants. We cannot make the local financial system substantially less highly geared.
Freedom and Responsibility elicited responses from all quarters. The voluntary sector, professional organisations as well as local government have welcomed its positive tone and outlook. There was extensive support for our vision of local authorities which:
- provide clear leadership for their communities
- deliver high quality services
- and which are open, accessible and accountable
Future policy on local taxation will play a big part in our drive to create an environment that will enable local authorities to thrive as community leaders. We have made clear our intention to develop a system that is simpler for local authorities to administer and easier for local taxpayers to understand. We will also strive to make it fairer to those that have to pay. This is a bold vision but one to which we must aspire to if we are to provide local authorities with the support they need to develop first class public services. A simpler and fairer system of local taxation will help us to achieve our aim of transforming the way in which local government does business.
Fairness is a key aim of the forthcoming council tax revaluation. We want to ensure that the burden of taxation is fairly distributed across Wales with overall yield from the tax remaining the same. Assembly and local authority representatives are currently examining the robustness of the existing banding structure and the effect of house price inflation over the last ten years. Careful consideration is also being given to individual local authority tax bases to ensure that any changes do not have a detrimental impact in relation to the amount of tax that can be raised locally.
We will publish detailed proposals for change in a consultation paper later this year.
Nearly everyone has to pay council tax or business rates, but few people fully understand how their bills are calculated. For example, the annual council tax billing round provides local authorities with the ideal opportunity to communicate their financial decisions to local residents. In many cases it is the only annual dialogue between local authorities and taxpayers. However, the scope for meaningful dialogue is hampered by heavy regulation. So, in the interests of greater openness, accessibility and accountability, we are currently looking at ways to improve and simplify the presentation of council tax bills, and the quality of the accompanying information.
On business rates, the present system has been plagued for over a decade by overly complex transitional relief schemes. While these schemes have protected ratepayers from large increases in bills, they have been difficult and costly for local authorities to administer and have confused ratepayers by producing bills that are almost indecipherable. Also, many small businesses have had to pay more than they ought to be paying in order to fund relief for larger, more profitable companies who can probably afford to pay their full bill. We have already taken a bold step by introducing a radically different transitional relief scheme for the current rating list, and we will seek to make further improvements at the time of next revaluation.
We are also committed to delivering a Right First Time approach to business rate valuations. This will give ratepayers a greater involvement in the process that determines how much rates they should pay. This will help to demystify the way in which their properties are valued for business rates. This in turn should lead to more acceptable valuations and a reduction in costly appeals.
Simplicity will also be a key feature of our thinking as we develop our plans for a rate relief scheme for small businesses. At the same time we will want to do whatever we can to reduce the administrative burden on local authorities. Our idea of replacing the existing rural rate relief scheme with a similar scheme covering all parts of Wales would certainly achieve that by removing the need for local authorities to maintain rural settlement lists.
I mentioned earlier local authorities' role as community leaders. We want to see local authorities that are more responsive to local needs and more accountable to the communities they serve. Many people believe that local authorities' dependence on funding from central government is a major obstacle to this and want to see a full return of business rates to local control. However, this is not a straightforward option and there are a number of complex issue to be considered. I will want to consider carefully the views of all the key stakeholders before deciding what is best for Wales.
I hope this gives you a flavour of what we are trying to achieve. There are challenging times ahead for everyone working in the field of local taxation, and I reaffirm our commitment to work with our key partners in local government and the rating and valuation profession to deliver real benefits to the people of Wales.'