Y Pwyllgor Llywodraeth Leol a Thai

Local Government and Housing Committee

25/01/2024

Aelodau'r Pwyllgor a oedd yn bresennol

Committee Members in Attendance

Carolyn Thomas
Jayne Bryant
Joel James
John Griffiths Cadeirydd y Pwyllgor
Committee Chair
Luke Fletcher
Sam Rowlands

Y rhai eraill a oedd yn bresennol

Others in Attendance

Carolyn Bartlett Prif Swyddog Strategaeth a Thrawsnewid, Asiantaeth y Swyddfa Brisio
Chief Strategy and Transformation Officer, Valuation Office Agency
Carolyn Dawson Prif Weithredwr, Tribiwnlys Prisio Cymru
Chief Executive, Valuation Tribunal for Wales
Dr Llŷr ap Gareth Ffederasiwn y Busnesau Bach
Federation of Small Businesses
Jonathan Russell Prif Swyddog Gweithredol, Asiantaeth y Swyddfa Brisio
Chief Executive Officer, Valuation Office Agency
Lakshmi Narain Sefydliad Siartredig Trethu
Chartered Institute of Taxation
Lisa Hayward Swyddog Polisi Cyllid, Cymdeithas Llywodraeth Leol Cymru
Finance Policy Officer, Welsh Local Government Association
Matthew Evans Y Sefydliad Ardrethu a Phrisio Refeniw
The Institute of Revenues Rating and Valuation
Matthew Phillips Pennaeth Gwasanaeth, Refeniw a Budd-daliadau, Cyngor Bwrdeistref Sirol Rhondda Cynon Taf, Cymdeithas Llywodraeth Leol Cymru
Head of Service, Revenues and Benefits, Rhondda Cynon Taf County Borough Council, Welsh Local Government Association
Morgan Schondelmeier Cymdeithas Cwrw a Thafarndai Cymru
Welsh Beer and Pub Association
Robin Osterley Prif Weithredwr, Charity Retail Association
Chief Executive, Charity Retail Association
Robin Williams Cynghorydd yn Ynys Môn, Cymdeithas Llywodraeth Leol Cymru
Councillor in Ynys Môn, Welsh Local Government Association
Stuart Adam Sefydliad Astudiaethau Cyllid
Institute for Fiscal Studies
Susan Morgan Cynghorydd yn Nhorfaen, Cymdeithas Llywodraeth Leol Cymru
Councillor in Torfaen, Welsh Local Government Association

Swyddogion y Senedd a oedd yn bresennol

Senedd Officials in Attendance

Angharad Era Dirprwy Glerc
Deputy Clerk
Ben Harris Cynghorydd Cyfreithiol
Legal Adviser
Catherine Hunt Clerc
Clerk
Osian Bowyer Ymchwilydd
Researcher
Rachael Davies Ail Glerc
Second Clerk
Stephen Davies Cynghorydd Cyfreithiol
Legal Adviser

Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.

The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.

Cyfarfu’r pwyllgor yn y Senedd a thrwy gynhadledd fideo.

Dechreuodd y cyfarfod am 09:03.

The committee met in the Senedd and by video-conference.

The meeting began at 09:03.

1. Cyflwyniad, ymddiheuriadau, dirprwyon a datgan buddiannau
1. Introductions, apologies, substitutions and declarations of interest

Welcome, everyone, to this meeting of the Local Government and Housing Committee. This meeting, as usual, is being held in a hybrid format. Aside from adaptations necessary to conducting proceedings in that way, all other Standing Order requirements remain in place. Public items are being broadcast live on Senedd.tv. and a record of proceedings will be published as usual. The meeting is bilingual and simultaneous translation is available. Are there any declarations of interest from Members, please? No. 

2. Bil Cyllid Llywodraeth Leol (Cymru) – Sesiwn dystiolaeth 1
2. Local Government Finance (Wales) Bill - Evidence session 1

We will move on, then, to item 2 on our agenda today, and that is an evidence session in relation to the Local Government Finance (Wales) Bill. And I'm very pleased to welcome, joining us here in person, Lakshmi Narain of the Chartered Institute of Taxation, and Matthew Evans of the Institute of Revenues, Rating and Valuation, and, joining us virtually, Stuart Adam from the Institute for Fiscal Studies. So, thank you all very much for giving evidence to committee today.

I'll begin, then, with some general questions on general principles of the Bill, before bringing in other members of the committee. Firstly, then, I wonder very generally whether our witnesses could outline initial thoughts on the Bill's provisions and the general principles of the Bill? Who would like to begin? Yes, Lakshmi, please. 

09:05

Yes, thank you very much. I represent the Chartered Institute of Taxation and our focus as a professional body is that we are an educational charity, and the primary objectives that we pursue are to endeavour to ensure a thorough understanding of what a good tax system should not only look like but also be implemented. So, our main focus is on looking at it from the whole range—from the commencement through to the final implementation of any tax system—to ensure that we have a clearly articulated policy objective, a thorough, detailed scrutiny process, and then the implementation, which should also be accompanied by a review process. Now, it seems to me that, if you do that, you have a system in place that is likely to receive the support of the majority of stakeholders, whether they happen to be taxpayers or the authority or, from our point of view, the professional advisers.

So, from our point of view, we've looked at both the policy objectives—. We've set out our policy approach in our representations. We've also identified the policy objectives of the Welsh Government, which I think broadly we are in agreement with in terms of the way in which they're articulated. What we would identify is that there are terms that need further clarification in order to ensure that you've got an appropriate objective and, in particular, where one talks about fairness.

But let's move away from that and look at the implementation. As far as implementation's concerned you've got, obviously, the need for appropriate scrutiny and, for there to be scrutiny, it seems to us, the professionals, that there does need to be an opportunity for yourselves—Parliament—to actually consider any proposals to liaise with representations and then to be able to determine what the options might be.

Now, we've identified a specific issue, and that is the problem of the balance between primary legislation and secondary legislation. There is a third level and, of course, that is just explanatory notes. And, in broad terms, we're very much in favour of as much being in primary legislation as possible. Relatively little should go into secondary legislation; that should generally be administrative matters et cetera. And it should really only be clarification and support for stakeholders that ought to be in the tertiary, i.e. the explanatory.

So, our general view is that, broadly, the proposals are fairly positive in terms of using primary legislation, but there are a number of areas where we feel that it strays a little bit too far into using secondary legislation. And in particular we've identified the particular problem that arises with the procedures for implementing secondary legislation, and, in particular, the affirmative process, where either it's accepted or it's rejected and there's no possibility of amendments being made. That seems to us to create potential problems.

I think that's probably as much as I'd want to say at this moment.

Yes. Okay, Lakshmi. Well, thank you very much for that. Matthew, Stuart, would you like to add anything? 

Certainly. I welcome the opportunity to speak today on behalf of the institute. The institute is the professional body concerned with all aspects of local taxation and benefits and administration across the UK. I think we recognise that there is a balance between primary and secondary legislation. A lot of the time, the legislative timescales are tight, which is why secondary legislation might well be considered appropriate. In making any changes, I think there's a need to have a clear consultation process and rationale for the changes, and I think that would be an appropriate way of delivering that. I can see why secondary legislation has some concerns, because you can make changes relatively quickly, but there needs to be clear support and rationale for the process of making changes.

09:10

Yes. I think, broadly speaking, there are two parts to what the Bill does. There are the substantive changes to policy, which, broadly speaking, we'd support in terms of ensuring more and more frequent revaluations and the potential for moving away from band D as the reference band and so on, and I'm sure we will come on to those. I think there are some that might go further and some I don't have particular views on, but I think, broadly speaking, it moves in a welcome direction. 

The other main content is in terms of how the policy is made—essentially, what's in primary legislation and what Ministers have more discretion over—where I have less strong views on that. I absolutely take Lakshmi's point that, other things equal, things as important as determining the tax liabilities that households and businesses should face ought, where possible, to be in primary legislation and enable the additional scrutiny and so on that goes along with that as well. I also see the advantages, sometimes, of giving more flexibility to respond and to respond more quickly and in a more agile way, as well as the downsides, frankly, of making it easier for Ministers to tinker with things where there are advantages to stability and certainty as well. I'm not quite sure where that balance should lie. We note in our submission that one possible route to take is the route that was taken a couple of years ago for land transactions tax and landfill disposals tax, which was to give discretion, but discretion only to change these in particular specified circumstances. That might be a route to take, but, as I say, I don't have strong views as to what the right outcome is there, just on where the trade-offs lie.

Stuart, just in terms of specified circumstances, would you have any particular suggestions to make to committee as to what those circumstances might be, with regard to the powers in this Bill?

Again, not strong ones. I note what the provisions were in that last case, which were about being able to respond to changes made by the UK Government, to respond to decisions by courts and tribunals, and then also to protect against tax avoidance, to comply with international obligations—those kinds of things all look sensible. I could imagine that different criteria might be suitable here, but, no, I don't have strong recommendations, but I think that would be a good thing for the committee and the Senedd to consider.

Okay. Thanks for that, Stuart. Before we move on to other committee members, I just wonder, in terms of concerns about powers in the Bill and whether they go too far in giving discretion to Welsh Government, would you have any particular concerns that you'd like to direct the committee's attention to? Are there any particular changes that you would like to suggest or propose?

Yes. I think I'd just say that we're at a very early stage, of course, and provided that there's appropriate scrutiny permitted wherever discretion is provided—as long as there's a process in place for opportunity to be provided for yourselves, the committee and for stakeholders to be able to make their views known, then it seems to me that, as long as the system is rigorous and subject to scrutiny, that's perfectly fine.

09:15

I would say it's probably too early to say. You've got council tax consultation, which is out currently, so, yes, once you get responses back, you can look at it at that point. But, yes, I agree with what Lakshmi said about scrutiny. There does need to be that opportunity.

Okay. Thanks for that. We will move on to other committee members, then, and, firstly, Sam Rowlands. Sam.

Yes, thank you, Mr chairman. Good morning. Thank you, all, for joining us this morning and for taking the time—it's really appreciated. I just want to come on to the non-domestic rates elements within the Bill, and particularly the revaluation. Clearly, there is a proposal within this to move to more frequent revaluations, about every three years, and perhaps you could just point to what you see as the benefits or disadvantages of that proposal.

Certainly, the institute is supportive of a three-year valuation, but, if you do that, you need to reduce the antecedent valuation date from two years to one. That's possible to do, given technology and the list that's undertaken by the Valuation Office Agency. Having that shortened AVD to the actual revaluation with three years should ensure that the rating list is more accurate and may well reduce appeals. Clearly, if a ratepayer thinks their valuation is wrong, they're going to exercise that right to appeal anyway.

Certainly, if I may just add a comment, and that is that we didn't specifically address this issue on the basis that we didn't have a strong feeling as to whether it ought to be three years, five years or whatever. But, certainly, the basic principle that if you've got a tax that is charged on the basis of a value, then having a value that is close to being current value is eminently sensible. The problem is that, of course, we've got the conflicting needs of the stakeholders. From the taxpayer's point of view, the more frequent the valuation, the greater the compliance obligations, and, of course, that's likely to be detrimental to the way in which the business operates. I believe you've got another evidence session this afternoon where you have the Welsh Beer and Pub Association, and they will raise the point of something that I personally have been heavily engaged with in the past, and that is discussions as to what the value of a pub, restaurant or hotel might be. Those arguments have gone on for years. So, moving to more frequent valuations is likely to be quite challenging, it seems to me, for a number of businesses, not necessarily for the routine, average property that one might be looking at, but as soon as you move away—and we're probably talking about many, many thousands—you're likely to have considerable additional obligations on businesses, which is not likely to be welcome at all.

As a matter of principle, I think the more frequent the better, frankly. I think three years is better than five years and, ideally, annual would be even better than three years. If you're going to have a tax, it makes sense, as far as possible, to tax on the basis of the latest information, just as a matter of fairness. We don't value people's income for income tax every three years or anything like that. It should be the same, also because it allows tax bills to respond more quickly to changes in economic circumstances and changes in value, which is something that has been a concern with business rates in the past. So, I think, as a matter of principle, it is a good thing. It's pretty much unambiguously welcome, in my view.

There is, then, a trade-off with practicality in terms of the administrative cost to the VOA, the compliance cost for taxpayers of more frequent valuations. I don't really have the expertise to comment on how big those are and how those trade off against the benefits. My instinct is that three years, rather than five years, is an improvement, but I can't say that I've got some sort of quantified, definitive basis for saying that. I agree with Matthew's point. Again, I don't have the technical knowledge, but if it's possible to reduce the antecedent valuation date or shorten that window, then, almost regardless of the duration of cycle, reducing that length would be a good thing to do.

I found it quite striking, looking across the UK, that the review of business rates that happened in England a couple of years ago considered that and said, 'Well, no, it's too practically difficult to reduce it'. and yet Scotland has in fact managed to reduce it, which I didn't really address. I think that would be a good thing to do, if possible. I don't know the detail or the practicality of that, but, in principle and certainly subject to the administrative consideration, I think moving to more frequent revaluations is a good thing.

09:20

Thanks. I guess there is a balance—. Sorry, Lakshmi, you wanted to say something.

Sorry, if I could just add that, in relation to taxation, we have got an instance where a value is taken and then revised. That's in relation to what's called the 'annual tax on enveloped dwellings', and HMRC in that particular case came to the conclusion that the value should be once every five years. If I recall correctly, they set the initial one in 2012 and the tax didn't come in until 2013, so it provided a year's advance notice for these properties. And we're not talking necessarily about a very large number of properties, but clearly there was a feeling that allowing a lead-in period of at least a year was probably necessary and that having a value that was fixed for a five-year period and then amended again every five years was probably a reasonable balance. So, I don't know whether that's helpful in the context of what we're looking at here, but it seems to me that it's illustrative of the need to be wary of values that change too regularly, too often.

Yes, that point is appreciated and I guess it's for businesses to understand their ability to plan three, five years down the line and those movements up and down—I guess, generally, it will be up, let's be honest—and what that may look like for them in terms of their planning.

Just further on this, though, I think, Matthew, in some of the evidence that you provided to us as a committee you pointed to perhaps some of the transparency of the VOA in their processes and seeking greater transparency from the VOA. Could you be able to expand on that point a little bit further about fairer assessments, I guess?

I think an individual or a ratepayer needs to see that the process of the Valuation Office Agency have undertaken, in the situation that Lakshmi has mentioned about pubs and restaurants—. There are always disputes about the level of takings or barrelage that has been used in previous assessments on valuation. And, really, the situation on that is that the valuation is based on rental, and it's just having this situation where an individual, if they wish to appeal, has a reason and rationale, and the VOA could defend the rateable assessment that has been used. A lot of the time, when you have a five-year valuation, people appeal against the valuation and they're often successful. So, I think, in this current situation now—you have a five-year list, three-year transition, ideally moving to three years—you would remove the transition scheme altogether. 

Okay. Does anybody else want to comment on that at all? No. That's fine. And then, just perhaps the final point from me, Chair, if I may: Welsh Ministers are seeking to have powers to amend regulations in future to enable shorter revaluation cycles. Again, we've touched on this point. I'm just wondering how you think those shorter revaluation cycles may impact appeals by ratepayers. That's something's that already been touched on, that appeals process, but is there anything further you wanted to touch on with that at all?

I think ratepayers will always potentially appeal if they think their valuation is wrong. Having a three-year valuation may mean that it's more easily defendable, if you've made the revaluation, because you're always keeping on top of any potential changes in terms of the value or rental income from it.

Clearly, that would create—. So, more revaluations is one point in terms of administrative burden, I guess, but then the appeals process is perhaps, in many ways, a more significant administrative burden. Have you any thoughts about whether you think those responsible are geared up enough to be able to deal with what may be a much more significant amount of appeals coming through? [Inaudible.]—or is that not, perhaps, in your remit? I don't know.

09:25

I'm sure the Valuation Office Agency would probably be better placed to respond to that. I think, certainly, there is a risk that a new list brings appeals, but a more frequent list may reduce that chance. That's something I couldn't really comment further on.

Thank you. I'm just going to ask questions on the artificial NDR avoidance arrangements—so, just regarding the Welsh Government's proposed power to specify artificial anti-avoidance behaviour in the regulations and your views on that.

We're supportive of the approach of the Welsh Government on anti-avoidance, yes.

If I can just add that the issue from a practitioner's point of view is often whether or not there's any clarity. That leads to behavioural issues, and in particular if there is any doubt as to what might or might not fall within the category of abusive, egregious avoidance, or whatever, the likelihood is that a number of parties will take a Russian roulette approach to this and say, 'Well, what's the likelihood of the authority being able to identify that I have a problem or there is a problem?' And if the feeling is that the authorities are not going to be sufficiently well resourced, then I think we have a practical problem as far as the operation of the tax system. 

I don't have anything very informed to add, no.

Okay. Thank you. Do you think that the Welsh Government should be under a mandatory duty to consult before using certain powers in the Bill? It sounds like—

—from your previous comments that—. Okay. And then, regarding NDR multipliers as well, could you expand on the proposed power for the Welsh Ministers to impose different multipliers and the anticipated benefits or risks associated with it?

As a professional body, we don't comment on rates themselves. What we would say, of course, is that the larger number of rates available, the more complicated it becomes to make business decisions. Obviously, the computation can be relatively straightforward because it is all done using computers, et cetera. But, where it starts to impact on what the likely cash flow cost might be, again, you're likely to end up with adverse behavioural decisions.

We agree with the principle. You can revise it, but if you're moving to a three-yearly revaluation, I'm actually thinking that, if you did revise it, you could actually conflict the rateable values, because that's the basis it's made on. And if you actually reduced certain categories, what you may find is it then reduces the rent. So, it could distort the actual list itself, the valuation list. 

Yes, I'll come in on that. Again, I think we separate out the questions as to what's good policy and what's a good way to make policy. Broadly speaking, I think there are actually rarely good reasons for having multipliers that vary across places or across different types of business, or by rateable value, and so on. I think it usually adds instability and uncertainty into the system, and more often than not I don't actually think it does what policy makers intend it to do. I'm wary of making it easier to move them around too much, but it's always tempting to say, 'Those things that I want to change should be made easier to change and those things that I think shouldn't change should be entrenched in legislation'. I'm not really sure that's how the decision should be made.

Obviously, the other point to make is that there is already discretion over reliefs and exemptions, and you can use those to achieve very similar things to reducing the multiplier. So, there's first of all the question of is there a reason for those two different powers to be at different levels, one to require legislation and one not, and the related question as to, if you have the power to use it, is it more transparent or less transparent to do these things via, say, reliefs for small businesses rather than a lower multiplier for small businesses. Reasonable people might differ, but where it's actually a new power is in terms of increased rates rather than reduced rates.

09:30

Diolch, Cadeirydd. Good morning, everybody. Perhaps you could say a bit about how the new provision of information to the VOA might impact ratepayers, and perhaps say a bit about if you think there will be a potential additional burden placed on them.

I think in principle, we would support the duty for ratepayers to supply information, but there should be some caveats with that. It needs to be proportionate—that's one thing—and we think we also have to recognise that many people who are liable for business rates don't actually pay business rates because they receive an exemption or a discount from the bill. So, I think if something does need to come in, it needs to be proportionate.

If I can just say that we also have concern here that a lot of the information may not be readily available in digital form, and you therefore have a process issue as to how that information is going to be gathered and then submitted to the authority. Additional compliance costs, as I've said a number of times already, are not welcome, so it's a question of getting a balance between the needs of the stakeholders.

What concerns, if any, do you have about the new duties, and what support, guidance and communication do you think should be provided and made available to ratepayers?

I think there would need to be clear instructions in terms of the levels of information and reasons for information and an appropriate timescale for them to provide that information. I think there also needs to be recognition that if they are renting a property from a landlord of some description, the information that is requested may well be out of their control and it would be on their landlord to provide. Sometimes there can be delays for a ratepayer providing information because they need to seek information from a landlord about certain details of a property.

I would also say that there's the broader issue of communication, and particularly for those who are digitally excluded; I think that's something that needs to be addressed.

Absolutely. We've mentioned the word 'proportionate', do you think the provisions to impose civil penalties on ratepayers for failure to provide the required information under the new duty is proportionate?

It seems to me that there needs to be more consultation on what would be a reasonable obligation to place on the ratepayers.

I agree. I do think there does need to be a bit more detail around that before you could have a firm opinion.

Thank you, Chair. Thanks ever so much for coming in this morning. I just wanted to briefly just touch upon residential tax and revaluation. I know, especially with revaluation, we've touched upon it in terms of business rates, but I just wanted to ask your opinions. As you know, the Welsh Government is looking at ending band D as the reference point for residential council tax, because it believes that will open it up to be a fairer, progressive system. I was just wondering what your views are on that. Is that something that you agree with?

09:35

I don't have anything to add here, because our members, generally, don't get involved in providing advice on council tax. Obviously, council tax is an issue that arises where you end up with premises that are used partly for business and partly for residential purposes, but generally we would defer to other specialists. 

I think, if you are looking at changing it from band D, we're supportive of that proposal. I think, whatever it's changed to, it needs to be clear, so taxpayers understand that. I think, currently, they've had 30 years of understanding what band D means in council tax terms. Moving away from that may confuse some taxpayers. 

I agree that transparency is important. I actually think that moving away from band D could help with that. So, even if you ignore the consultation, ignore the rest of the legislation, you assume that council tax doesn't change at all. A problem I have noticed over many years is the number of times I hear people saying or assuming that the average band D rate is the average council tax rate. But, actually, most properties are below band D. So, even if nothing else, doing things with reference to band C, for example, would actually be closer to giving people an idea of what the average council tax bill actually is. Because it can create confusion just to have band D being the reference band, even though it's well above the average. 

I'm not saying that that would necessarily be a good change to do in isolation, but I think, actually, the flexibility to change that is useful, and it does become more useful if you are considering the kind of things that the Welsh Government is currently considering in terms of adding more bands. In principle, it doesn't necessarily constrain things, but if you have to have band D as the reference band, and you want to add more bands at the bottom, you have to go down the route that is in the Welsh Government's consultation, saying, 'We'll have a band A1 and A2 and A3 or A- and A- - and things like that', which, again, I'm not sure helps with transparency or much else. 

So, I think, actually, the flexibility to move away from band D being the reference band, if you're thinking of reforms to council tax—. It would be the case even more if you were thinking about more radical reforms to council tax, perhaps moving away from a banded system entirely, and moving towards having just tax as a percentage of property value, along the lines that we have in Northern Ireland or the old domestic rates system. So, on the whole, I think, actually, giving the flexibility to move away from band D does help in terms of giving more flexibility as to what a reform looks like, and, potentially, giving people a clearer idea of what the true impact of council tax is and what it's really doing. But I do agree that, for any changes that are made, being really transparent about them and what the impact is will be very important. 

Perfect. Brilliant. Thank you for that. I suppose the concern that I always have—and I suppose it's always there when you're looking at reform—is about the timing. A lot of the current valuations are two decades old—house prices were different then to what they are now. Given the current financial situation as well, there's always a question about whether or not this should be happening now.

But if I can just talk about the revaluation, we touched upon it with the business rates, and, obviously, there, they're looking at doing a three-year revaluation. With residential properties, they're looking at a five-year revaluation. I just wanted to get your views on that. I know, Stuart, you mentioned that it would be brilliant if it was an annual revaluation—that would be easier, that would be more transparent. But I just wanted to know your views on the five-year revaluation, and the impact that could have on the housing market. I'd imagine there would be issues with house prices there. I don't know who wants to go with that first.

But then, also, the second question I'd like to ask is about the role of the Welsh Ministers. Obviously, this Bill will give the Welsh Ministers power to implement those revaluations when they deem necessary. I just wondered is that too much power. 

09:40

I think having a cycle of revaluations every five years seems appropriate and provides some certainty to everybody—the local authorities, taxpayers, the Welsh Government as well. As you pointed out earlier, it is 20 years since the last revaluation. When you're looking at potential impacts—and I'm sure Stuart will cover this, obviously, in the report that they provided—you've seen some significant changes in valuation that have occurred over the past 20 years, certainly. Unfortunately, for myself, I'm old enough to remember the last revaluation we did in 2003, and some of the values that increased the highest in that revaluation have seen a smaller increase in valuation since then. Certainly, five years seems appropriate, and I think it should stay five years. I'm unconvinced whether that power should remain with Ministers as such; it perhaps needs to be legislative and it needs to come through the legislative process, if that was to change.

I think, first and foremost, any kind of regular revaluation is very much welcome, whether that's five years or more frequently than that. The idea that we should leave it 20 plus years between revaluations, I think, is terrible. So, the big win would be legislating for any sort of regular revaluations, and to my mind anything beyond that is secondary by comparison. Again, whether five years, three years or one year or whatever is the right answer depends in part on a trade-off between principle and practicality. I think, personally, I might have leaned towards going straight for a three-yearly revaluation, but I don't feel very strongly about that.

For both council tax and business rates, there is the point about certainty for taxpayers and so on, and I think, actually, there is an advantage to having changes that are more frequent that will be smaller and more routine. I think there are practical advantages to that as well as practical challenges. The longer the period between revaluations, the bigger the jumps tend to be and the harder it is for people to know how big the jump is going to be. If you were revaluing it every year—. I'm not suggesting that's a practical proposition, but if, in principle, you were revaluing it every year, yes, people would be getting new valuations every year and would have to be getting used to that, but they would be relatively small changes and it would be easier for people to know what's coming. So, I think, even on the practical side and in terms of stability and predictability for taxpayers, there is actually advantage to more frequent revaluations.

To come to the other question as to what should be in primary legislation and where there should be discretion, again, I don't have a firm answer to that. I think one thing I've noticed is that the talk around this Bill is all about, 'We'll put five years in legislation, but we want discretion to be able to make it shorter.' I'm not sure there's actually anything in there that stops them from using that discretion to make the interval longer. I may have missed it, maybe that is in there, but if not, I think I'd like to put that in as discretion—if anything, discretion to shorten but not discretion to lengthen. Because I think while intentions might be good and it may be that the idea is, 'We'll try it out with five-year revaluations, and if it goes well, we might shorten it', the temptation that we've seen over the years is always to delay and put off revaluations because they can be politically difficult, creating winners and losers, and I'd be very wary of that. 

In terms of should they have discretion to make the interval shorter, again, I can see the point of that and I can see the advantages. Again, given that I'm generally in favour of more frequent revaluations, it's easy for me to say, 'Well, let's make it easier for that interval to be shortened', but that's where I think, actually, there is also an advantage to giving taxpayers more certainty about when a revaluation is going to happen, and knowing that it's going to be every five years almost come what may, or every three years almost come what may, rather than saying, 'Oh, well, actually, Ministers might decide to change it and do it at a different time.' I think there are advantages to having more certainty in there, and making it harder to change the frequency of whether that's five yearly or three yearly.

Finally, there was also a question about impact on the housing market. Revaluations and expected revaluations, yes, we would expect to have an impact on the housing market. Most obviously, if the council tax bill attached to a property goes up, then people will be willing to pay less for the property, so the property value will fall and vice versa—as, in fact, would be in the majority of cases, council tax bills would go down, you would expect house prices to go up as a result of that, and that can even start to happen in anticipation of future revaluations. I'm not sure I actually see that as a problem. That's just reflecting reality; it's not, as it were, that those whose bills are going up are seeing losses twice over, or anything like that. Again, I think uncertainty is, if anything, more of a problem: if people buying and selling properties don't actually know what the council tax bill attached to that property is going to be, that makes it a little bit harder for people to buy and sell in good knowledge. But, again, I think that's an argument for having a stable system with regular revaluations; I don't think that's a good argument for having no revaluations or only very infrequently.

09:45

Sorry, may I just make an observation? And that is that we're looking at value changes, but the bigger impact is likely to be on what the cost would be to the occupier of the property and whether they would be able to lodge some sort of appeal against it. To a large extent, that then depends upon what the structure of the taxing process is and whether or not there's a level of tolerance, i.e. a band, and if the band was fairly wide, then, of course, small changes in value won't make very much difference. Whereas if, in fact, the bands are quite narrow, then any change in value is almost certainly going to lead to higher or perhaps lower tax, and, of course, inevitably—. Certainly where I live, we have a WhatsApp group for the street, and it doesn't take very long before somebody's going to say, 'Well, my rates have gone up', and then you've got a huge argument arising, so, yes.

I think a question was made earlier with regards to NDR, and the issues, potentially, around appeals on revaluation. Certainly, with it being 20 years since the last revaluation, if this proceeds in 2025 or a later date, I think it's reasonable to assume we'll have quite a considerable amount of appeals to be dealt with, because people's bands will have changed, potentially, three or four bands, which is quite a substantial impact. So, certainly, I would suggest the impact on council tax would be greater in terms of appeals than in NDR.

The issue that I have then also is—and I remember reading an article about it—that, proportionally, the house prices that have increased the most tend to be in less affluent areas, paradoxically, I think, and then that's the concern my end, then. If I look at where I represent, especially somewhere like the Rhondda and Cynon Valley, house prices there have gone up. I remember looking, 10 years ago, at a house, you could get one for about £50,000, £60,000, but now it's nearly £200,000, and that's a big push there. And I think they are the ones that'll probably be impacted the most—I just wanted to highlight my concern there.

Okay. Just to say as well, Stuart, that there will be an ability for Ministers to decide for longer periods for the revaluation cycle, beyond five years, as well as shorter ones. Okay. Luke Fletcher. Luke.

Diolch, Cadeirydd. I've just got one question to start with, on discounts and reduced amounts, and it's specifically for Stuart. Just looking at the IFS's evidence, in the evidence it talked about how the Welsh Government's stated intention of keeping the one-adult discount at 25 per cent was 'unfortunate'. I was just wondering if you could elaborate a bit on that. Why is it unfortunate? 

09:50

Yes. So, I think—. Right. So, there's a question as to whether the tax and benefits system in general, and council tax in particular, should redistribute from multi-adult households to one-adult households. That, in the end, is a political value judgment on which I don't have a particular view. I think our concern with the single-person discount, as it's currently structured, is that because it's just 25 per cent of the bill, that—. That's the only feature of council tax at the moment that really distorts the housing market, because it means it's a bigger discount if you occupy more valuable properties, and therefore it gives an incentive for one-adult households to live in bigger, more expensive properties, and multi-adult households to live in less valuable properties than they otherwise would. And so, it contributes both to under-occupation and overcrowding of the housing stock. Given what a limited supply of housing we've got, it really means that we're not making the best use of the housing we've got. 

I think that would actually be relatively straightforward to fix, because rather than saying it's a straight 25 per cent discount, you could say that the discount is—I can't remember what the maths is, but something like 20 per cent of the band D rate, or 40 per cent of the band A rate, or just a flat £200 a year across the whole of Wales, or whatever. And so you could still have a discount if you wanted to have a discount for single-adult households—as I say, I take no view as to whether we should have that kind of discount or not—but if you made it flat rate rather than a percentage of the bill, then it wouldn't have that distorting effect of changing who's got an incentive to live in what kind of property, and therefore leading to, as I say, inefficient use of the housing stock. 

So, I think there is a clear improvement that could be made, and, by the way, would make the system more progressive in the process, because it essentially would be making the discount bigger for those in low-band properties and smaller for those in high-band properties, because, at the moment, the discount, as a 25 per cent discount, that's a big discount if you're in band I, it's a much smaller discount if you're in band A, and I struggle to see a good reason for that. As I say, it's distortionary in the housing market as well, so that's perhaps something that I would definitely want to change in the council tax system. 

Thank you for that. That was really useful. Before I move on, I don't know if anyone else wanted to comment on that, or—. Matthew. 

I think, certainly, if you look at the single-person discount, when Welsh Government undertook its consultation last year, a lot of responses from individuals thought the single-person discount should be higher. I think there's a political decision, in terms of single-person discount, on whether it's fit for purpose. Looking at the CT1, which is the all-Wales analysis that was released last week, I think the level of single-person discount is just under 40 per cent of the tax base, and it seems to be increasing by about 1 per cent a year for the past few years. If you removed single-person discount completely, I suppose that would have an effect of an overall increase in the council tax base and reducing council tax for a large proportion of payers, because the base is bigger, but it would probably increase the costs of council tax reduction scheme, because that could be based on 100 per cent rather than 75 per cent. If you reduced it to 20 per cent, we're talking marginal gains. If you're a millionaire, you would potentially be entitled to a single-person discount—it's a discount regardless of circumstances. You could argue to means test it. If you means tested it, you're probably adding a significant layer of complexity and putting a significant burden on local authorities to then administer it. 

Sorry, can I just make an observation? It seems to me that the points that Matthew has just raised highlight the lack of a clear policy objective. If you've got a policy objective, you need to determine why is a discount being provided. Is it because the services being provided aren't as great as they would be if it was a multiple-occupied property? I'd just raise the issue that if you have clarity on what the policy objective is then it seems to me a lot of the issues that have been raised by Stuart and Matthew start to fall away. They don’t disappear, but they become less of an issue. 

09:55

Great, thank you. Just finally from me, then, Chair, in terms of section 20, relating to the publication of notices, does anyone have any view on the move to digital publication of notices, the advantages and disadvantages of that?

Certainly, our view would be that you need to be able to deal with people who are digitally excluded, and providing some sort of information through, for example, libraries and the like is absolutely essential.

We're supportive of the approach to remove the requirement. I think it's somewhat outdated. Whilst we publish it in local papers—many councils do that, and it's a historical hang-up in that sense—I'm unsure of how many people actually see that anyway. So, I think a move to online would be sensible, and it's relevant nowadays in the current situation.

Just to say that there has been quite a lot of public interest, actually, in that provision, and, as you might imagine, quite a lot of interest from the newspaper industry, but—. Sam.

If you've finished with that question, do you mind if I just move on to something that's just been niggling at me in my mind a little bit? I think it was a comment that, Lakshmi, you made right at the start about the definition around fairness, and that being a concern perhaps either for yourself or for those you represent. Could you expand on that a little bit, about why that's something you're thinking through yourselves?

I think often—. From our perspective, so often the word 'fairness' is used to justify a particular tweak to the system that isn't otherwise justified, and of course it seems to me that, where you use a word such as 'fairness', you then need to be able to articulate on what criteria you're going to measure the achievement of that objective, and unless you've got a basis for being able to assess whether or not you have achieved the particular target then it is purely a political justification for a position that's been taken. And so often what it results in is the system not operating in a coherent way, because it's perceived as being unfair in a particular regard, but without any ability to be able to ensure that there's accountability for that particular policy rationale.

So, would I be right, then, in saying that, perhaps, from what you've seen so far, you're not confident there's a system in place to be able to assess that definition of fairness, however defined by Welsh Government?

Indeed. Indeed, yes. Yes. And sorry, if I can just add, what we are very keen on in relation to almost any Bill of legislation is that there is a post-implementation review process for being able to assess whether or not those policy objectives have been met, and that requires, of course, the policy objectives to be articulated, be appropriately measured and then evaluated against outcomes. My own personal experience—and I've been involved in tax for close to 50 years now—is I've seen so often that they introduce something and then find, a number of years down the line, they've had to reverse it, because they say, 'Actually, this isn't what we intended.' Of course, their intention was never articulated, and therefore it becomes a political decision.

Okay, Sam? Okay. If there are no other questions from committee members, then, it just remains for me to thank the three of you for giving evidence to committee this morning, and just to let you know that you will be provided with a transcript to check for factual accuracy in the usual way. Diolch yn fawr. 

Gohiriwyd y cyfarfod rhwng 09:59 a 10:16.

The meeting adjourned between 09:59 and 10:16.

10:15
3. Bil Cyllid Llywodraeth Leol (Cymru) – Sesiwn dystiolaeth 2
3. Local Government Finance (Wales) Bill - Evidence session 2

Okay. Croeso nôl. Welcome back to a further evidence session on the Local Government and Finance (Wales) Bill. I'm very pleased to welcome, joining us here in the committee room, Jonathan Russell, chief executive officer of the Valuation Office Agency, and also Carolyn Bartlett, chief strategy and transformation officer for the agency. And joining us virtually is Carolyn Dawson, chief executive of the Valuation Tribunal for Wales. Welcome to you all and thank you for coming in to give evidence to committee this morning. Perhaps I might begin, then, with some questions on the general principles of the Bill, and firstly, very generally, whether you might outline your initial thoughts on the Bill's provisions and those general principles.

Bore da. Mae'n dda i fod yma.

Good morning. It's good to be here.

In terms of the general principles, we have been working closely with the Welsh Government, so we're aware of what the main factors are going to be in the Bill. Those are the more frequent valuations, the information duty and the introduction of penalties. We have been working closely—. We're able to deal with those, we can manage that more frequent revaluation cycle, so we're confident that we'll be able to cope with and deal effectively with the requirements of the Bill. Indeed, our past track record demonstrates that we can do that, so it doesn't hold any concerns for us. In terms of the specifics, I think that's more for the Welsh Government to decide what they want to do and how they're going to go about it, and then we'll work with them, as we have done in the past, to make sure that we deliver it effectively. And always bearing in mind that, at the end of it, there is a customer, so that's going to be one of our key considerations—to make sure that we can deliver both for you and for the customers.

No. Okay. Let me just ask you, then, Jonathan, in terms of the VOA, there's going to be a significant system transformation project, and that's currently under way, which will create the potential for more opportunities for decisions to be made by the Welsh Government in relation to the valuation processes. Could you just, for committee, expand a little on that, please?

Yes. When you talk about valuation processes, I presume you mean the frequency of the revaluations. So, I think the valuations processes themselves, in terms of the work we do, won't change dramatically. I think it would be worth while just explaining to the committee a little bit what our responsibilities are. So, our responsibilities are to carry out independently valuations, be it for non-domestic properties or domestic properties, and those valuations then lead to the rateable value, which then leads to the bills being issued by local authorities. The valuation methods that lead to those will not change as a result of the Bill; we'll still use the three main processes of valuation, which are rental comparison, contractors, or receipts and expenditure. So, the work we actually do will not change. What will change will be the amount of evidence we are asking ratepayers to provide us. We already ask for a considerable amount of evidence. We just need a way of formalising that, and that will help with the more frequent revaluations. So, we get information from the ratepayers and that'll help us compile the evidence to then lead to the rate or value that we come to at the end of the valuation period.

10:20

I see. Okay. Thank you very much for that. To all our witnesses, then, could we just get your view in terms of the Welsh Government's draft budget, which states that allocations have been made to

'establish a sufficient funding baseline for both bodies in future years',

for the Valuation Office Agency and the Valuation Tribunal for Wales? Could you just tell us how that additional funding is likely to be used in the next financial year?

Yes, certainly. Again, we have a service level agreement with the Welsh Government, and that SLA is reviewed quarterly, so we do have a very close, robust and open working relationship with the Welsh Government, because, as you know, we set budgets and then things may change throughout the course of that budget. The current estimate for 2023-24 is £17 million. That's gone up because we're doing more work. I think, in 2021, it was about £8 million. Obviously, the more work we're doing, the budget will increase. Of the current budget of £17 million, about £11 million of that is on people, £2 million on tech and then £5 million specifically on the council tax revaluation you're doing. Going forward to 2024-25, we're not exactly certain yet, because we're still working through what the budget may be, but the estimate is it's likely to be in the region of £17 million as well.

And then, we also have done some budgeting thinking about what would happen in 2030, when the council tax revaluing becomes more frequent. So, specifically for the 2025 council tax, that's about £12.5 million, and then, if you go ahead for the 2030 revaluation, our estimation of that would be about £14 million. Then, on the NDR reform specifically over a 10-year period, we estimate that to be about £15 million or £1.5 million per year. But just to put that into some degree of context, I think the revenue that you get from council tax is about £2.6 billion, and our resource costs are about 0.6 per cent of that. But we think and we are confident we have enough resource to take forward the requirements that you're going to put in the Bill, but, obviously, we'll work with you to see if those requirements change. If we're not spending that, we'll send it back; if we need a bit more, we'll ask for a bit more. I think we sent some back this year because we slightly underspent, so we do keep a robust check on it.

For VTW, the majority of the uplift in our budget will go on staffing. We've been very low on staff for the last few years. We've cut our cloth to fit the budget. With the prospect of a council tax revaluation and also with this stream after check, challenge, appeal, with the appeal part, we obviously need to up our staffing levels to meet the workload. The biggest part of our budget will go on that. Also, training, because we're going to have new staff, and our clerks, unlike in other tribunals, are professional officers, so they will need to be trained. So, there'll be fees for IRRV and things like that. And then, obviously, because we're upping our staff, we're also going to be looking at the technology we use and probably replacing stuff that is now outdated. But we think this will allow us to service both lots of appeals.

Okay, Carolyn, thank you very much. We will move on to other committee members, then, and firstly, Sam Rowlands.

Thanks, Chair. Good morning, all. Thank you for joining us this morning. So, you touched on, in particular from the VOA side, the capacity that's going to be needed with more frequent revaluations. Could you expand a little bit further on the discussions that you have been having with the Welsh Government to understand what that capacity may need to look like, please?

Yes, certainly. So, in terms of the capacity we're using, we have our population of 3,500 in VOA, around 200-300 in Wales. We are, actually, going through a period of significant technological investment, so not just for the Welsh Government, but, more generally, we're looking at making sure we're modernising our IT so it is more effective, more efficient. So, we're doing that across the board.

And then, in terms of the council tax revaluation, we're using mass appraisal, which is an internationally recognised way of doing things. We have used it before and this is a way of actually, again, also speeding up the valuation process. Indeed, for the current council tax revaluation we’re proposing, we’ve already done the first round of valuation. We’re still planning for the second round to make sure we validate those valuations. So, a lot of it is about using new technology, making sure we’re working more efficiently, more effectively, and, of course, part of the requirement is getting the evidence in from ratepayers too. So, a lot of it’s about making sure that we’re using the evidence base from the ratepayers so we can quickly make those revaluations.

And in terms of what we’ve done in the past—and you are moving to three-year revaluations—the valuation we’ve just done is actually a three-year revaluation. So, we have done it before and we’re confident we can do it again. A lot of it is about making sure we get the tech right. We have massive numbers of—not massive; we have significant numbers—of surveyors, to make sure they’re qualified, professional. We have great staff—they’re committed, they’re professional. So, we’re confident we can do it.

10:25

It all sounds very positive, but there must be some risks or concerns you might have around delivering this, and, as you said you've done it recently, what kind of lessons have you learnt and what are the risks you think that you would have a level of worry about?

We're certainly excited by it. We’re an organisation that does valuation, so we love the opportunity to do valuations. It’s what people in the organisation do, and they're really looking forward to it. So, yes, we’re excited about it. There is definitely some risk with it. We actually think, to ensure the long-term sustainability of the whole rating system, you could argue a more frequent valuation allows people see what the rating is based on, based on more up-to-date evidence. We get more up-to-date evidence. We’re improving our tech, so there is risk there, but I don’t think there’s anything that we should be concerned about; it's just making sure we run the system properly. Carolyn’s a lot more close to some of the detail than I am, so I don’t know if she wants to come in.

I’d simply add that one of our challenges has been not having done a council tax revaluation for 20 years and the kind of level of relevance of the evidence that we hold on properties. So, we’ve undergone a really, really extensive data improvement exercise over the last year, making sure we’ve got the very latest evidence on Welsh properties and sales evidence of similar properties so that we’re really well placed to do that.

Okay, thanks. Perhaps, just to go a little bit further on this, as well, within the legislation, it allows the Minister or it proposes for the Minister to have some flexibility around the three-year frequency as well. Have you had conversations about your ability to gear up to those potential changes and how much notice period you would require to be able to undertake that work?

If you can look at the system as a whole, three years is quite a change for your ratepayers. And, yes, we can do our work—that’s what we do—but we're always considering that we need to make sure that we land it properly with the people who actually end up paying the bill. So, we have been having conversations about the significant change this will be. Yes, for us, three years is fine. We’d have conversations with the Welsh Government about the timing, but, as long as we have notice, we can change the dates slightly. But if you’re alluding to bringing them more frequently than three years, that would be a significant change. I think we’d have to work through quite a lot of detail about what that would mean both for us and, more importantly, for the ratepayer, especially if you consider the extension of the information duty et cetera, because, at the end of the day, we want people to be able to comply with the duty. We want people to understand the bill, how the bill’s been arrived at and have confidence in it. So, that would be our consideration when having discussions with you [correction: Welsh Government]. Obviously, at the end of the day, it’s a Welsh Government decision and we’d have to work with you around making sure you’re aware of the risks and also what we could possibly need to make sure it would work properly.

Yes, and just to go a bit further once again, we heard evidence earlier this morning from individuals who shared that the council tax revaluation moved to every five years, but that the legislation may allow Ministers to make that either longer or shorter, and perhaps the risk with that is that it becomes a political football, because clearly a revaluation of residential for council tax purposes can be a bit of a political minefield. I guess there’s a risk you could get caught in the middle of that if you’re planning for a five-year r­­­­evaluation but suddenly the Minister says, ‘Actually, we should extend that by a further year because, politically, it’s better for us.’ I guess you’d have to just react to whatever a Minister would want, in that case. Is that right?

Yes. Politics aren’t for us; we just do the valuation.

I think we're really well prepared to undertake a revaluation whenever the Welsh Government decides they want to go ahead.

Yes, all right. Thank you. And then, moving on, Carolyn, from the valuation tribunal position, in terms of trends in appeal volumes, with a new compliance regime, I was just wondering if perhaps you could help us understand what plans are in place if those cases did exceed your current expectations around appeals.

10:30

I think that's why we're concentrating this year on getting more staff in. As I said before, at the moment, we've been understaffed for the last couple of years. It's hard when you don’t know what’s going to happen with the rates of appeals. We’ve been monitoring the CCA in England to see what’s been happening there to try and see what rate of appeals they’ve been getting. They are lower than they expected, I think. But I believe there are a lot of proposals that are still in the challenge stage. So, I think the Valuation Tribunal for England are still expecting quite an influx. I think we’ve got time to prepare with CCA. It’s quite a lengthy process for appellants. So, that gives us time to get those staff trained. We’re not worried about the level of appeals that will come to us. We feel that we can handle it. We’re bringing in more staff, we’ll be concentrating on training during the year so that we’re ready to take on whatever comes our way.

Perhaps you could give us a bit more flavour as to what it is you expect with the way things are currently proposed.

It's very difficult as far as non-domestic rating is concerned to know what the level of appeals is going to be. We don't expect the same level as we've seen in previous times when we've had revaluations, but we do expect that any appeals that come our way will have to go to substantive hearing in order to clear them, which means that we'll probably have some more listings, but we will have long days at tribunal. It's really hard to know with non-domestic rating—it's an unknown for us. We've never had CCA before, we've never been through this process, and we've never had appeals directly for a long time for non-domestic rating appeals. So, it's a bit of an unknown. I don't know that I can say much more, really.

I guess what we're trying to understand is the level of confidence that we could have that you'll be geared up to handle those potential increases. You said at the start that you recognise that you're going to have to increase your staffing to react to this, so you must have, I guess, some sort of idea of what sort of level that would be to.

It's a good question. I'm not 100 per cent sure. To be honest, I think we'll get more appeals from the council tax revaluation. I don't think we'll see many appeals in the next year from non-domestic rating, unless they're hardship. I think the numbers will be fairly low. I think we're looking in the hundreds over the next year, not thousands.

I'll be asking questions regarding charitable rate relief and artificial NDR avoidance. But before asking that question, when you're looking at valuing a property, I assume it's based on the size of the property, but with climate change and many properties at risk of flooding, maybe subsidence, landslide and all this happening—flooding, mainly—these days, would that be taken into consideration, do you think, when valuing the property?

The valuation of a property is done on several factors—it's not just the size. It depends whether it's a non-domestic or domestic valuation. One of the things that we do look at is the tone—what is the tone of the environment. The best thing we can do is to have comparables and evidence around that. For example, if a house down the street has just sold for x, then does that set the tone for the rest of the immediate vicinity? But also things like schools, hospitals, pharmacies—all these sorts of things play into it. So, it's not just as simple as saying, 'This house sold for this'. We look at a range of data, and that's what the mass appraisal system is doing as well—it's taking a collective view of what is the tone of the area, what influences how much people will pay and what the price is for those domestic dwellings. And then, on NDR, it's different—it depends on what the property is, but all those factors will be considered, so it's evidence based. The best way of setting a non-domestic rating is you have a property that is rented out on the day of the antecedent valuation date and that then sets the tone for that area. So, we make it as evidence based as we possibly can. We don't set the market, we just reflect it. So, if there is an issue with an area where flooding may have been an issue, we'll reflect that, because that's what the market has determined. 

10:35

I didn't know all that; I don't know if other committee members knew. But I just think that, if we're looking at going forward with revaluation, people need to know, don't they, really, beforehand what it's all based on. So, it's very important.

Yes, and that is something we are taking incredibly seriously. We want to be as transparent as we can be. We've just done the latest non-domestic revaluation and, as part of our proactive approach to that, because we're doing it very quickly, we went out and let people know how we value all sorts of properties so that people would understand the valuation methodology we use to get to their rates bill. So, we're very much aware that, if we do that, people have more confidence in the system, and that will lead to probably fewer checks, challenges and appeals as well, because people understand it.

That's fine. But if you want to spend a day in our Cardiff office to learn more, you're more than welcome. 

Thank you. I'd like to ask if you have a view on the provisions relating to charitable rate relief and the Government's new powers regarding artificial anti-avoidance arrangements and any practical issues that this might bring.

It would be worthwhile just setting out a little bit about what the agency isn't responsible for. We are responsible for the valuations, but we don't have a policy remit or a policy responsibility. We don't have a responsibility for setting bills, collecting bills or taking payments. So, policy decisions around what's a charity and what isn't a charity aren't for us, really, they're for the Welsh Government to set in legislation. We will then, if necessary, do the valuations and others will set the bills, et cetera. So, we don't have any responsibility for that.  

Okay. And the appeals process, then, regarding tackling artificial avoidance arrangements. So, the appeals process, would that be with you then, or do you think that would be—

No. Carolyn can say a bit more about that.

I think it would be the other Carolyn.

The other Carolyn. I've never been in a meeting with three Carolyns before. [Laughter.]

As far as VTW is concerned, we're quite happy to welcome a new stream of appeal. It's not something that we've dealt with before, but looking at the regulations within the Bill, I can see that it's set out well and the responsibilities of the tribunal are clear. We can either confirm the notice or require it to be withdrawn. It's a very simple stream of appeal. And, obviously, the amount of appeals that we get from this will very much depend on how many section 63K notices are served by either the billing authority or Welsh Government Ministers. But we don't foresee that it would cause a big problem for us. We think the numbers will be limited. Obviously, I'm sure billing authorities and Welsh Ministers will be looking to help the appellants, so that should make our life easy.

Diolch, Cadeirydd. Good morning, everybody. Just following on around some of the information for ratepayers, how do you think the new provision might change how ratepayers engage with the Valuation Office Agency? Do you think there'll be an additional burden on ratepayers?

Thank you. In terms of how they'll engage with the Valuation Office Agency, we like engagement, we want people to be looking at the guidance we produce, interacting with the social media and communication channels we provide, because again we want people to understand how we reach the valuations so that they can have confidence in them. So, the more interaction we have in that sense, the better. We want to make sure that the information requirement is simple and easy to comply with, because at the end of the day, we don't want a lot of information coming through into the agency that isn't correct, and also we want to make sure that we're not putting a burden on businesses.

I know Carolyn has done a lot of work in terms of the impact assessment and what we think that might be. It's probably worthwhile just saying that the requirement isn't particularly new. We already ask for a lot of information to gather evidence about setting the valuations. I think we asked for 0.5 million pieces of information last year, for the valuation we did recently. So, it's nothing new, it's just formalising it, but we do want to make it easy for people to comply with it. Do you want to add anything more to that, Carolyn?

No, only to say that we're absolutely committed to making it really easy, straightforward and simple for our customers to give us that information, and we're building an online service to make sure that that's the case. And we're doing lots of user research and user testing to make sure it meets our customers' needs. 

10:40

I was just going to ask you about what sort of guidance is going to be prepared and published for ratepayers.

We're very much hoping to develop a system that makes extensive guidance unnecessary. The idea very much is that people can sign up online and then follow the step-by-step processes in our service. So, we're hoping you won't need to get to grips with lots and lots of printed guidance. We will make guidance available ahead of launching the service, absolutely, so that people can familiarise themselves if they want to, but, as I say, very much our aspiration is to make it unnecessary for people to need lots of guidance because they can go online, sign up for an account and just follow the simple step-by-step step processes on that.

Jayne, just before you go on—. Will there be additional requirements for those who receive 100 per cent rate relief in terms of information provision and what is to come compared to what we have now?

They will have exactly the same requirements as anyone else, there won't be extra requirements. It is worth noting, as Jonathan said, we already ask our customers for a lot of information. We will be sending out over 0.5 million requests for information this year and about 60 per cent of that goes to customers who don't pay business rates. It is really important to us in terms of how we do a revaluation that we have to value every single property whether they pay business rates or not. It's really important that we get that information in. And, of course, having accurate information can determine whether you pay business rates or not, whether you are over or under that threshold. So, it's really important to us to get the comprehensive information from all our customers so that we can do accurate and fair valuations.

In general terms as well, we touched in our earlier evidence session on those that are not digitally enabled in whatever way and what would be required of them in terms of information provision, documentation and how onerous that might or might not be. What would you say to those sorts of concerns?

We will absolutely be making sure that there's a route for people who are not online to give us information. We actually already have quite extensive assisted processes for people who don't have online access, so it would be an expansion of those and plenty of support through our customer service centres. We've developed seven different user personas for developing the service, and one of those is an assisted route for people who don't have online access. So, we'll be making sure that we meet their needs as we develop the service, very much so.

Just on that point, what about those who have English as a second language? Do you do a lot to try to make sure they're aware of the situation?

Yes, definitely. We've got one of our customer service centres actually based in Cardiff and we have a dedicated Welsh language line for people whose first language is Welsh. Our Welsh language scheme was updated in 2023 and it was approved by the Welsh Language Commissioner. We've actually set in train a scheme to review it in four years' time. But obviously, if evidence proves that that's not quite right, we'll revisit it too, because we're absolutely committed to making sure that people can deal with us in the language they feel most comfortable with.

And just in terms of other countries, people who come with different languages as well, I know it's difficult for every language, but how are you trying to make things easy so that people are able to understand?

We do have access to translation services should we need it. We do concentrate on the main languages—obviously, that's English and Welsh—but we do make sure we're as open as we can be to people whatever language they use. Because at the end of the day, we want people to be able to comply with the system and not feel they want to evade it because they just don't understand it or can't interact with it.

Absolutely. Thank you. And just finally from me—this is really for the valuation office—what would be the bar for determining whether to impose civil penalties on ratepayers for failure to provide the required information under the new duty, and how will you engage with the Welsh Government to monitor the administration of the regime?

We have a really close working relationship with the Welsh Government as it is, and we imagine a continuation of that. We have a service level agreement agreed yearly and we meet quarterly to monitor how that's going. We have various other committees as well where representatives from the Welsh Government sit and provide information, advice and guidance to us. But, as I said, we don't want people to fall foul of the regime. We want people to be able to comply with it.

In terms of setting the bar, I'm not quite sure how that would work in practice. At the moment, it's very light touch and we wouldn't see that changing, because most people want to comply. If you look at the overall evidence in terms of appeals, for example, on the last list—the 2005 list—I think it was something like 3.9 per cent. So, even where people have some disagreement with the bill, it's quite small, quite low. I think, last year, we had something like 57 complaints, so most people can comply if they do want to comply with it. I don't know if Carolyn wants to say any more about how we work on the penalty regime, but overall the principle is that we don't want to be applying penalties. It's far better that people understand it and comply with it.

10:45

I was just going to say something very similar. Our priority on this is absolutely getting it right for our customers, making it straightforward and easy for them to comply, so penalties, for us, are very much a last resort and would reflect deliberate and repeated non-compliance. And before we issue any penalties, there will be a series of reminders and prompts and warnings, so people will have every opportunity to provide us with the information and we'll work with them to make that easy for them. There will be a right to request an extension to provide that information, a review, and ultimately a right of appeal, and you might want to talk to the other Carolyn about that.

We actually do already have the power to issue penalties, and we issue very low volumes—I think there were 77 in Wales last year. So, we will have discretion in the way we operate the regime. I hope the way we operate our current penalty shows that we are very proportionate in the way we do that, and absolutely our priority is getting it right for our customers and making it easy for them to provide the information we ask for.

On penalty notices, we've had very few appeals on penalty notices, which I think shows that the VOA handles them well, and any that have come to tribunal—. I would say, in the last three years, we've had maybe two penalty notice appeals, which have never come to a substantive hearing. Normally, once we register them, we'll inform the Valuation Office Agency that they're there, and then they get in touch with the appellants and they seem to be able to settle them without having to come to tribunal. So, I would say that, if they continue with the past experience we've had, the appeal levels should be very low.

Okay, Carolyn. Thank you very much. Okay, thank you, Jayne. Joel James then.

Thank you, Chair, and thanks ever so much for coming in this morning. I've only really got the one question, and it's for the VOA again. You touched upon it earlier in the discussion about that budget flexibility you have, and that you have sent money back, and I just wanted to get an idea of the Welsh Government's recent assessment of the cost or the budgetary costs that will come. I think it's anywhere between £12 million and £15 million, and I was just wondering whether or not you thought that was an adequate settlement figure, and if you could see situations where you might need more, if that makes sense. There might be a situation where it's, 'Hang on, this year we need substantially more,' you know.

I think the budget is robust. It's based on the best available evidence we have, looking at the past, what we think, for example, the appeal rate might be. So, I think it's as robust as it can be. If we require more, it may be if the requirements from the Welsh Government change slightly, for example in doing more frequent revaluation itself, we're doing more work, so that will cost more. We'll have to look at what the actual impact of the NDR reforms are. We've costed that at £1.5 million a year over 10 years. Again, we think that's robust, with the available evidence we have at the moment. With any new system, we need to keep it under review, and one of the key things we need to be sure of is that there are no surprises, so that's one of the reasons we're very keen to keep the dialogue going with Welsh Government, to make sure that, if anything does change, you know about it, we know about it, and we can come to a solution together, because this is going to work by us, with the ratepayers work and then agents and other interested stakeholders working in partnership. It's not something that we do to people; it's something that we try and do together in partnership. So, it's robust at the moment based on the evidence we have. Hopefully, it may cost slightly less. We don't know. But if it does cost more, we'll be in conversation with you and let the Welsh Government know.

Diolch, Gadeirydd. Just thinking around the procedure on the valuation lists, I was just wondering if you'd be able to outline some of the potential benefits and disadvantages of the provision within the Bill around five-yearly cycles of revaluations. 

10:50

For us, the benefits are that we get used to doing revaluations. It's something we do. It's good to have that predictability, that certainty, that consistency. It'll mean that the evidence is up to date, so, if it's done every five years, it'll allow us to get into a programme of actually making sure we know what we're doing at certain times. There would be the evidence-collecting period, and the valuation period, and producing the draft list. So, it provides certainty into the system, I think, in terms of, when we're dealing with ratepayers, the valuation date is more relevant, so, again, they'll see how it reflects the current economic circumstances. The longer you go between valuations, the economic circumstances can change, and people may think that doesn't, then, reflect their experience as a ratepayer in terms of their business valuation. 

From our point and perspective as a valuation agency, no. It provides that consistency, that certainty. It allows us to do things, for example, like recruitment, getting surveyors in, using data. So, no, nothing from our perspective.

Okay. If I can come to Carolyn—and it's the Carolyn on the tv—just thinking from the perspective of the Valuation Tribunal for Wales, I imagine that you would anticipate that there would be more challenges in the early stages of any new valuation cycle, especially considering how long it's been since the last valuations were done. Am I right in saying that you would anticipate that?

For non-domestic rating now, yes?

Can you just repeat the question? Sorry. 

So, I imagine you would anticipate that you would have more challenges to valuations—

—around that. And so what would you anticipate that would need to be done, then, to meet some of those challenges?

Obviously, when the new list comes in for council tax, yes, we would expect a huge uplift, depending on where the market sits, really. I think, with council tax, a lot of it depends on what people are seeing. So, if there's a fall in property prices just before the valuation list comes into force, people tend to forget that revaluations were done at AVD, which, in this case, if it goes ahead next year, would be 1 April, 2023. So, they forget that the valuation was actually done then, and if there's a significant drop between the value of their property at that date and then, obviously, they're going to feel really aggrieved. So, I think we'd be looking at a higher level of appeals in those circumstances. However, if the market goes the other way and the property prices rise—which happened in the last list—I think people keep quiet about the fact that they think their banding isn't quite right, because they feel that they're winning. That's the losing situation.

And, obviously, we've had an economic issue in this country over the last few years, and people are very conscious of where their money's going. So, if they feel that they're paying a higher price than they should, then they're going to appeal. People have far more access to information online about property prices, and they feel that they know that the valuation office is incorrect in its assessment of their property, and therefore they're more likely to put them in, because they feel they can come and prove that point at a tribunal. 

With more regular revaluations, I suppose it does provide more of an opportunity for regular public engagement around what's going on. So, how, then, do we, essentially, ensure that people, firstly, are aware that revaluation has taken place, and, then, also, how do you then engage those people in the process and walk them through it? I'm wondering if there's any thoughts on that. 

Yes. I think it's a partnership approach. The Welsh Government decides when the valuation takes place, and we are preparing for that now. When that decision's made, there's the Welsh Government responsibility in saying, 'This is what you're doing, this is why you're doing it', and there's our responsibility to make sure people understand, for example, how we go about and set the valuation. We want to be very proactive in that, because, if people understand it, and understand the property attributes we use to determine valuation, they'll have more confidence in the system. And we want to share as much data as we're allowed to with that. And we will also be producing draft lists, so people will be see, 'Well, this is what we think the valuation is' before—. So, there's the draft list stage and the compiled list stage. So, in the draft list stage, people will be able to look at the factual information we hold and see if, factually, the information is correct or not. If it's not, they can say, 'You need to change it: we've got four bedrooms, rather than seven', or something, so we can change that. So, it's about being as transparent as we possibly can in terms of the valuation process, then the purpose in doing it, that lies with the Welsh Government and others.

10:55

Okay. I'm not sure if anyone else wanted to come in before I hand back to the Chair.

I don't think so, only to say we've got lots and lots of experience of doing really quite extensive communications campaigns with our customers, so we definitely plan to do that in this circumstance.

Okay. Diolch, Luke. Are there any other questions from committee members? No. In that case, then, thank you all very much, all three of you, for giving evidence to committee this morning. You will be sent a transcript to check for factual accuracy. Diolch yn fawr.

7. Cynnig o dan Reol Sefydlog 17.42(vi) i benderfynu gwahardd y cyhoedd o'r cyfarfod
7. Motion under Standing Order 17.42 (vi) to resolve to exclude the public from the meeting

Cynnig:

bod y pwyllgor yn penderfynu gwahardd y cyhoedd o'r cyfarfod er mwyn trafod y dystiolaeth, ac o eitem 8 y cyfarfod, yn unol â Rheol Sefydlog 17.42(vi).

Motion:

that the committee resolves to exclude the public from the meeting to discuss the evidence, and from item 8 of the meeting, in accordance with Standing Order 17.42(vi).

Cynigiwyd y cynnig.

Motion moved.

Okay. At this stage, I wonder, under Standing Order 17.42, if committee might approve us going into private session at this stage, and also for item 8, when we will also be considering evidence that we've heard today. So, at this stage, we could consider the evidence that we've heard up to this point, and then we'll go into private session for item 8 to consider further evidence at that point. Is committee content to do so? Yes. We will move to private session, then. Thank you very much.

Derbyniwyd y cynnig.

Daeth rhan gyhoeddus y cyfarfod i ben am 10:56.

Motion agreed.

The public part of the meeting ended at 10:56.

11:30

Ailymgynullodd y pwyllgor yn gyhoeddus am 11:31.

The committee reconvened in public at 11:31.

4. Bil Cyllid Llywodraeth Leol (Cymru) – Sesiwn dystiolaeth 3
4. Local Government Finance (Wales) Bill - Evidence session 3

Welcome back, committee members, to our further evidence session on the Local Government Finance (Wales) Bill, with local government witnesses. Thank you, all, very much for coming in, either physically or virtually, to give evidence to committee today. So, we have, joining us here in the committee room, Lisa Hayward, finance policy officer for the Welsh Local Government Association; we have Matthew Phillips, head of service, revenues and benefits, Rhondda Cynon Taf County Borough Council; and Councillor Susan Morgan, WLGA finance cabinet member. And joining us virtually is Councillor Robin Williams, WLGA finance cabinet member. So, welcome to you all. Perhaps I might begin with a general question, then, on the general principles of the Bill—whether you would share with committee your thoughts on the Bill's provisions, and whether you agree with the Welsh Government statement that the Bill will,

'further expand the Welsh Government's and local government's capabilities to deliver the fairest possible arrangements within the context of the established non-domestic rates and council tax systems.'

Who would like to offer an initial view?

Go on, then, I'll start. Good morning.

Just to confirm that we think the Bill enables the taxation system to be more responsive. A new and specific Bill for Wales is needed. It reflects the ability that we can change local taxation, as needed, as we develop, better suiting current society. We know the previous Local Government Finance Act 1992 came out on the back of the community charge and the introduction of council tax, and it has been changed on a number of occasions since, so the legislation is quite unwieldy. We feel that a specific Wales Bill will help us to move forward to address issues within the non-domestic rates and council tax systems.

Okay, Lisa, thank you very much. Do any of our witnesses want to add anything to that, or are you all content with that?

Nothing further to add, thank you.

Okay. Thank you very much, then. We will move on to other committee members and, first of all, Sam Rowlands.

Thank you, Chair, and good morning, everybody, and thank you for taking the time to be with us here today. I'm just interested in—the capacity within local authorities at the moment is very stretched, I guess, and the particular financial context that you're facing, as local authorities, is very challenging, to say the least—what capacity you might have available currently to undertake additional work, especially with the three-yearly revaluations lined up for non-domestic properties, and how you will meet that challenge of that extra work.

I'll start by saying, in general, that we accept that it will bring additional work, and capacity and resource issues are a concern at the moment, particularly in light of local government funding and a slightly uncertain future, but local authorities have always delivered. We've got an excellent track record in delivering to support our society. But I will hand to Matthew, from a local government perspective for experience of recent non-domestic rates revaluation and what that actually impacts on at a local level.

11:35

Thank you, Lisa. Certainly, from my experience of past revaluations, it doesn't ordinarily generate a significant amount of work from a local authority perspective, or it hasn't in my experience. Obviously, the more frequent those revaluations, then the more the likelihood for more work to be generated, but I don't think that's something that would be overly burdensome for local authority teams, despite pressures of work and future funding arrangements. The potential, I guess, for more regular revaluations is that it could reduce levels of appeals against rateable values, provided the information that is provided by ratepayers and the Valuation Office Agency is accurate and reflects market rental values, et cetera. So, I wouldn't be overly concerned by that, although I accept that it would generate more work. 

I'd just like to take the opportunity to say that my experience of council staff in Torfaen, at the very least, is that where there are benefits to the community, where there are challenges that our communities are facing and they have an opportunity to step up to the mark to improve lives by good communication and plenty of support, they've got an excellent track record in so doing. 

Yes, thank you. I suppose, from my perspective, I'd echo what's been said by my colleagues, but I guess my question and my thought process is where do the challenges lie and whether there would be challenges in capacity within the valuation office, for example, to carry out the reviews that are going to be required on the non-domestic rates and on the council tax changes, going forward, if the proposals are adopted.

That's a really good point, and we were able to have the VOA with us earlier, as a committee, today, and it was exactly the types of points that Robin was raising there. Just going back to, perhaps, the point Matthew raised around acknowledging that there's likely to be an increase in terms of work for local authorities here, it might not be for you to answer, but perhaps give us a flavour of the types of things you're doing to prepare for that additional work. Are budget lines being acknowledged in that sense—so, budgets agreed in local authorities, are they being slightly adjusted to allow for greater capacity within departments like yours? 

Generally, no, I would say; it's a matter of absorbing what comes our way with the resources that we have. I would say that we're tried and tested in that regard in terms of revaluation exercises previously. We have systems and teams that have a heritage of dealing with the additional work that comes through from a revaluation, and, generally, there's a spike in work at any point in revaluation. It tends to occur at the same point that we issue the rating bills that are sent out at the same time. So, I guess we would resource up at that point until business settles down, and then it would just generally become a day-to-day administrative issue.

I'd support that, if I can, to say that, particularly on non-domestic rates, when there was a revaluation effected last year, April 2023, it does become pretty much business as usual. You kind of know when your peak period is going to be, and it's not necessarily when the new rateable values are known; it's once the bill hits the mat, which always coincides with council tax billing. So, you resource up. You prepare your contact centres and your telephony staff for that. So, it's something local authorities do year on year anyway. It's accepted that, with the revaluation, there is always a peak because of the potential for appeal, but no-one has the ability at the moment to forward plan resource; it tends to be more reactive. But issues like that are pretty much, in the revenues world, business as usual. 

And do you think there's more that could be done, perhaps, with the VOA or some body to help communicate that message before those bills do land, because I always find it's a slightly strange thing that the councils often get it in the neck for non-domestic rates, but clearly they're just collecting on behalf of the Welsh Government; they're not setting the rates themselves, or anything like that. So, is there a piece of work that you think could be done that helps communicate these changes, or just the message more generally, so things can be dealt with before those bills land?

11:40

I'd agree with those observations. I think the valuation office have, in previous revaluations—I seem to recall them doing it last year—prepared a suite of assets that we could use on social media platforms and the council website to try and promote that message ahead of any billing exercise. I've no evidence that that works, but I know that it was done. I guess, from a local authority's perspective, having reflected back on the exercise last year, I must say I can't recall that there was any particular surge in enquiries around the revaluation of properties, certainly nothing that warranted additional resource being pushed into a particular area. Whether that was down to the marketing or the publicity that the VOA made available, I can’t comment, but I know that they did work to try and do some of that upfront communication last year. 

I don't know whether it's something for council members to consider as well, but just that point, generally, where, because the letters come from the local authority collecting the cash, it's councils and councillors who are assumed to be setting that rate and being responsible for the rates of non-domestic taxation. Do you think there's anything that could be done to improve that communication or message that you're just there to collect it on the Government's behalf? Or am I just barking up the wrong tree?

I think effective co-ordination of the communication across the partner bodies involved in changes is really important. That's always something that can be improved, in my experience, and local authorities are part of that mix. But where changes are made at the Welsh Government level, or where responsibilities sit with the valuation office, you'd expect co-ordinated communication. 

Yes. Okay. Thanks. And then, perhaps, if I may just go a little bit further, Chair.

The Bill we're considering looks to give Welsh Ministers powers to amend regulations in future to enable shorter revaluation cycles. I just wonder how you think that may impact on the ratepayers you support.

We think further powers to change a revaluation year give us flexibility to respond to situations that can happen locally and regionally. Naturally, it takes the reliance away from having to be part of a UK Government Bill. We noted from previous evidence that the business sector is supportive of regular revaluations. However, we have to be, from the local government perspective, mindful of the effect on the ratepayers themselves, and the impacts of significant changes, whether positive or negative. On the whole, we are supportive of more regular revaluations in general, but I think the ability to shorten the timescale is something that is well worthy of consideration and inclusion, because if you’re getting to that regular process of revaluations, you can actually, hopefully, remove the need for complex transitional relief schemes, because they play a vital part whenever you do a revaluation but they are quite cumbersome to administer, and not necessarily easy for taxpayers themselves to understand, either. It makes billing even more complicated and a little bit onerous. So, we think the timing could be—. If you’ve got a period of absolute certain economic stability, why would you want to technically go through the process for a Bill to be of negligible difference? I’ll ask my local authority colleague to support on that one as well. 

Yes, I'd agree with that. I think more regular revaluations would be welcome. The opportunity to amend future dates, certainly, operationally would make more sense than what we have now, I think, to have that in place. As Lisa alluded to there, the greater the gap between revaluations, then the complexity with transition doesn't help. That is probably when we get more enquiries in relation to the bill that we send out. There are so many lines on there about the increases being staggered, et cetera, over a number of years. So, to be able to remove those kinds of relief schemes would help.

11:45

I think that you mentioned, obviously, the impact on ratepayers. We have representatives from the Federation of Small Businesses and others coming in after you. What sorts of things do you think that they might say to this, and what might their concerns be with the higher frequency?

I think that they would probably be concerned about the impact on businesses that are seeing quite a significant change to their operating model and their financial viability. It's a difficult one because you can see the need for regular change to reflect the market, but also, if it's too regular it can make it unstable as well.

I think that the system that we have had in the past does provide certainty and stability, accepting then that when properties and businesses have gone through a period of turbulence, they are having to wait and be picked up at the next revaluation. So, I'm not really sure exactly what their direct view would be for small businesses, but naturally, they seem to be more subject to minor shocks in the economic situation than a larger company. The change of the high street reflects that.

Yes, okay. Obviously, those questions would be for them. I was just trying to get ourselves warmed up for the next session as well. Perhaps one final question, Chair—is that okay?

Going back to the point around the pressures on you as local government, which may require that larger capacity, could you perhaps give us a flavour of the types of discussions that you have been having with Welsh Government in terms of additional funding to enable you to have that capacity, rather than it perhaps all being absorbed within current budgets?

There have been discussions through the formal route in respect of the impact assessment associated with the Bill, moving forward. But, I guess that, from what I'm aware, nothing specifically has taken place for what that actually means for a revenues department on the ground, what that impact is, where the peaks and troughs are, where you need the extra cost pressures to be supported. From a local authority perspective, as we said, it's something that we kind of manage.

We have an eye on the fact that regular revaluations will incur additional costs. Also, there's the additional cost in respect of the operating systems that the local authorities all use, which are provided by private software companies. So, we have to be aware that there are costs there that will need to be covered to make sure that this is successful, moving forward. We've had headline general discussions, but not actually detailed, specific discussions of what it means, right down to the granular detail, across authorities.

Of course, the Welsh Government have made an estimate as to how much it would cost. I think that's based on a return of six local authorities out of the 22, in terms of the survey. So, I just wonder how confident you would be that the Welsh Government have a handle as to the resource implications.

I think that, at the moment, because of the situation on budget funding, every department would be responding to say that they are underfunded and that they need the additional resource at the moment. But in respect of this, we know that, whenever we have a revaluation, or any change to any taxation system, we've got to factor in the extra cost from the software suppliers as well. So, it's something that is, to a degree, out of your control, but you have no option other than to fund from whichever resource that you can.

So, we accept that, as we move this forward, there needs to be more understanding of the cost that a local authority has to incur to deliver. Hopefully, we can get to an arrangement where there are regular funding discussions, particularly around the software side of it, moving forward, because we cannot deliver regulations without that.

Okay. I'd like to ask some questions regarding conferring, varying or withdrawing reliefs and exemptions. What impact would that have on you as local authorities, on your resources?

Also, changes to charitable rate relief. So, charities are being asked to provide more information to have that rate relief—providing bank statements, et cetera. So, the impact that that would have on you, really, having to work with charities, maybe. Some charities are very small bodies, and they might struggle to provide that information straight away. There could be unused buildings at that time. I remember that, during COVID, there were unused buildings, and then they have changed again. So, really, the impact of that for you.

I will deal with some of that. Certainly, if there were additional reliefs to be introduced, then we would expect the Welsh Government to provide some funding towards that. I think that, from an operational point of view, we'd want any changes to reliefs or exemptions to be effective. It's important that they meet the requirements, that they're easily understood by ratepayers and authorities in terms of implementing those changes.

Where possible, automatic awards of relief would be welcome. We've seen that work before with small business rates relief and retail, leisure and hospitality relief. What's happened recently, over recent years, due to the legislative changes that have been made to both those reliefs, we now require an application form from ratepayers because of the limits that have been imposed, and that's created new administrative workloads for local authority teams and costs. And some of those are cumbersome and ineffective, and, I suppose, more importantly, they've reduced take-up in some instances for those reliefs, and that means eligible businesses missing out on the kinds of relief that they should be entitled to. So, we'd want those schemes, if possible—or where possible—to be some kind of automatic award, if they could be.

There's also consideration, I guess, of making some business properties exempt from rates, if that's possible, rather than introducing short-term reliefs. A more permanent form of exemption would be better, and the expense of the administration and operating cost, again, to be met in the usual manner. We talked about software changes there; they're always important and key. Any development that needs to be done to the operating systems generally comes at a cost, so we'd need to factor that in.

In terms of charities, I certainly think that the guidance—. The question here mentions the guidance, that would be helpful—to have some kind of Welsh Government guidance on that, and how we administer it and operate it. That would bring consistency and help develop a best practice approach. At the moment, where we have unoccupied buildings, and there's the potential for them to be used in the future for charitable purposes, that's difficult to police, it's difficult to dispute. I suppose, for context, in Rhondda Cynon Taf, currently we've got eight properties, unoccupied properties, that we are allowing the exemption for. In terms of monitoring that, we generally ask one of our officers to visit it to confirm whether it's empty or occupied, and we ask for very little evidence, because it's that difficult; it's just a statement of intent, really, from the charitable body. So, I think the provision of annual reports and accounts, at least, would demonstrate some assurance that the charity is active and that it has the proper governance arrangements in place. And it does place the onus on the charity to provide the paperwork, which clearly helps, and would potentially deter some charities from making false claims. 

Your point about newly established charities is noted. We deal with that at the moment for occupied properties, for example. So, where a newly formed charity moves into unoccupied premises, then they would come to us asking for mandatory relief or discretionary relief, and we allow that, on the basis that they've occupied and provided that they supply us with a set of accounts perhaps in a year's time when they've got those available. So, there is precedent for that in the existing regulations.

11:50

I think so. And Welsh Government have done that for other relief schemes that have been introduced recently, such as the retail, leisure and hospitality scheme. They've provided guidance to go with that, which certainly helps.

No, I'm actually in a room where there's a glass window opposite me and I was waving at somebody as they were going past. So, apologies. [Laughter.] Force of habit. 

I'm not waving at anyone, just to be clear. I just wanted to emphasise the importance of the transitional arrangements and of where a relief might be withdrawn, that transitional arrangements will be key, as will, again, that degree of understanding and support that our teams are famous for giving in the instance where there's change. So, I think, allowing for that period of transition, ensuring that it's properly resourced and that it's not underestimated in terms of its challenges. It takes many years for people to get used to a system, and when it changes, it can take some time for them to absorb the change and to make it part of everyday practice. So, where there are new requirements, I think that degree of flexibility, tolerance and support in the transition arrangements is really key.

11:55

And I guess time, then, for any organisations, as well, to be able to supply the information needed would be—.

[Inaudible.]—decision-making processes, for sure. And also, I suppose, the question in terms of varying discounts or amending discount exemptions is that businesses have become reliant on some reliefs over a number of years, because they've been in place, so there's that consideration as well, I guess.

Yes, I'm not waving this time. I think that what my colleagues have just said emphasises to me how cumbersome and complicated the whole system is and how I think we need to look at it in terms of simplifying the whole process from top to bottom. I know it probably sounds easy for me, sitting here saying that, but I think that's a part of the issue, that people don't understand what they're entitled to, and when it comes to reliefs, and so on, people don't know what's available. So, I just feel that there's a need for us to be looking at this in the round in terms of simplifying the whole process. Thank you.

We've had a few discussions about that in the Senedd, that not everybody claims what they're entitled to and we need to promote that more.

I suppose that takes me back to the point I made earlier about the automatic awards, not for all reliefs, I understand that, but certainly where it is obvious that a business qualifies or meets the qualifying conditions for a particular award. That certainly helped.

Okay. Let me ask one or two questions on completion notices, and firstly whether you agree with the proposals to extend the procedure with regard to completion notices, so that it's not just new buildings, but properties that are temporarily removed from the rating list for alterations, and whether you think that those proposed changes will resolve the issues with the current process.

I think in general, we are in agreement, and we can't see any issues at this stage. It would allow properties to be brought back into rating quicker and so avoid unnecessary billing delays, which benefits both the authority and the ratepayer themselves. From an operational perspective, I think we've decided quite unanimously across local authorities that this is a positive move that they wish to see; it will help the process and avoid a period of uncertainty for the ratepayer, waiting to know what their bill is going to be when they're entered back into the rating list. So, it's something that we support and we think it's a positive proposal.

Okay. The explanatory memorandum states that this provision, this change, will result in modest additional administrative costs for local authorities. Is the WLGA content that there has been enough analysis, particularly with regard to large urban areas and whether or not they might be disproportionately affected by the change?

It's something that we haven't gone into in complete, full detail. We note the costs in the explanatory memorandum, but at the moment, it does seem to be—. As it's a new procedure and something that we're not fully aware of the scale of, it will definitely be something that we'd have to monitor, through implementation. And we would hope to be able to continue the dialogue with Welsh Government, and then if it does become something that is much more burdensome and onerous than was expected, it is funded accordingly. But it's something that's going to be quite a new procedure, so we'll enter into it with trepidation, really. We note the costs that are noted, and we think they err on the side of caution, but until we actually really see how it works in operation, we can't elaborate any further at the moment on that point.

12:00

And there is that understanding with Welsh Government in terms of this particular legislation, is there?

I am aware that—. We do have regular discussions and we speak about coming involvements. Underneath the Bill, we know there's going to be a whole host of subordinate legislation, and, thankfully, over the last number of years, we have had an excellent working relationship with colleagues in the local government finance division, so we are able to raise issues very early and work towards amicable solutions. So, we know that we have got that vehicle for conversation and we do have regular, frequent and productive conversations with colleagues who are able to then amend the guidance, change legislation, work on the subordinate legislation. We have got that working relationship, thankfully. So, we will be able to have that conversation, moving forward.

Okay. Thank you all very much. If nobody has anything to add on those matters, we will move on to Jayne Bryant. Jayne.

Diolch, Cadeirydd. Good morning, everybody. I just want to ask a couple of questions on discretionary relief and varying exemptions, what type of circumstances discretionary rate relief might be applied by authorities and why would it be considered beneficial to remove that six-month limit.

Currently, discretionary rate relief within Rhondda Cynon Taf, for example, is awarded mainly to not-for-profit organisations or social enterprise companies. So, our current policy allows for relief to be awarded to organisations like sports clubs, community centres, altruistic organisations and sporting grounds, as a couple of examples. The proposal to remove that limit or the existing limits would enable councils to award relief retrospectively where ratepayers have delayed making an application, for example, and that's something that we are able to do at the moment, but, obviously, within the confines of the existing regulations.

Thank you. How will the provision to remove the limit provide local authorities with more discretion and flexibility—you've given an example there—and what impact will it have on councils' budgets?

Certainly, from my perspective, I don't see a significant impact on council budgets. Generally, from my experience, applications for those kinds of reliefs are made within time and there are very few occasions where we have to consider any kind of backdating to a previous year. So, I wouldn't anticipate a significant impact on council budgets.

Thank you. Just on NDR multipliers, do you have any views on the provisions that would allow Welsh Ministers to create additional multipliers, and the anticipated benefits or disadvantages associated with that?

I'll take that one, yes? Currently, the same multiplier applies to all hereditaments, so it's easily understood by ratepayers. We accept the provision that additional multipliers could be used to support certain sectors, perhaps renewable energy as an example, or to address a specific gap in the economic market. But we do have concerns about bringing in tiers of multipliers. We think that, should that step be taken, then it needs to be fully consulted upon, with clear, detailed assessments, a fully detailed regulatory impact assessment, looking at the perceived impacts and benefits of it, because, technically, you're introducing then a two-tier system into an established tax-collecting mechanism. That will create some instability and needs to be carefully planned and managed. We're not against it, but we're erring on the side of concern that it's something that hasn't been done. To have the power to do it, it's great. It has been done—it's been done in London for Crossrail, but with a specific major project. So, it can be utilised, but, at the moment, we've got a system that is stable and easily understood, and we think that any consideration to changing or bringing in additional multipliers for certain sectors needs to be thoroughly explored before implementation.

Thanks, Chair. With the potential of multipliers being in there, would you anticipate a risk of increased avoidance? So, potentially, if I had a business that looked like one thing, but there was a lower rate if my business looked like another thing, I could perhaps make a move into that, and how would you—? What role might you play, do you think, to monitor that and evaluate that potential avoidance?

12:05

I think it's a very good question. For example, when we’ve done previous schemes in the past and support schemes where you define a category of a property or a business that’s eligible for relief, naturally those who are outside it question and look to possibly change or—. We’ve had examples in the past of just slightly changing the configuration of the business premises, so it’s public facing or non-public racing. So, it’s a concern that, yes, if you’ve got a two-tier multiplier system, where one is obviously more beneficial than the other, then it’s natural that people would look to see how they can amend their business model that they fit into that one. It would have to come with very specific criteria, but, obviously, because it would be a financial incentive, there is scope for areas to look at where it could lead to avoidance tactics.

I don’t know if there’s anything you wanted, from a local authority perspective, to add to that element.

No. Well, only to add, I guess, that the difficulty in policing that kind of activity, it is—. To get around as many business premises as we have within an area, it’s difficult. So, I would agree that there’s potential for it, and, as Lisa mentioned, we’ve had those examples in previous schemes, where we’ve got embroiled in discussions about what the business actually is, and you can imagine that happening again.

I’d just like to add that the provision to be able to introduce those additional multipliers isn’t quite the same as actually doing it, and that discretion is going to be at the heart of this change, and judgment and clarity, just as we’ve talked about in relation to all other aspects of transition and change, so I think that’s quite important, to stress that the provision to do it isn’t the same as necessarily doing it readily and frequently. It seems to have some very specific uses that could be explored, but those would remain to be developed, and we’d be looking to see more information on that, I’m sure.

I just wanted to go back to the question of the six-month limit as well, and, again, this question of showing consideration to the objectives, and, if a local not-for-profit organisation or charity is going to make a major contribution in an area, to deny that relief because they are new and have developed into that role, and have been made aware of the relief just that bit too late, seems to be counter-productive to me, so I fully support that change.

Thanks, Chair. I guess, on the provisions front, we get nervous sometimes about allowing that provision to Welsh Ministers, because I guess they could use it, couldn’t they, at their discretion. Thanks, Chair.

Thank you, Chair, and thanks ever so much for coming in this afternoon now. It’s so nice to see you, Matthew. I well remember the e-mail exchanges we used to do about council tax rates, so it’s good to finally put a face to a name.

I suppose I just wanted to ask a couple of questions on council tax, but the first one I wanted is to do with—and you’ve briefly touched upon it in terms of charitable rates relief and the requirements from them, but, as you know, with the new legislation that’s being proposed, there would be a requirement on non-domestic ratepayers to—if there’s anything that affects the valuation of their properties, they have to notify the valuation office, and they’ve also got then to do that on a yearly basis as well, and I just wanted to see, get an idea of, the implications from a local authority point of view of what that would be for councils in Wales, really.

I think the intention is to be applauded, I guess, in terms of the flow of information between ratepayer and valuation office. And from a local authority perspective, if that information flows through to the local authority, then that would help, and it would be welcome. My concern is that, over a number of years, I think that there's been a lack of engagement between ratepayers and local authorities for a number of reasons, mainly because some of the reliefs that have been in place have helped to distance ratepayers from the local authority. So, as an example, most small businesses now with a rateable value of under £6,000 don't have any rates to pay and, therefore, feel that there is very little need to engage with the local authority. So, the request, I guess, for information may fall on deaf ears and, obviously, there's provision within the regulations for fines et cetera. So, that may be an issue that I foresee and it certainly came to light during the pandemic when we were offering, or Welsh Government were putting forward, business grants: suddenly we were inundated with information from businesses that we had never heard of. And I suppose the nature of the reliefs, in terms of providing full relief for a rates bill, has meant that many businesses have just lost touch with us, and that's left a gap of information currently. So, there is that potential for ratepayers not to take up the offer from the valuation office to provide information.

12:10

I can well remember, during COVID payments, the amount of businesses in my ward that were coming forward basically trying to get a revaluation from the valuation office because of the implications that it was having there. So, does anyone else have anything to say on that?

Just to say that we think it's a positive move, but we have to be mindful that this is something that ratepayers are not used to doing. So, we're supporting it—anything that improves the flow of information can only be of benefit to both the valuation agency and the local authority, and indeed Welsh Ministers looking at legislation. But it's not something that will be achieved quickly and we think there needs to be time to actually get systems in place and the communication flow established before any penalty regimes come in, because it's something that ratepayers are not used to doing. So, we don't want to have a great big penalty measure for something that ratepayers have just been—. I'm not saying been ignorant of, but they haven't had to engage, so I think we need a measured approach to doing that.

Okay. I think that makes sense and, as you say, the amount of businesses that have no engagement because they come under the threshold—. If I can turn to council tax then, obviously, we discussed there businesses having the three-year review; with residential properties now, it's the five-year review. I wanted to get your idea of the potential benefits and disadvantages of that, because we've heard from previous evidence sessions that there might be implications on house prices, but then, obviously, the more staggered that review could be, rather than having it—. It could even be a three-year review rather than a five-year review for properties because then the change in property prices is more—. I don't want to say miniscule, but it's lighter than if it was every five years. And I want to get an idea of the potential benefits and disadvantages of that.

But then, also, the legislation allows for the Minister to call for an earlier review, but also allows them to put a review back, and I was wondering about concerns there, because the concern there that has been highlighted is that council tax revaluation is a contentious issue and, as Carolyn mentioned earlier, we had it 20 years ago, and then England were meant to follow, but, because of the impact it had in Wales, they never did. And that was a political decision. I just wanted to get your views on that, really.

And a final question I have, then, if it's okay, again links to the five-year revaluations: what sort of additional funding are you looking at, or support do you expect from the Government to help with that? Because I know—. We had the valuation office here earlier, the costs for them could be anywhere from £12 million to £15 million, but could also be up to as high as £18 million. I just wanted to get your views on that.

Okay. I'll start with this one then, then I'll hand over. So, I think speaking to business rates, non-domestic rates, as you've just mentioned, so we've got the argument for a regular revaluation, and I think the arguments for and against it are quite just. So, with more regular revaluations, the property values are up to date, the tax base appears more transparent, and there's that clear, visible link between what your property is currently valued at and the relevant banding that you're put in. If it becomes a regular and established system, it should result in fewer appeals from taxpayers because they're seeing it following the property market, which we know goes up and down on a periodic basis.

Similarly, I think the power to amend the timings is needed, because a regular revaluation might actually be ineffective. If you've got a long-term period of stability on the house market, it could just be a whole undertaking for negligible benefit. I accept that in moving forward, though, that we could have improvements in technology that enable the Valuation Office Agency to revalue properties at a much speedier and more cost-effective method. It's certainly not the process that was achieved ready for the inception of council tax in 1993, where you had to drive around a street and look at the properties. We have got lots of online tools looking at property values.

We think that it's sensible that there's the provision there to amend the timings between revaluations, but I think the fact that we're looking at this now—. We've got a tax base, as you've mentioned, that's based on 2003 property values, effective in the 2005 revaluation. So, we're not starting from a stable footing anyway, if we'd gone through a revaluation and now want to put it on. So, I think we're mindful of the fact that we know that whenever we start a process of revaluation, there's going to be turmoil for ratepayers, because there's going to be change. They haven't had a change since the 2005 revaluation. And you notice that England stepped away from doing their revaluation, and our colleagues in Scotland are looking at some amendments to the higher bandings only. I think it's a bold step for us to be looking at a revaluation and bringing it up to date. There has been a huge change in the property and economic markets since 2005, and I think it's only fair that that is reflected.

Looking at what the long-term costs of it could be, though, the estimates in the impact assessment in the explanatory memorandum are very thorough, and there's been lots of engagement with local authorities. But I guess the difficult point from a local government association perspective is that we've yet to start a process of revaluation. So, we need to know what the turmoil and the fallout is going to be from the first one before we can measure it, moving forward. It will obviously be the worst one, because bringing any property value up to date over 20 years is going to have a significant impact on all taxpayers, whether positively or negatively. So, moving forward, we think that the intention to establish a regular process and then allowing that timing so that, if it actually is not needed—we could have a 10-year period of economic stability, but maybe I'm optimistic there—you don't have to go through the process then if it's not needed, and it'll just cause an additional expense.

I don't know if, from a local authority perspective individually or from Councillor Morgan's perspective, if you want to add anything to that.

12:15

Yes, thank you. I think two reflections from me. One is that it is always a courageous decision to look at revaluation. No-one's denying that, and I think it's to the credit of Welsh Government that they are contemplating this. People are much more conscious of property values these days, with the availability of information. There's a near-obsession with property prices in some parts of the UK—perhaps not quite so striking in Wales, but nonetheless, people are very mindful and aware. And I think the knowledge that a more regular, more frequent valuation would be the norm would be welcomed by most residents. 

I do agree with the point that, if there's a very, very good reason for not holding that five-yearly review because of very unexpected stability, then that provision would be helpful. But, yes, I think this is a courageous and appropriate move that's being proposed in this legislation. 

I suppose this brings me on to a last question in terms of local authorities budgeting for it. Have you been given an idea of the cost implications that this will have for you? And do you need or do you expect there to be more money coming from the Welsh Government to be able to help to implement all of this?

I think, on the first point on the revaluation, if we proceed with, for example, a planned 2025 revaluation, if that's to happen, we are aware that that's going to cause significant turmoil, because every ratepayer will be affected. It's 20 years. So, we need to factor in what that costing will be, and we would expect that to be adequately resourced. Similar to non-domestic rates, as it becomes more regular, the costs then balance out because ratepayers are used to it—and they're expecting a change because it's going to be reactive to markets. But from a costing perspective, yes, we are aware that the first stage, which is potentially a 2025 revaluation, will be quite costly because we will deal with hundreds of thousands of queries from taxpayers disputing the value of their property, and they'll come to the local authority first before they start the formal appeal mechanism.

12:20

Yes. And if I can just add, the other factor that may well be impacted is the council tax collection rate. If people are going through a process of challenge and then potentially appealing, then they may withhold payments during that period, so that could have a financial impact on councils as well. So, it's just something to bear in mind.

Diolch, Cadeirydd. If I could just touch on, for a moment, council tax reduction schemes. In the Bill, there's a proposal to move to a more national system. Is that a good idea?

Yes, absolutely. Local authority benefit departments have been pushing for this for a number of years. As we know, the council tax reduction scheme replaced the abolished council tax benefit. What we find at the moment is because the existing regulations are bound to a specific financial year, they can't be reactive. You can't refer to any change. The current process is that the regulations are laid in December, approved in the January, a council has to adopt their scheme by 31 January of that year ready for the April implementation. No change can take place once that has happened. Conferring the duty on Welsh Ministers will allow them to respond to crises and national emergencies. We've seen, unfortunately, too many of those over the last three or four years and the regulations could not respond. We had the pandemic, the situations in Afghanistan and again in Ukraine. We had to ask local authorities to use their discretionary powers to support people affected because the regulations couldn't be changed because they are time-bound for that year. And from the local authority perspective, it actually removes the requirement for them to do an annual consultation on something that doesn't necessarily change from year to year, but it's part of the process. So, it's actually a change that has been requested by local authorities; it benefits the—. Currently, we've got just under 270,000 households that benefit from the council tax reduction scheme; this actually does support those even better moving forward because the regulations can be changed to react to a situation.

So, I imagine Lisa's view is reflected with Matthew, Susan and Robin. So, unless you want to come in on anything additional there? No?

—I would agree with Lisa's comments on that issue.

No worries. Thinking about section 20 of the Bill, so, this publication of notices, is the provision to move to publication of notices in a digital way welcome as well? We can assume that there are cost savings there because there's no need to publish in newspapers.

Yes. I mean, the requirement's always been to publish in at least one local newspaper, but I think we are all mindful of the fact that printed media is in a different position in 2024 than it was in 1993, at the outset of council tax, with a reducing number of local newspapers in circulation. We note that the cost savings are relatively low in respect of removing this requirement. I think that in the explanatory memorandum the cost is about £33,000 per year across Wales. So, it's a low saving, but, unfortunately, we don't actually know how many people read the paper either and are picking up that information. So, local authorities always do put the information online as well, as supporting.

But we want to add a note to this point that we feel that some local authorities may wish to continue that approach as well, and we wouldn't want any change in the Bill to preclude them from doing that. It's what best suits their communities. And local authorities, as Matthew can expand on from a Rhondda Cynon Taf perspective, know how to reach their residents. And there will be some communities—we've all got them, you know, where we live—that still rely on the local paper. So, getting that information, you know, it's a way of actually ensuring that the information has gone there.

So, we kind of agree with, you know, there is no longer the requirement, but we wouldn't want it to be actually, you know—. It's the local authority decision, it's what best suits providing information. They have to provide the information in accessible formats and ensure that people who aren't digitally included can get that information, and sometimes the local newspaper is still the best way for doing it. But, again, we accept that that is a local authority decision for what works best within their area.

12:25

So, essentially, flexibility to do what is suitable for whatever local authority area is going to be important. I was going to follow up with a question, just roughly, around the cost savings and whether the impact, then, that that potentially could have is essentially worth it, but I know, obviously, you've referred to it in your answer already that we don't actually know how many people are reading those adverts in the first instance, so an impact assessment, I imagine, is very difficult to make.

Yes. We could only actually say, 'Well, this is what it costs actually putting the notice in the paper,' because that's the only tangible cost we can extract there. What we don't know is how many of the circulation of that newspaper actually read that article and possibly questioned it afterwards. As we say, we'd like the flexibility that it can be retained if the authority feels that's the best way in their area to provide additional supporting information.

So, I imagine with the duties that are within the Bill then, to publish in a way that those who might not have access to digital means can still see it, local newspapers could still be in the mix there. Are there any other ways in which you would look to meet that requirement or duty?

I think it's probably important to note here that the notice that we are referring to is the notification of what the council tax will be at a band level and community level, which is provided within the council tax bill itself, as well—supporting information in with the bill. From the point of view of the statutory notice, within Rhondda Cynon Taf we used to have, and well, we still do have, local papers, but we used to publish the notice in three papers. We changed that approach a number of years ago now, just to put it in one, into the Western Mail, for example, so we've streamlined that as it was, and put the information online as well. So, we're touching both bases, really, and always have done.

So, in essence, in reaching the sort of duties placed to ensure that people without access to digital can still see those valuations, not much is going to change there, really. The only change here is that additional, digital requirement.

Matthew Phillips 12:27:25