Magazine article Public Finance

Unwelcome in the Hillside

Magazine article Public Finance

Unwelcome in the Hillside

Article excerpt

It's a rare revolution that starts in Wales, but here's one that could have profound implications for the rest of Britain.

Perhaps not since Owain Glyndwr stormed across the Welsh Marches in 1400 to challenge English rule have events in Wales threatened such an upheaval.

It is, admittedly, a long way from the brave Owain to the 2005 council tax rebanding revolution, but this one might just set the government in England rocking too.

The two-year process of revaluing every property in Wales began, with very little fanfare, in 2003, master-minded by the Valuation Office Agency - a division of the Inland Revenue army - and with the active participation of the Welsh Local Government Association.

Two years on, on April 1 this year, all property owners in the principality found themselves recategorised in an updated set of nine council tax bands, rather than the previous eight.

Almost exactly a third of them discovered that their property had been ratcheted up by at least one band, according to the revised valuations, and were consequently facing steep rises in council tax.

And then the screaming started...

WLGA leader Alex Aldridge said: 'We accept that it is right that the council tax people pay reflects a more up-to-date valuation of their homes. But we are very aware of the impact on a significant number of homes which have seen exceptional increases in value in recent years.'

On the same day, a similar process began in England. This revaluation should be complete in time for the new categories to come into effect on April 1,2007. Government ministers are already dreading that day.

In Scotland, by contrast, joy was (relatively) unconfined when First Minister Jack McConnell announced on May 13 that revaluation would not take place - at least until the Holyrood elections in 2007.

He's not daft. The rumbling had already begun north of the border. Those active in Scottish politics have not forgotten that previous revaluations, especially the one held under the old rating system in the mid-1980s, have been intensely controversial. So if the Scots are running scared of revaluation and the English are parking it for a year or two pending Sir Michael Lyons' review of local government finance, what of Wales, where the revolution has actually happened?

The task facing the VOA was immense. The agency takes account of the size, age and character of the property, as well as the area it is in, and uses sales price data from around the valuation date to arrive at the correct band for the property.

The last full-scale revaluation was carried out in the wake of the poll tax revolt and the inception of the council tax. Since then property prices have rocketed, especially in the more desirable areas, and the population structure of Wales has changed markedly, as pits and old industries have wasted away, replaced by a more service-based economy.

The process, begun in 1991, was implemented in April 1993. Thus the tax bandings were based on 1991 valuations, as they still are in England and Scotland.

After long consideration, it was concluded that the existing eight-band system was too restrictive to cope with the broader range of property values, and a ninth band, for properties valued at more than £424,000, was brought in (see table).

The end result was that 58% of properties remained in the same band, just over 33% went up by at least one band, and only about 8% - including 100,000 properties in the Valleys - went down.

But, inevitably, there were spectacular valuation changes in some of the more prosperous areas. In Cardiff, 64% of properties were uprated; only 2% went down. Wrexham (52% up), the Vale of Glamorgan (44% up) and rural Monmouthshire (41% up) were among the hardest hit. Plaid Cymru Welsh Assembly member for Caernarfon Alun Ffred Jones claims to have two constituents whose properties have been moved from Band B to Band F, taking their annual council tax bill from about £650 to £1,200. …

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