Wales first minister defends raising council tax for second homeowners

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Second homeowners in parts of Wales face paying up to three times the usual rate of council tax under new laws set to be introduced in April, in a move designed to make it easier for local people to buy their own property.

The devolved government in Cardiff is poised to allow local authorities to introduce the heavier levies on second homes in an effort to deter landlords.

First minister Mark Drakeford told the Financial Times that the policy was designed to address the “anxiety” of Welsh first-time buyers priced out of the market in the place they were born. “It’s not because of wanting to be nasty to people that have second homes,” he said.

Drakeford’s comments came as the Welsh government proposed making a one-off payment to NHS staff in the principality worth about £1,000 for the 2022-23 financial year, in an effort to end strikes by healthcare workers, according to people briefed on the matter.

The new council tax policy, among others, shows how the Welsh government — led by Labour in an informal pact with the nationalist party Plaid Cymru — is taking an innovative approach to fiscal matters.

In line with research by officials suggesting a high concentration of second homes in beauty spots including Snowdonia, Drakeford said “the northwestern and western seaboard of Wales [will be] where those issues are the most concentrated”. “Different councils will use a different combination of new powers available to them,” he added.

Welsh First Minister, Mark Drakeford © Francesca Jones/FT

The London government is about to give English councils the power to double the council tax rate for second homes through its new “levelling-up” bill, aimed at reducing regional inequalities, which would bring it in line with Wales’s previous stance.

“We are trying to preserve the character of those areas . . . if you visit a ghost village, because there is no one living there any more, all the things that made it worth visiting there will have been eroded,” said Drakeford.

At the same time, landlords of “self-catering” properties will have to show that they are being let out for at least 182 days — up from 70 days — a year to continue to receive small business rate relief and avoid paying council tax.

In a separate move, the Welsh government will within the next year bring in a “tourist tax” policy, under which councils will be able to charge visitors to designated areas.

Drakeford said the tourist tax would be a “modest” fee of a couple of pounds for councils to enhance local areas, adding: “It will be hypothecated to the broad purposes that local authorities discharge that make an area attractive to tourists.”

He conceded that he had held “robust” discussions with tourism executives but stressed the policy would “do good for the industry”. “My message to them is that they should get involved and help us to shape this idea.”

Drakeford has also promised a “fairer” council tax system via an imminent revaluation of homes — the first since 2003 — and the introduction of new bands for more expensive properties.

“We should think of extending the number of council bands at the top,” he said. “You pay a bigger proportion of your income in the smallest house on the most modest income in Wales.”

But on income tax, the biggest revenue raiser, Drakeford has resisted calls to increase it by 1p to pay for demands such as higher wages for nurses.

Plaid’s leader Adam Price has argued that lifting income tax would “protect our public services and save lives” and defend Wales from “this Tory onslaught”.

Drakeford said there had been a “genuine debate” about the policy when in September Liz Truss, then UK prime minister, announced a 1p cut in income tax. But after she scrapped the move, he concluded the rise would be unpopular at a time of surging living costs.

“It would be naive to think you could use all that money for nurses because . . . understandably people in other parts of the public service would be looking to have the same.”

Nevertheless, Drakeford, a self-declared “proud socialist”, admitted it was awkward to be on the opposite side of the argument on pay to unions.

“My awkwardness is being a Labour first minister who has worked very hard alongside our trade union colleagues, managing strikes in the past,” he said. “It is not a comfortable position at all to find ourselves in, when so many of their arguments we believe are powerful.”

The Covid-19 pandemic saw the devolved administrations taking different approaches to lockdown restrictions, with Wales often more cautious than England.

The Conservatives, who want Drakeford — like his Scottish counterpart Nicola Sturgeon — to hold a Wales-specific Covid inquiry, have accused him of presiding over the highest death rate of the four nations.

But Drakeford rejected that claim, saying it should come with its own “very big health warning” because the data had not been adjusted for age. “Wales is older, poorer, sicker than the rest of the UK,” he said, arguing that a UK-wide inquiry was the right approach.

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