Does my Council Tax bill add up?

As Council Tax rises again, people in some parts of Wales will pay £500 more per year than others, even though their homes are worth around the same. How are our bills worked out, and what’s the money spent on?

A Major undertaking

Thirty years ago, in 1991, an army of civil servants and contractors began the mammoth task of recording the value of every house and flat in Britain. With a general election looming, John Major’s Conservative government was keen to come up with an alternative to the deeply unpopular Community Charge.

The poll tax, as it was widely known, had only been introduced in England and Wales a year earlier, following its introduction in Scotland. It had provoked riots in London as well as a widespread campaign of non-payment, and played a big part in the downfall of Major’s predecessor, Margaret Thatcher.

The poll tax’s most controversial feature was that every adult in an area would contribute the same amount towards council services, regardless of their income: "Why should a duke pay more than a dustman?" asked the government minister who introduced it.

The replacement scheme, Council Tax, would return to basing local taxes on the value of people’s homes. Throughout 1991 and 1992, using pre-internet methods like drive-by inspections, collecting estate agents’ particulars and consulting records of house sales, valuers sorted residences across the land into eight groups, called bands, to determine how much tax was due. Residents of the least valuable homes, in band A, would pay half as much tax as those in the most valuable homes, in band H.

30 years on, homes in England are still sorted into these eight bands, based on what they would have sold for on 1 April 1991. In Wales, properties were revalued in 2003 and a ninth band for the most expensive homes was added.

Every year, Wales’s 22 councils set their council tax level for band D properties (homes worth between £91,000 and £123,000 in 2003), and the other bands are calculated as a proportion of this rate. Comparing band D rates across the country over the past 25 years uncovers some – perhaps surprising – trends.

Poorer areas often have higher council tax rates…

Some of Wales’s most deprived areas have the most expensive council tax: Blaenau Gwent has set the highest rates every year since 2007, one of five former industrial communities in the South Wales Valleys currently at the top of the list. Meanwhile relatively prosperous Pembrokeshire has had the lowest council tax levels since 2006.

Cardiff has consistently remained in the lower half of the rankings, while nearby Newport has stayed in the bottom three for the last quarter-century. In 1998 and 1999, Monmouthshire had the lowest council tax levels in Wales, but in the early 2000s the county rose in the rankings and has remained in the top half of the table ever since.

...but residents of wealthier areas usually pay more

Comparing rates for one tax band in different parts of Wales doesn’t tell us how much residents in each council area actually end up paying. That depends on which tax band their home is in, which in turn is dependent on the types of houses and flats, and house prices, in the area.

Although Blaenau Gwent has the highest rates of council tax in Wales, house prices there are low: four out of five homes (83%) are in the bottom two council tax bands, A and B. This means that typical bills are among the lowest in the country.

Meanwhile in Monmouthshire, where property is much more expensive, more than half the properties (53%) are in the top bands, E to I. As a result, typical bills are much higher.

To compare typical council tax bills between councils, we can look at the central band for each area. This is the mid-point where half of local households are in this band or below, and the other half are in this band or above.

On this basis, the area with the lowest typical bills is Caerphilly, where the mid-point tax band is B, with households charged £1,193 per year. Monmouthshire residents typically pay the most council tax, with households in the mid-point tax band (E) charged £2,183 per year.

Councils can’t get by with council tax alone

In Wales, council tax revenue only contributes between 20% and 40% of councils’ day-to-day revenue, with wealthier areas able to raise bigger proportions.

Business rates, locally-raised taxes on commercial property, provide around 16% of council funding. The rest comes from the Welsh Government, using its grant from Westminster, where the funds ultimately come from taxes paid across the UK like VAT and Income Tax, as well as from borrowing.

What do councils spend money on?

Some of the most visible, near-universal services councils provide are are roads, refuse and recycling. But in budgetary terms, these are only a small part of local authorities’ work: together they represent about 7% of council spending.

By far the largest proportion of council expenditure is on caring for the youngest and most vulnerable sections of society. Welsh councils spend nearly 40% of their budgets on running the school system, while 27% is spent on social services (including looked-after children, care for the elderly and people with learning disabilities). 13% is spent providing housing and housing benefit payments.

Councils and COVID

Many of these most expensive services are mandatory, meaning councils are obliged to provide them. Another is public health, which has put huge pressure on councils since the start of the coronavirus pandemic, both operationally and financially. Over the last year, the Welsh Government has provided extra funding to councils of nearly £500m to cover their additional costs and lost income caused by COVID-19.

Councillor Huw David, presiding officer of the Welsh Local Government Association, said:

“Our councils reprioritised, restructured services and redeployed thousands of staff overnight. Like never before, the government and our communities have turned to us and relied on us.”