In addition to the previous post on tourism I also put out a message on Twitter and Facebook last week reminding people that Gwynedd Council was consulting over whether, or by how much, to raise council tax on holiday homes. The ability to raise council tax on second homes and empty homes being just one of a number of changes we can look forward to in the housing market.
Holiday homes also face the possibility of higher Stamp Duty Land Tax when this is devolved in April 2018. (As do Buy-to-Let properties.) Or rather, from that date, we shall see Stamp Duty replaced with a new Land Transaction Tax, to bring Wales into line with the Scottish and UK governments. There was a consultation process, but few responded, seeing as it was not well advertised and ran from July 13 to the end of August.
High summer is an odd time to hold a public consultation process, but while the rest of us were sipping mint juleps and humming Summertime, you can be sure that the organisations representing holiday home owners and private landlords were beavering away ensuring that those they represent had their concerns noted.
Another change is that the ‘Welsh’ Government is now empowered to introduce a tourist tax of the kind found across Europe in cities and regions experiencing large numbers of tourists, with the money raised then used to fund those local services that tourists use but otherwise would not pay for.
Taken together, and implemented imaginatively, as an integrated system, these changes could have wide-ranging and far-reaching implications, all of which would be beneficial to the national interest. Let’s look at these measures in a little more detail.
COUNCIL TAX ON SECOND HOMES
This is an issue that provokes a great deal of debate and passion, and tends to divide people along rather predictable lines. For example, how many second home owners will support increasing council tax on their properties? And how many of those attending one of the regular Meibion Glyndŵr Reunion Dinners (black tie affairs) will argue for anything less than a 500% increase?
A great deal of nonsense is talked in defence of second homes. Here are some of the arguments we’ve heard ad nauseum over the years.
‘To raise council tax on holiday homes in Wales would be racist’. Which is one way of confirming that they are overwhelmingly English owned.
‘Holiday homes put a lot of money into the local economy’. Which wants us to believe that a property lived in for two or three months a year puts more into the local economy than that same property would if lived in permanently by a local family.
‘Nobody else wanted to buy it’. Of course not, you conducted a comprehensive local survey, didn’t you?
‘People would stop coming here’. Why? And as I say, holiday homes often put little into the local economy. Something brought home to me a few weeks ago as I was a-sauntering through Aberdyfi.
A builder crossed the road and asked, ‘Are you Royston Jones?’ Despite not knowing him, and being unsure of his position, I nevertheless answered in the affirmative. After which he introduced himself and we discussed this and that. He’d been in school with my kids and he seemed an easy-going sort of bloke until, while discussing holiday homes, he made it clear that one thing that really pissed him off was holiday home owners bringing in tradesmen from their home area, rather than giving work to locals.
I knew exactly what he was talking about. My wife looks after a holiday home in our village for a family from the East Midlands (she has done for a few decades). Earlier this year there was a builder from the same area working on the property for months, and living in it while he worked. So here we had an example of local tradesmen denied work and local B&Bs denied business.
There is no doubt that raising council tax on holiday homes would encourage some owners to sell and deter others from buying. And the greater the increase then the greater the encouragement/deterrent. More importantly, increasing council tax on holiday homes would bring more properties into full-time use, and this would lead to more vibrant towns and villages, because shops, pubs and other facilities struggle to survive in communities with too many properties empty for most of the year. And this is not just a Welsh problem.
Consequently, there is no sensible or rational argument against raising council tax on holiday homes across Wales, which is why opponents of such moves are forced to employ absurd arguments. Here are a couple of examples that the Cambrian News (where else?) carried some three years ago, when the subject of council tax on holiday homes was being discussed. (Click to enlarge.)
According to Eric Richards of Aberdyfi, second homes are essential to the local economy. He seems to believe that a property ceasing to be a holiday home would remain empty and fall derelict. Another blind spot is failing to understand that Aberdyfi is not representative of Gwynedd. The economy of Bangor – the largest settlement – is based on higher education, administration, the retail sector, etc. The economy of north Gwynedd as a whole would hardly notice a doubling of the council tax paid on holiday homes.
While ‘Pat Beaumont’ believes that increasing council tax “borders on racism”, and might result in “property burning starting again”. Quite how tackling the problem of holiday homes would lead to “property burning” is not explained. Does the writer envision an arson campaign being waged by those feeling aggrieved because they’ve sold their holiday homes to locals?
LAND TRANSACTION TAX (FORMERLY STAMP DUTY)
The new Land Transaction Tax (from April 2018) offers another tool with which to reduce the numbers of holiday homes, or certainly to tax sales of holiday homes and invest the funding gained in the wider community. Of course there are issues to be resolved, fine tuning needed here and there, but a feel for the issues involved can be found in the Summary of Responses (to the consultation process).
As I suggested in the Introduction, those in the know, the property professionals and the business associations, made sure their views were known. The Summary tells us there were six, formal written responses, and these came from:
1/ Chartered Institute of Taxation and Stamp Taxes Practitioners Group
2/ Residential Landlords Association
3/ National Association of Estate Agents
5/ Central Association of Agricultural Valuers
6/ Wales Association of Self-Catering Operators
I bet you didn’t even know there was a Chartered Institute of Taxation and Stamp Taxes Practitioners Group (and it is ‘Chartered’, not ‘Charted’, as it says in the Summary).
Many of these organisations of course operate within an Englandandwales framework, which explains their wish that there “should be ‘only one rate throughout the UK’.” Though I suggest that the ‘Welsh’ Government be guided by what’s best for Wales, not what’s convenient for the National Association of Estate Agents.
The current Stamp Duty does not apply to the following categories: property purchases of £40,000 or less; caravans, mobile homes and houseboats; non-residential transactions; employer provided accommodation; and certain purchases of leasehold interests subject to specified conditions.
Seeing as those responding to the survey were asked if they agreed with these exceptions it’s reasonable to assume that these are not set in stone. Which would mean that it’s within the powers of the ‘Welsh’ Government to reduce the threshold to £10,000 or less and apply the new Land Transaction Tax to the sale of static caravans.
Another imaginative use of the new Tax would be to reduce the numbers retiring to Wales, or certainly make retirees contribute more to the country in which they plan to spend their declining years. There is nothing heartless or racist about this, it’s pure economics.
Everyone – and here I really do mean everyone – agrees that the ‘advanced world’ is facing a demographic time-bomb with its ageing population. With a decreasing percentage of the population in work, paying the taxes needed, it becomes more and more of a burden on the national purse to support the growing numbers of elderly people.
Therefore, any country or territory attracting elderly people from outside of its borders has problems. Any country actively encouraging another country’s older people to move in is behaving irresponsibly.
Yet in Wales, this is exactly what we do, by allowing, even encouraging, the building of tens of thousands of new properties in rural and coastal areas that planners – and here I include the Planning Inspectorate – know will not be bought by local people, some of them will even be marketed over the border as ‘retirement properties’. And yet politicians and civil servants refuse to publicly admit what they all know – attracting large numbers of elderly migrants inevitably results in an overburdened health service and other issues.
I know I’ve used this example before, but it explains perfectly what I’m talking about. In the area where I live, south west Gwynedd between Barmouth and Aberdyfi, the 2011 census told us that the 65+ age group makes up 30.1% of the population. And within that age group 65% was born in England.
The figure for the percentage of the population in the 65+ age group is 20.7% for Gwynedd as a whole. For Flintshire it’s 17.6%. For Cardiff 13.2%.
This is not natural. This is not sustainable. This is a recipe for disaster for our health service and our wider economy. Unless of course you believe that retirement homes and the like, paying the minimum wage or less, can be the foundation for a healthy economy.
A partial remedy lies in applying a higher level of the new Land Transaction Tax – why not double? – to persons over the age of 50 moving to Wales who have never previously lived here. The extra funding could go straight into the Welsh NHS.
As I’ve said above, tourist taxes of various kinds can be found around the world and, increasingly, across Europe. This article from lovemoney.com explains the tourist taxes you can expect to pay in a variety of countries. If we look at the figures for Italy we see that – as in other countries – different cities and regions charge different rates. Rome charges €6 a night to stay in a four-star hotel whereas Palermo, on Sicily, charges just €2. Florence charges €2.50 a night for self-catering, Milan charges nothing.
There is no reason why Gwynedd couldn’t charge £2 a head per night for self-catering, including static caravans, but Merthyr, or some other area wanting to attract more visitors, could decide against any charge at all. The system across Europe seems to be left to local authorities to decide and it could be the same in Wales.
The Bevan Foundation discussed the issue in February and said, “We suggest that a tourism tax should operate in Wales as a per night charge on hotel room and holiday park stays, capped at seven nights. The tax would be collected and managed by local authorities, and the money raised would be allocated to fund local authority and police services.”
For once I find myself agreeing with the Bevan Foundation (God!), the money raised by a tourist tax must stay within the area where it has been collected and used for the benefit of the local people, the majority of whom derive no benefit from tourism. The money raised must not, as the tourism operators will demand, be spent on encouraging more tourists.
And as for something else we’ll hear –‘This will drive people away!’ The continental experience is that it doesn’t. It’s just a small surcharge that ensures tourism puts something back into the communities it affects. The greater that effect, then the more that should be put back. (And with the post-Brexit pound plummeting and hard times ahead, now is the ideal time for Wales to introduce a tourist tax, ready for the 2017 season.)
With a co-ordinated strategy using legislation already in place or soon to be enacted we could achieve a number of what I consider to be desirable objectives:
- By increasing council tax on second homes, and also using the new Land Transaction Tax, we could greatly reduce the numbers of holiday homes and make the dwellings released available to the wider community.
- By applying the Land Transaction Tax and a tourist tax to static caravans, but exempting serviced accommodation, we could take the first step on the long road to removing the hideous caravan sites that mar our coastlines and replacing them with hotels and other establishments that will provide more jobs and put more money into local economies.
- By applying the Land Transaction Tax (and perhaps Council Tax) selectively to retirees we could reduce the pressures on the NHS and various services in many parts of the country. Again, this could be done by district. For example, increase the LTT for those wanting to retire to Pembrokeshire and Conwy, but not to Wrexham and Neath Port Talbot.
There will of course be obstacles to making any of this happen.
To begin with, there will be those who’ll argue, ‘Oh, but caravans and care homes are the basis of our local economy’. If anyone really believes that then what they consider to be ‘the local economy’ is no better than living in the shadow of a big house, surviving off scraps and cast-offs, and constantly being lied to about ‘generosity’.
Yet the defenders of caravan sites and care homes will not all be beaten and brainwashed, for some people make a lot of money from them. These will not give up easily. There will also be well-connected interests opposing Wales using the Land Transaction Tax, council tax and tourist tax in her own interests.
Finally we can guarantee opposition from the ‘Welsh’ politicians in London, who see their role as opposing anything that might benefit Wales . . . if there’s the remotest possibility it might harm England’s interests. Also the civil servants in Wales, advising our Assembly and ‘Welsh’ Government, but answerable to London. And with so many senior officers in local government having no loyalty to Wales we can expect hostility from that quarter too.
It will be an uphill struggle to change a system that has been in place for centuries in order to start running Wales in the interests of the Welsh. The tools are available; it’s now a question of having the will, the courage, to use those tools.
But it must be done, because living in the shadow of the big house has never served our interests. And nowadays, the big house is not what it was; cracks are appearing and they’re struggling to pay the bills. They’ve also started drinking, shouting at the neighbours and anybody else who comes too close.
It’s time to put up a little fence, nothing too intimidating, just enough to make them understand that this side of the fence belongs to us. They’re still welcome to come . . . but on our terms.
♦ END ♦