Welsh Government has the powers to reduce crisis poverty – now

Attention has rightly turned to basic income as a way of ensuring financial security for everyone during the pandemic and resulting deep economic recession. Facing the prospect of shattered livelihoods and disappearing incomes, we have seen the UK Treasury make guarantees to business in the form of an 80% wage subsidy, rate relief and various other massive sums of money. A basic income would bail out the people directly and is one of Undod’s key demands. Issues like how a basic income interacts with the social security system are less important when it is a short-term and temporary measure (it would be paid out on top of all currently received benefits in this case).

However, it is clear that in the short-term these kind of game-changing amounts of money can only be mobilised at the British state level. And quite literally, the Welsh Government is prohibited by the UK from creating new social security payments – although it should be noted that the Welsh Government has not called on the UK Government to introduce basic income in any case. We must obviously press for the welfare system to be devolved to Wales so that extra gains can be won here.

As an immediate alternative though, the Welsh Government has full control over council tax. It controls all aspects of the tax including bands, rates, property valuations, council tax benefit, and collection. This is why to its partial credit, the Labour Government in Wales has changed the enforcement regime to get rid of imprisonment for non-payment of council tax.

Council tax is obviously a local tax intended to fund local government. It is not ideal as a national tool to protect people from impoverishment. But in a pandemic situation we can’t be picky. Council tax is the single devolved tax most likely to impact on people’s finances. Also, compared to income tax, it is difficult for the wealthy to avoid as it is a tax on property.

The absolute most vulnerable people in Wales are of course already helped with their council tax through the Council Tax Support system. But the tax still captures a great deal of working households, people in poverty, and especially the working poor.

The following steps or a combination of some of them could be undertaken by the Welsh Government instantly. The budget situation appears unclear at the moment. For context, the equivalent of a whip-around (‘reprioritisation’) within the existing Welsh budget raised about £100m. We cannot cost all of these suggestions without the kind of information that civil servants have access to. But something needs to be done.

The Council Tax Support system could be used to issue a crisis payment to households in Wales – either as a blanket payment or as a payment restricted to the most vulnerable households. The current support system costs about £270m. Would an extra £100m make a transformational difference? It would presumably be possible to lift a great number of people out of paying council tax for say between six months and a year.

Suspending council tax for the third of properties that are in the bottom two bands would, at a rough approximation, cost £500 million. However, doing so would also free up significant funds from the Council Tax Support system to target those in need in higher banded properties.

Outstanding council tax debts in Wales, amounting to £94m in 2018 according to this report could be written off. There should certainly be a memorandum issued to all local authorities to suspend all aggressive enforcement for the foreseeable future, only chasing council tax owed from the highest-banded properties (an imperfect measurement but one which mostly captures people with wealth and assets).

A progressive or radical Welsh Government might look to freeze or reduce the council tax bills of specific people in society – people with disabilities, some types of self-employed people, or people who have been made redundant or had a pay cut as a result of the pandemic (some of this would have to be self-reported). What about freezing or suspending council tax for all of those who are registered as mutual aid volunteers with either their local authority or with a community group?

Council tax brings in perhaps £1.8bn per year and while we do not have the capacity to fully cost specific proposals, clearly targeted actions within that number should be affordable in a time of emergency.

Perhaps these demands will be called unrealistic. But the clock is ticking, and new council tax bills are hitting doormats and inboxes across the nation. Along with action on private renters, this is a devolved area where a socialist government could make a genuine difference to people’s lives, proving that self-government is better for working class people than Westminster control.

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This is a companion discussion topic for the original entry at https://undod.cymru/en/2020/04/02/tlodi-covid19/