The Welsh Government is considering introducing tax breaks to stem the flow of people leaving the country, especially from rural areas, and preserve the Welsh language.
Inspired by the Castilla-La Mancha region of Spain, where a 25 percent income tax reduction is offered to residents of rural areas, the Commission for Welsh-speaking Communities has recommended a similar approach to boost economic and social activity in the affected parts of Wales. through depopulation. The committee, which was set up in 2022, argues that such tax incentives could help prevent young people from leaving, which would support both the economy and the survival of the Welsh language.
A recent survey found that 81 percent of young people in West Wales feel the need to leave rural communities to advance their careers. Ben Lake, Plaid Cymru MP for Ceredigion Preseli, recently raised concerns in the House of Commons, warning that depopulation is causing a “collapse of public services” in parts of Wales.
More than 200 rural areas have seen population declines over the past decade, with many young people moving to England. To reverse this trend, the committee suggested that the Welsh government could explore financial incentives similar to those in Castilla-La Mancha, where residents are offered significant tax breaks to encourage them to stay. In Wales, such a policy would eliminate income tax for basic rate payers and provide significant savings for higher earners.
However, tax experts have expressed concerns. Chris Etherington of tax consultancy RSM noted that while tax cuts can be a motivator, there is limited evidence to show they are effective in preventing depopulation. Rachael Griffin, a tax expert at asset manager Quilter, warned of potential “unintended consequences” such as complications with the tax cut for pensions and the possibility of rising property prices if wealthier individuals were attracted to the area.
The Welsh Government has yet to make a decision on the commission’s 50 recommendations, which aim to tackle immigration and strengthen rural communities. A spokesperson said they are considering the findings and will respond in due course.