Wales considers 25% income tax cut to tackle rural depopulation and ‘brain drain’

The Welsh government is considering introducing tax cuts to stem the tide of people leaving the country, especially from rural areas, and to preserve the Welsh language.

Inspired by Spain’s Castilla-La Mancha, where rural residents are offered a 25% income tax cut, the Welsh-speaking Communities Commission has recommended a similar approach to boost economic and social activity in parts of Wales affected by population decline. The commission, set up in 2022, argues that such tax incentives could help prevent young people leaving, which would support the economy and the survival of the Welsh language.

A recent survey showed that 81 per cent of young people in West Wales feel the need to leave rural communities to further their careers. Ben Lake, Plaid Cameron MP for Ceredigion Preseli, recently raised concerns in the House of Commons, warning that population decline was causing “public services to collapse” in parts of Wales.

More than 200 rural areas have seen their populations fall over the past decade, with many young people moving to England. To reverse this trend, the committee suggested the Welsh government explore financial incentives similar to those in Castilla-La Mancha, where residents receive large tax breaks to encourage them to stay. In Wales, such a policy would abolish income tax for basic taxpayers and provide significant savings for high earners.

However, tax experts have raised concerns. Chris Etherington, of tax consultancy RSM, pointed out that while tax cuts may be a driver, there is limited evidence to show they are effective in preventing population decline. Rachel Griffin, a tax expert at wealth management firm Quilter, warned of potential “unintended consequences”, such as complications related to pension relief and the potential for property prices to rise if wealthier individuals are attracted to the area.

The Welsh government has yet to make a decision on the committee’s 50 recommendations, which aim to tackle out-migration and strengthen rural communities. A government spokesman said they were studying the findings and would respond in due course.