Local Government and Communities Committee

Meeting date: Wednesday, October 5, 2016

Official Report 591KB pdf

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Subordinate Legislation

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Council Tax (Substitution of Proportion) (Scotland) Order 2016 [Draft]

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Council Tax (Variation for Unoccupied Dwellings) (Scotland) Amendment Regulations 2016 [Draft]

Welcome back to the Local Government and Communities Committee meeting. We are back in public and we move to item 3, which is subordinate legislation. The committee will take evidence on the draft Council Tax (Substitution of Proportion) (Scotland) Order 2016 and the draft Council Tax (Variation for Unoccupied Dwellings) (Scotland) Amendment Regulations 2016. I welcome Derek Mackay, the Cabinet Secretary for Finance and the Constitution; Robin Haynes from the Scottish Government council tax and council tax reduction reform branch; and Stuart Foubister, who is a solicitor with the Scottish Government.

The instruments are laid under the affirmative procedure, which means that the Parliament must approve them before the provisions can come into force. Under the next two agenda items, following this evidence session, the committee will be invited to consider motions to recommend approval of the instruments.

I invite the cabinet secretary to make a short opening statement.

Thank you for inviting me to give evidence. I will begin by saying a few words about the perhaps less debated of the two statutory instruments under consideration: the one that applies to second homes.

As the explanatory note describes, under the present legislation a council may grant a discount of between 10 and 50 per cent of normal council tax liability in respect of a second home. The draft Council Tax (Variation for Unoccupied Dwellings) (Scotland) Amendment Regulations 2016 seek to extend that flexibility to allow a council also to decide to grant no discount in respect of second homes—in other words, to charge the full council tax on second homes.

In that context, a second home is defined as a dwelling that is furnished and lived in for at least 25 days in any 12-month period but not as someone’s sole or main residence. That is distinct from, for example, dwellings that have been unoccupied for more than 12 months, to which separate legislation continues to apply unchanged. Importantly, the draft regulations do not seek to alter the treatment of properties where the owner or tenant is required by their job to live elsewhere—for example, members of the armed forces living in barracks.

More than 27,000 properties are defined as second homes in Scotland. If enacted, the draft regulations would give councils additional flexibility and autonomy to address local circumstances while raising an estimated £3 million.

The draft Council Tax (Substitution of Proportion) (Scotland) Order 2016 seeks to do one thing only: to increase the amounts of council tax payable for properties in bands E to H by 7.5 per cent, 12.5 per cent, 17.5 per cent and 22.5 per cent respectively. The change would affect just over a quarter of households in Scotland and have no impact on the 1.8 million or so properties that are in bands A to D.

The change is set out in article 2 of the draft order. It would make the council tax more proportionate. Indeed, the independent Resolution Foundation report in April this year stated that the proposals would increase the proportionality of council tax. The question that is being put to the committee and the Parliament in considering the draft order is whether we want council tax to be more proportionate by requiring people in band E to H properties to pay slightly more. If the new multipliers were implemented, with the present rates of council tax, charges for affected properties would still remain on average less than the equivalent in England or if there had been no council tax freeze. The measure will raise an additional £500 million over this parliamentary session.

The draft order is, of course, not the only change that the Scottish Government proposes. The committee has representations on other measures, some of which relate to regulations that amend the council tax reduction scheme and are presently under consideration by the Social Security Committee. Other changes are non-legislative or can be delivered within existing powers.

I note that the committee has taken evidence on a number of issues that are beyond the subject of the draft order, including a lively discussion last week on how the changes might be communicated to households. However, the resolution of many of those points will be achieved through dialogue and agreement between, in the main, the Scottish Government, the Convention of Scottish Local Authorities and the local government revenue and benefits practitioner community.

The changes can be implemented in April 2017. Wider change, as some of the evidence to the committee confirms, cannot be delivered in that timeframe, for administrative or legislative reasons. For example, the powers under which the draft order is made do not extend to notification to taxpayers or funding to councils to implement the changes. However, the powers allow ministers to amend the proportions that determine the council tax that is charged on all dwellings in relation to the band E charge set by councils.

The key question to consider when assessing whether the draft order should be approved is whether we want to make council tax more proportionate by requiring people who are in properties in bands E to H to pay relatively more.

Thank you, cabinet secretary. I suspect that we will have a number of questions about the draft Council Tax (Substitution of Proportion) (Scotland) Order 2016, but first I have had an indication that there are one or two brief questions about the draft Council Tax (Variation for Unoccupied Dwellings) (Scotland) Amendment Regulations 2016. I call Elaine Smith.

Thank you for joining us this morning, cabinet secretary. Can you clarify that the draft Council Tax (Variation for Unoccupied Dwellings) (Scotland) Amendment Regulations 2016, which you mentioned first in your opening statement, recognises the importance of local decision making in the changes that are being made?

I suppose that that is fair in that it gives councils the flexibility—yes.

Thank you. I just wanted to clarify that.

A theme may be emerging here, cabinet secretary, and I am sure that we will have a lively discussion. I remind members that I am in their hands with regard to how many questions we ask, but we also have a significant period—should members wish to use it—for debates on each of the statutory instruments.

I thank you and your colleagues for coming, cabinet secretary. Your proposed change to council tax has been linked to the attainment fund. Which came first—the idea of the attainment fund and how to fund that, or a desire to reform council tax?

I suppose that that is a more difficult question for me to answer, in that I was not the cabinet secretary at the time when the statement was given about the council tax approach, which then went into the preparation of the manifesto that was presented to the public. However, the First Minister outlined our response on local taxation earlier in the year. I think that both are important to Government—reforming local taxation and targeting resources at tackling the attainment gap that exists.

I am right, though, about the money that is raised from council tax, am I not? I know that you will say that councils will keep all that money, but you will reduce the grant. Councils will get the money, but it will be used for the attainment fund.

I answered the previous question as accurately as I possibly could and I will do the same with the question about the resource. You are asking how the revenue will be raised. The multipliers will generate more money for local government, and it is with that knowledge that other decisions can then be made about the wise use of resources. However, it remains the case that every single penny that is raised by council tax, including through the multipliers, will stay with the local authority.

The method of local government funding and distribution is a matter that is agreed with local authorities. I was previously on a distribution and settlement group within local government, and that was an interesting and challenging experience. However, it remains the case that every penny that is raised in council tax will stay with those local authorities, and any further mechanism will be through the budget and the revenue support grant, as has previously been explained in the chamber.

Mr Simpson, I have had bids for supplementary questions on the subject from Mr Gibson and Mr Stewart, but you can follow up on that if you wish.

Thank you, convener.

A lot of the evidence that the committee has received has been about local accountability. Essentially, the policy is being introduced to raise money for a national priority. There is great concern about that in local government, and that has been reflected in the evidence that we have had. How do you respond to that?

I think that some people have suggested that we are clawing council tax money away from councils, but we are not. Local authorities will keep every penny that is raised through council tax, including through the multipliers. What we are able to do through the revenue support grant and how the Government distributes the money is—similarly to the business rates scheme—to adapt the arrangements for how we allocate additional resources to local authorities. That is how we can address the issue and ensure that there are resources for education. That is a matter of discussion with local government, but council tax moneys will stay with councils. What we will discuss in targeting the attainment fund is to do with revenue support.

Mr Simpson, do you want to come back in with a final question before I bring others in? I now have three bids for supplementaries on this theme.

11:15  

If that is okay, convener.

Cabinet secretary, I think that you are trying to dodge the issue. You know exactly what I am asking. You are going to take the money back, through grants, to fund a national priority, and that breaks local accountability. Council tax bills will rise to fund your priority. You are entitled to have priorities, whatever they are, but in essence you are funding your priority from a cut in revenue grant, as a result of increasing council tax.

You accused me of dodging the question, but I argue that you are dodging the answer, which is that local authorities will keep every penny of council tax that they raise—every penny. That is extra resource to local authorities, which is arising from the change to multipliers that we are proposing.

There is a well-established system of redistribution and distribution of resources on a needs basis, through local government finance orders and through negotiation with local authorities. That infrastructure is well established in the world of local government, which you know well.

I say again that the moneys that are derived from the multiplier change will stay in the council tax pot. Councils will have that accountability.

Mr Simpson will have the opportunity during the debate to add to what he has said, if he wants to do so. He has had a fair airing.

According to the figures from the Scottish Parliament information centre, East Renfrewshire Council will raise an extra £4 million, and North Ayrshire Council, which covers the area that I represent, will raise an extra £1.9 million. In tackling the attainment gap, East Renfrewshire, which has the highest attainment in Scotland, might not need £4 million, whereas North Ayrshire might need significantly more than £1.9 million.

The cabinet secretary said that the money that is raised through council tax will stay with councils, so East Renfrewshire Council will keep its £4 million. If North Ayrshire is to have more than the £1.9 million that it will raise, to close its attainment gap, will the funding mechanism’s redistribution formula be altered to ensure that in reality, on the ground, East Renfrewshire Council will get less than £4 million through its council tax increase, because it will not need it to meet the attainment challenge, whereas North Ayrshire—or Glasgow, or other deprived areas—will get significantly more?

Local government redistribution is a needs-based system. All the distribution factors and all the indicators play into that system. The Government proposed a focus on attainment, with a specific way of addressing need. The answer to the question is yes; the approach will be based on need. That is still subject to discussion with local authorities and others, but it will be done through the revenue support grant, through the grant settlement and through the distribution machinery. The answer to your question is that the system is needs based.

I declare an interest as a serving member of Perth and Kinross Council.

Thank you for giving us an indication of where we stand. Many representatives from local authorities in Scotland are unhappy about the idea of funding national priorities in the way that is proposed, as Mr Simpson said. Given the bands that are proposed, Perth and Kinross will probably raise about £22 million from the increases, and if the Government is considering redistribution and using free school meals as an indicator, the council will expect to keep £6 million or £7 million.

I am not sure whether free school meals are being used as an indicator; there is a lot of speculation about what might happen. However, what is apparent is that residents will assume that the money that is raised from their taxes will go to support schools in their area. That will happen to an extent, but in an area such as Perth and Kinross it might be the case that the majority of the money is not used in the area. Some people might regard that as a plundering of the tax revenue that is raised.

I think that we might be repeating the issues. I can only say again that that will not be the case, because local authorities will keep every penny of the council tax that is raised in their areas.

The Government and the Parliament are entitled to look at the multipliers and the council tax proposition. That is why the issue is being debated now and will go to the Parliament.

The Government and local government engage on distribution, on the revenue support grant and on the overall budget settlement and the indicators that inform it. That is the existing infrastructure, and it is through that kind of approach that we have embarked on the current proposal. However, I repeat that every local authority will keep every penny that is raised as a consequence of the proposed changes. The Government, through the funds that we deploy and the settlement that we deliver to local government, can then discuss how the targeted resources that we are providing will be delivered to each local authority. We will of course try to do that in partnership with local authorities.

It is correct to say that the methodology around need is to do with free school meals. We are engaging with the education sector and will engage with local government to see whether people have suggestions about another way to do it, but that is our proposition and how we will approach the issue.

We have a final supplementary question on this subject, after which we will move on to another theme.

I do not recall in the evidence that we have received over the past few weeks anyone saying, “Don’t do this.” However, we have heard the Government’s proposal being referred to in evidence as a “political fudge”, and being called “less regressive”, “slightly more progressive”, “a wee bit fairer” and “tweaking at the edges”.

Local authorities will raise extra funding from the bandings involved in the change, and you have told us that they will keep that extra funding, which they will. However, given what happens thereafter, is there a kind of reverse ring fencing? We have heard evidence that suggests that that is what witnesses think. You are intending to reduce funding, so what you propose is similar to ring fencing but in a kind of reverse way. It is not extra money to provide a Government priority but less money, because local authorities will get the extra money through a rise in local taxation.

That is a helpful question. Changing the multipliers will generate over £100 million through council tax, which local authorities will keep. The Government is entitled to readjust its revenue support grant to deliver targeted additionality. A number of political parties called for that kind of additionality for supporting education—specifically, to support increasing attainment. Local authorities will keep the resource, and the Government is entitled to look at the revenue support grant and all the factors within that. We will discuss that with local government and I hope that we will reach a deal and take a partnership approach on that. However, it is for us as a Government to propose our finance order and our mechanism to Parliament in order for it to judge whether it supports it. As I said, the multiplier will generate more money for public services.

Good morning. In evidence, we have heard many people calling for revaluation of properties. Can you expand on why the Government is choosing not to undertake revaluation, and maybe speak to some of the practical implications of revaluation and the costs involved?

With regard to what revaluation could achieve, in practice it would take time, be costly and put extra uncertainty into the system, which could for many households result in a shock that they would not be prepared for. As I think the commission found, there would also be a rebalancing issue with regard to geography and tax take. A number of factors would come into play in a full-scale revaluation.

What we are proposing is not the end of the story in terms of local taxation or, for that matter, council tax. I said in the chamber that I want further discussions around what we could do next. However, I think that the steps that we are taking are very worthwhile because we are proposing a balanced approach that is more progressive, fairer and can be delivered at lower administrative cost and quickly—as early as April next year—while generating resources for public services. We have presented a balanced package. Revaluation would be a shock for many; there would be an administrative cost and it would take time to implement. I do not think that it would be particularly welcome, and the commission reported that it would be very challenging.

We are taking a very balanced approach that is giving local authorities certainty about income. It will give certainty to council tax payers, too, because the vast majority of people will not pay more as a consequence of the regulations. There is the matter of there being flexibility for local authorities to raise council tax at their discretion, for which we have proposed a cap of 3 per cent, but I think that the package is balanced and is set out in a very reasonable way.

Why is the cap 3 per cent and what will the Government do to ensure that it is enforced?

Capping is a political judgment based partly on what would be acceptable to the public and partly on what would be in line with inflation—although it is hard to judge inflation with all the current economic turbulence and uncertainty. It is a judgment about what is reasonable for local authorities and for taxpayers—there were in the past quite substantial increases in council tax that were not welcomed by local populaces. There has been a period of a council tax freeze, but it is acknowledged that that freeze cannot continue. As a party and a Government, in the election we put to the people a proposition that was endorsed, which gave us a mandate to take forward our tax proposals, including the reasonable 3 per cent cap on council tax increases.

We are approaching the matter by taking a partnership approach with local government. I want to embark on those discussions in a constructive spirit and, I hope, to find agreement, as we have in the past. One has to use one’s own judgment about whether local authorities would put council tax up beyond 3 per cent. We will start off with the partnership approach, but there are existing legislative provisions for Government to cap council tax if that is required. To do that, I would have to return to Parliament on a local authority by local authority basis, which I would do if required.

Revaluation was recently debated in Parliament. Some members suggested that if we implement a fully progressive system as proposed by the commission, we should also implement revaluation and have the 3 per cent council tax increase, too. I am looking at the numbers on that. Under the Scottish Government proposals, the council tax for a band E property would increase by £207 per year, but under the commission proposals it would increase by £436. Band H properties’ council tax would increase by £516 under the Scottish Government proposals and by £3,688 under the commission’s proposals. That is before a potential 3 per cent increase. If we were also to have revaluation—which I believe we have to have at some point, cabinet secretary—would we be able to take the council tax base with us? Would we get buy-in from the families that we represent for their property to be moved into a higher tax band when their council tax would already be increasing by £400 or £500 a year—potentially plus an additional 3 per cent?

I have covered some administrative points and the convener has expressed points about the shock to the system.

If there was that degree of turbulence, there would be an issue about compliance and certainty of payment. It would mean considerable change all at one time, and the difficulties that would come with that give us great concern. There would be substantial increases—far more than we are proposing—and a lot of turbulence, uncertainty and change, at a lot of administrative cost. For all those reasons, we are not convinced about revaluation.

11:30  

The 3 per cent figure seems to be arbitrary. The UK Government has set a long-term inflation target of 2 per cent, so I am not sure why 3 per cent has been picked. The issue goes back to local democracy, which has been raised with us by our witnesses. Surely it should be up to local government to decide what increase, if any, there should be. We elect people to make local decisions.

An increase of 3 per cent across the board—or whatever the amount below 3 per cent is—is not progressive, because it would affect everyone equally. Many people’s incomes are not increasing by 3 per cent a year, so that increase would surely hit people in the lower bands. If there is going to be a 3 per cent increase every year, which is more likely if you set a cap than it would be if you left it to local government to decide, surely that will be increasingly burdensome in the years ahead and will unpick some of the good work that has been done through the council tax freeze.

All I can say is that the SNP stood on a commitment to follow this approach, and that was endorsed by the people. In the past, people did not appreciate significant increases in council tax, which is why there was a view that the council tax, which was fully compensated for by the Scottish Government, was appropriate. However, it is right that it is time to look at empowering local authorities to make the decisions about how much council tax they charge.

We proposed the 3 per cent cap because we feel that it is a reasonable limit. Parliament and Government are entitled to set a cap if we have achieved a mandate from the people, which we believe we have. We were not the only party in the Scottish Parliament elections that proposed such a cap, so I believe that there is consensus around this issue, and around the taking of a reasonable approach to ensure that there are no particularly high council tax rises. It was not so long ago that a local authority was toying with introducing an 18 per cent council tax rise, which I think would not be welcomed by people in that local authority area.

The Government is taking a balanced approach; it is protecting household incomes and leveraging in further resources for public services, while taking the necessary steps to make the council tax more progressive.

We will have a brief supplementary from Graham Simpson, after which we will move on to Andy Wightman, because we want to explore another theme.

I think that you said that if we had revaluation it would be a “shock to the system”—which I think means “unpopular”—and there would be winners and losers. We took evidence that suggested that 60 per cent of households are in the wrong band at the moment. Let us say that half of those would win and half of those would lose if they were revalued. How long do you want to leave it? We have values that are 25 years out of date. Do you want to go on for another 25 years?

We do not propose to have a revaluation in this term of office, and we did not propose that in the March statement or in the manifesto. We have outlined the package of measures that we proposed and which was endorsed by the people. I am not sure whether the Conservatives now support revaluation, but it is not the position of the Government.

We will leave that sitting there. Members will have the opportunity to explore that further in the debate. Elaine Smith wants to come in before Andy Wightman.

The cabinet secretary has said several times that the SNP has a mandate because of what was in its manifesto. I presume that that is why you did not consult fully on the changes. If you had consulted, much of the evidence that we received would have been explored in that consultation. Do you really feel that that was the correct approach, given that you are not a majority but a minority Government? Would not it have been better to consult?

We reflected on the commission’s work, we listened to other stakeholders and then we formed a view, as a party and as a Government, on what we wanted to propose. We believe that the package that we are offering—particularly on the multipliers, which are what we are debating today—is the right one to generate more income and to make council tax fairer through the multiplier effect, and we will do further work with local government on implementation. We need to know whether it is the will of Parliament to let the measure progress to allow the multiplier to change along the lines that we suggest, and that will be tested today.

Thank you for coming along, cabinet secretary.

I have a constituent whose flat in Edinburgh is in band E, but which is now worth quite a bit less—£20,000 less—than nearby flats that are in band B. What should I say to him when you tell Parliament and this committee that your proposals are more progressive, more proportionate and fairer?

I think that it is the case that our proposals are fair. A majority of households will not pay any more as a consequence of the multiplier change. We are trying to protect households from a big council tax increase, which is why we propose a 3 per cent cap. In addition, we will generate more resources for public services. I think that ours is a fair and balanced approach that will not deliver the shock to the system that a full-scale revaluation or astronomically high council tax increases would do.

I will tell my constituent that and see what he makes of it.

In the Local Government Finance Act 1992, it was anticipated that there would be revaluations, which is one of the reasons why, when someone makes an alteration to their property that has the effect of changing their council tax band, that change is not implemented until the property is sold. Those provisions were put in place because it was anticipated that there would be revaluations.

You say that a revaluation now would be “a shock”. I suggest to you that that ignores the fact that deferral schemes have been introduced in Northern Ireland, that Wales had a transition and that, even under the 1992 act, you have powers to introduce a revaluation on a timetable of your choosing. If a revaluation is not to take place in this session of Parliament, when do you anticipate one taking place? Do you anticipate 1991 values still being used on their centenary, in 75 years?

I suspect that Mr Mackay might not be the cabinet secretary in 75 years. [Interruption.] That said, what are the medium-term plans of the Scottish Government?

I do not know whether Mr Simpson was saying to the convener that I might still be the cabinet secretary in 75 years’ time. I suspect that I will not be.

I have made it clear that we did not propose a revaluation in our manifesto or in the March statement, so it is not a proposition for our current term of office, for all the reasons that I have given. That said, I do not think that the taking of decisions on local taxation should end with today’s decision. We should continue to discuss what further improvements we want to make. I make that offer again, because there are issues to which we can give further consideration and there are further amendments that we can make to the system. We should continue to explore that. In the chamber, I described the process as a journey, and I meant it.

Today, the committee is considering the proposals that we laid out during the course of the election, which we are now asking Parliament to support. We have embarked on the journey and we will return to other issues if members want us to explore the matter more fully. I say that in a spirit of consensus. We are taking a constructive approach. We recognise that there are issues that are worthy of further exploration, but that does not lead me to the conclusion that a wholesale revaluation is wise or necessary at this time.

I have a final question. I welcome your indication that there should be further discussions. You say that you are implementing your manifesto. On 22 September, you told the chamber:

“I categorically assure every local authority area that every penny that is raised in council tax will stay in that local authority area. How we propose to allocate revenues towards education is as was proposed in our manifesto, which is through the revenue support grant.”—[Official Report, 22 September 2016; c 37.]

Can you point me to the bit of the manifesto that says that you would distribute or allocate those revenues through the revenue support grant?

What we are complying with is the desire to raise the extra funding and our proposal to spend resources on education through the attainment fund. Raising council tax, which stays with local authorities, allows us to have a mechanism within the revenue support grant.

The Scottish Parliament manifesto that the SNP produced did not cover every element of local government distribution. You would not expect it to, because some of that is down to dialogue with local government. However, we fund local authorities largely through the revenue support grant or the local government finance orders that come to Parliament.

I have made it clear that we want to deliver the increase to the attainment fund and see through the multiplier changes and, as finance secretary, I propose to do that as part of the revenue support grant. After all, there is existing infrastructure for determining need and distributing resources.

You have said that this statutory instrument is not the end point of the process and that, as you said in the debate the other week, this is a journey. Before we move to the next question, can I ask how, as we continue on this journey, you see the role of the committee in working collegiately with the Scottish Government to tease out some of the options, including suggestions that, if the committee can reach unanimity on them, could be explored further by the Scottish Government?

Clearly, I want to deliver the Government’s manifesto, but we also want to continue to be progressive and reasonable in our approach in the light of circumstances. The committee can continue to have discussions, and I am certainly happy to be engaged in that; equally, political parties will give me their budget asks and express their views on budget proposals and what they think the future of taxation should look like. As I have said, I am open minded and I know that, at First Minister’s questions, the First Minister said that she, too, is happy to engage on tax matters. That commitment to engage, listen to views and take things forward is certainly there, but we also want to do what any Government wants to do, which is to deliver our manifesto.

I understand that, cabinet secretary. Elaine Smith has a supplementary.

On the subject of revaluation, I should point out that some council tax payers were not even born when their properties were assessed. That point has to be made, because we heard a lot of concerns about it in evidence; indeed, one of the professors who gave evidence said that it

“really undermines the credibility of the system”—[Official Report, Local Government and Communities Committee, 21 September 2016; c 6.]

if about 57 per cent of the properties are in the wrong band. I accept your comment that revaluation was not a part of your manifesto but, going back to my earlier point and perhaps building on what the convener has just said, I wonder whether, given that there is a minority Government, you are at least open minded on testing the will of Parliament as to whether there should be a revaluation.

I am expressing the Government’s view that we do not see a revaluation as wise or necessary. It would be costly and disruptive, and I think that there would also be compliance issues. A lot of the issues were discussed this morning, and it is not a proposition that we support. The collection rates for council tax are largely high, and we want to build in more progressivity. Of course, I point out that work on the council tax reduction scheme is going on separately in another committee. This feels like the right balanced approach. Because revaluation would bring so much administrative turmoil, cost and uncertainty and would raise the issue of compliance, it would be a concern for the Government—and potentially for local authorities, too, if there was an effect and an impact on their collection rates.

Mr Stewart has indicated that he would like to ask another question before we move to the debate on the motion, and I see that Mr Simpson wants to get in. Mr Simpson, is your supplementary specifically on revaluation?

No.

In that case, I will take Mr Stewart first.

11:45  

Many people said that the council tax freeze was unsustainable, so it might not be a surprise to everyone that we are going to have this change. However, how are we planning to ensure that the public awareness campaign is progressive and that people get the opportunity to hear about the change before the bill lands on their doormat? It is important that we get a flavour of what is planned in the run-up to the change, and of how people can engage with that process, because for some it will not be a surprise, but for others it will be a shock.

That is a fair question about the communication of what is decided. Parliament, through its committees, will determine what is decided, and that determination will then go to the whole Parliament. The communication exercise that follows that will be extremely important, because we need to raise awareness about what is happening.

Principally, the council tax notice that comes through the door is the piece of correspondence that people will look at. There is a job of work to be done to communicate what is happening with the multiplier, so that everyone understands it and knows how it affects individuals. Although it is not necessarily a matter for this committee, the council tax reduction scheme is an important factor and we need to ensure that we raise awareness of it so that people get the relief that they are entitled to. The decisions that local authorities might make on any council tax increases must be communicated, too. All that must be communicated direct to householders, because this is a tax that touches every household. It is important that we share the information as soon as possible.

Clarity about what is going to happen will be available—hopefully from today—to the information technology companies, the service providers, the world of local government and householders. At that point, we can embark on that campaign.

Mr Gibson has a supplementary question on that point.

You are going to send out notifications to say that council tax in bands E to H will increase. Are you also going to send a letter to the 74 per cent of people whose council tax bands will not experience a change to let them know that the Scottish Government is not going to increase their council tax?

I am sure that the Government will be as positive as possible in our approach. We will work in dialogue with local government and, ideally, it would be good to have a joint piece of communication between the Scottish Government and the Convention of Scottish Local Authorities about how we share the information to local householders.

I am sure that political parties will express their own views about council tax bills as we approach the forthcoming local government elections.

I suspect that they will.

Mr Gibson’s question was helpful. My take on last week’s evidence-taking session was that everyone wishes the council tax to increase—although they have different ideas for the mechanisms by which that could happen—but no one wants to take the credit or blame for that. That was the mood music of last week’s meeting. Some local authorities might wish that the Scottish Government was not doing it in the way that it is doing it, and others might support the Scottish Government’s approach, but can you give a commitment that, regardless of such policy differences, the Scottish Government and COSLA will try to speak with one voice and in a co-ordinated fashion for the purposes of promoting this tax change to our communities?

Of course. It is important that, whatever the political differences on local taxation, good, sound and clear information is given to householders so that they know what they are paying and why they are paying it. Your plea is reasonable and I believe that the Scottish Government and COSLA will engage in that process constructively.

Given that 32 local authorities will distribute information at taxpayers’ expense, it would be helpful if there were neutral information that explains the factual position, as opposed to expressing opinions.

That is right. I am sure that we are all familiar with our own council tax bills. They are fairly dry and straightforward pieces of communication, although, sometimes, they are accompanied by information from local authorities. It is important that we try to ensure that there is joint communication from COSLA and the Scottish Government to set out the facts and the changes so that taxpayers understand clearly and in good time what they are being asked to pay.

We are moving towards the end of our questions, but Mr Simpson has indicated that he wants to ask another one.

It is just for the sake of clarity. We have figures from SPICe about the additional income that will be raised in individual councils. For example, in the City of Edinburgh Council, the figure will be £15.6 million and, in East Renfrewshire Council, it will be £4 million. There is a variety of figures. Once you have dealt with grants, will any individual council lose more in grants than it would have gained in council tax?

The final figures and distribution have not been determined, so I cannot honestly explain that at the moment and give those figures.

So it is possible—it could happen.

As I have said throughout, local authorities keep every penny in council tax. How we then distribute through the attainment fund is yet to be determined.

Can I ask one more question, convener?

Yes. I am conscious of time, but you can ask one more.

Cabinet secretary, if you were able to identify £100 million from somewhere else, would you be proposing these council tax changes?

That is pure speculation. Everyone has said that the council tax freeze is unsustainable—there is consensus on that. A lot of householders may want it to continue, although that is arguable. Folk have described it as popular. However, it is absolutely necessary to reform the council tax in the way that we are doing. It is also important to invest in education and in attainment, as a number of political parties have described. I think that both are necessary.

We will move on. On an issue that that has had a significant amount of political attention, it is understandable and reasonable that we have moved towards policy and opinion, but there are some brass tacks on the statutory instrument that we have not yet explored. We will give the cabinet secretary the opportunity to put some of that on the record before we move to the formal debate. Elaine Smith wants to raise one of those points.

Actually, I want to raise two, convener, but I will put them together.

I presume that we expect a higher number of applicants for the council tax reduction scheme. Is there any attempt to target those people to provide them with adequate information? Could that be included in any national publicity campaign?

Secondly, could we have some opinion from you—or even some facts—about how the water and sewerage charges will fit in?

That is helpful, Elaine.

Those are two key points. First, on information, we can embark on a campaign, but generic campaigns sometimes feel quite meaningless to people, whereas a bill or an invoice can feel meaningful. The invoices provide a great opportunity to build in enough information about the relief schemes and potential eligibility for them so that we get proper uptake. There are about 0.5 million recipients of the current council tax reduction scheme, and we expect that to change. We will absolutely have a clear focus on information and eligibility in a general campaign and also very specifically in that communication to every household. That would also be good for current uptake of the reduction scheme. That is an excellent point.

I appreciate the opportunity to provide clarity on water charges. Roseanna Cunningham is the cabinet secretary with responsibility for the matter but, as I understand it, the water charges have already been laid out and we do not propose to change that this year. We do not propose to mirror the changes to council tax in the water charges, because of administrative issues. In essence, the current charging regime has already been laid out, so I do not propose a change to water bills following on automatically from the other changes.

Thank you for giving evidence to the committee.

Under item 4, the committee will formally consider motion S5M-01522, calling for the committee to recommend approval of the draft Council Tax (Substitution of Proportion) (Scotland) Order 2016. The committee will also consider amendment S5M-01522.1. Only the cabinet secretary and members may speak in the debate. At this point, I invite the cabinet secretary to speak to and move motion S5M-01522.

Motion moved,

That the Local Government and Communities Committee recommends that the Council Tax (Substitution of Proportion) (Scotland) Order 2016 [draft] be approved.—[Derek Mackay]

I invite Andy Wightman to speak to and move amendment S5M-01522.1

I have lodged the amendment to seek to express the committee’s awareness of the wider concerns around the Scottish Government’s proposed reforms to the council tax. These concerns are not, themselves, at issue in the statutory instrument but they have come through in evidence to the committee and no doubt we will make reference to them in our forthcoming report on the legislation.

The cabinet secretary’s motion takes the form of a recommendation to Parliament that the draft order be approved. Parliament will, in due course, make its mind up on that question but the committee has heard evidence that the context within which the order is being debated is problematic, most particularly the extent to which the Scottish Government’s proposals on council tax reform do not address the wide range of issues that are raised by the commission on local tax reform in its final report.

The evidence that we have heard is quite clear and, given its breadth and extent and the authority of the witnesses who gave it, it deserves to be noted in the motion. The amendment does no more than note some key concerns that have been expressed to the committee in oral and written evidence. It does not seek to take a view on the validity of those concerns or on whether we, as members of the committee, agree or disagree with those concerns. It merely notes them and recognises a fact of the first recommendation of the commission on local tax reform. I commend the amendment to members.

I move amendment S5M-01522.1, to insert at end:

“but, in so doing, notes concerns in evidence to the committee that the council tax base has not been updated since 1991 and that many properties are wrongly banded and will therefore be liable to inaccurate council tax bills; further notes concerns about the appropriation of local council tax receipts for Scottish spending priorities, non-statutory rate-capping and the adequacy of communication regarding forthcoming changes to council tax, and recognises the primary recommendation of the Commission on Local Tax Reform that “The present Council Tax system must end”.”

Thank you, Mr Wightman. We now move to the open debate. I am in members’ hands as to how long we wish the debate to last. Does any member wish to comment?

I am pleased that the convener chose the amendment lodged by Andy Wightman for debate today because it is fair to note the concerns that we have received in evidence at the past few meetings.

I said earlier in questioning and I will say again that much of the evidence that we received recognised that the order is either—depending on your language—slightly more progressive, slightly less regressive, or a wee bit fairer. The fact that the order allows a bit of a fairer approach to the council tax at local level has to be a good thing.

There are, of course, concerns about whether the Government is using a reverse ring-fencing approach to decide how some of that money is used, in a way. On the other hand, for me personally, it is difficult to argue against a Government policy that wants to provide funding for attainment and education; that is a good thing, but how we arrive at it has been the subject of some debate during the past few weeks.

Having looked at the evidence and considered it all, I am certainly happy and I did sign the amendment. What Parliament does is up to Parliament, but if the committee is to reflect the evidence, I make a plea to other members to support the motion as amended, because it reflects what we have seen. It simply notes the evidence and does not take a position on it.

Frankly, I do not think that the amendment adds anything that will not be in our committee report anyway. I draw attention to paragraph 7 of paper 1, which says:

“The Delegated Powers and Law Reform Committee ... determined that it did not need to draw the attention of the Parliament to the instrument on any grounds within its remit.”

We are really talking about two things: the evidence that we have taken; and the instrument itself. As far as the instrument is concerned, it is implementing a manifesto commitment and it is more progressive.

As we have discussed this morning and at other meetings, there are issues to do with the mechanism. I believe that the issues of revaluation and so on will all be covered in our report so I really do not think that there is any necessity to support the amendment.

I go along with that view. The main question that we are here to decide concerns the cabinet secretary’s proposals, so I do not see that there is much point to the amendment, and on that basis I will not be supporting it.

12:00  

Does any other member wish to add anything before we move to the vote?

I echo Kenneth Gibson’s thoughts. I am also a little concerned that we as a committee have not had the chance to reflect on the cabinet secretary’s evidence. It would not feel quite right to agree to the amendment before doing that. Noting the concerns that have been expressed is valid, but those should be noted in the committee’s report. I will not be supporting the amendment.

Does any other member wish to come in?

I am of like mind with several members of the committee who have spoken already. I understand the reason for the amendment, but I do not believe that it brings any more value to the process. We are here today primarily to look at the proposals from the cabinet secretary, and for that reason I will not be supporting the amendment.

I will make a brief contribution before we move to the summing-up speeches from the member who lodged the amendment and the cabinet secretary. Does anyone wish to add anything first?

On the main question, I am essentially against what is being proposed because it breaks democratic accountability with councils, and I cannot get past that. I speak as someone who has been—in fact, is—a councillor.

In my view, that is a fundamental change to the way in which local government and local services are funded. For that reason—and that reason alone—I will not support the cabinet secretary’s motion.

I will make a few remarks, and we will then move to the closing statements.

I will be supporting the statutory instrument that is before the committee today, as I cannot not recommend to Parliament the raising of an additional £100 million to tackle the lack of educational attainment among some of our most vulnerable children in some of our most deprived communities. For me, that is precisely what we are voting on here today, and I cannot find any compelling argument not to vote for it.

I now turn my attention to the amendment. Although I will not support the amendment, I think that Andy Wightman has done Parliament a service. Instruments quite often go through unnoticed, and so do the procedures of committees. Kenneth Gibson rightly pointed out that the committee has a reporting mechanism that will flesh out a number of the concerns that are noted in the amendment. I suppose that anyone watching the meeting today will be very aware of that process now, and will know that the committee will report on the matter and will draw to Parliament’s attention anything that we think is appropriate.

We will do that after having a chance to reflect on the entire sum of the evidence that we have received over a number of weeks, which will include the cabinet secretary’s responses to us today.

For that reason, I cannot bring myself to support the amendment that is before us, but I think that it is reasonable to say to anyone who is watching—and to my fellow committee members, as we seek to draft our report by consensus—that we will draw to the Parliament’s attention anything that we think is appropriate. In not supporting the amendment, I will seek to produce a much more fleshed-out and considered report to submit to Parliament, although I completely understand what Mr Wightman is trying to achieve.

As there are no other contributions from members at this stage, I invite closing comments from Andy Wightman.

I have heard what members have said. On the substantive motion, I will not stand in the way of the statutory instrument passing into law. I am, however, concerned that the full ministerial powers available under the Local Government Finance Act 1992 are not being used to bring the tax base up to date. I find it unacceptable that, in April next year, people will be paying the wrong amount of tax, in particular people like the constituent whom I mentioned in the example that I gave earlier. Nevertheless, I continue to commend my amendment to the committee.

Thank you, Mr Wightman. I call the cabinet secretary to sum up and respond to the debate.

I suppose that I should quit while I am ahead. I appreciate the support of those committee members who have spoken in favour of the statutory instrument. Fundamentally, we are debating whether to change the multipliers to generate more money for public service, and I think that that is the right thing to do. It is a balanced approach that protects household incomes, it is more progressive, it is fairer and it is part of the journey that I described in the chamber. I want to engage further with political parties on matters of taxation, and there will be plenty of other places to discuss local government distribution, the budget and other matters.

I reassure Mr Simpson that supporting the statutory instrument today does not necessarily imply support for any consequential budget discussions. The statutory instrument is fundamentally about the multipliers, and even the Conservatives had a proposal for raising bands and the multipliers for the upper bands. I am not sure whether there is an issue of principle on the multipliers.

I think that the statutory instrument is the right approach, and I appreciate the committee’s support. I, too, have heard the concerns that have been expressed in evidence, and we will all reflect on those.

Thank you, cabinet secretary. That concludes the formal debate.

The first question is, that amendment S5M-01552.1, in the name of Andy Wightman, be agreed to. Are we agreed?

Members: No.

There will be a division.

For

Smith, Elaine (Central Scotland) (Lab)
Wightman, Andy (Lothian) (Green)

Against

Doris, Bob (Glasgow Maryhill and Springburn) (SNP)
Gibson, Kenneth (Cunninghame North) (SNP)
Maguire, Ruth (Cunninghame South) (SNP)
Simpson, Graham (Central Scotland) (Con)
Stewart, Alexander (Mid Scotland and Fife) (Con)

The result of the division is: For 2, Against 5, Abstentions 0.

Amendment disagreed to.

The second question is, that motion S5M-01552, in the name of Derek Mackay, be agreed to. Are we agreed?

Members: No.

There will be a division.

For

Doris, Bob (Glasgow Maryhill and Springburn) (SNP)
Gibson, Kenneth (Cunninghame North) (SNP)
Maguire, Ruth (Cunninghame South) (SNP)
Smith, Elaine (Central Scotland) (Lab)

Against

Simpson, Graham (Central Scotland) (Con)
Stewart, Alexander (Mid Scotland and Fife) (Con)

Abstentions

Wightman, Andy (Lothian) (Green)

The result of the division is: For 4, Against 2, Abstentions 1.

Motion agreed to,

That the Local Government and Communities Committee recommends that the Council Tax (Substitution of Proportion) (Scotland) Order 2016 [draft] be approved.

That concludes consideration of that particular affirmative instrument. The committee will consider its report on the Scottish statutory instrument, as previously discussed, at its next meeting, on 26 October.

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Council Tax (Variation for Unoccupied Dwellings) (Scotland) Amendment Regulations 2016 [Draft]

Agenda item 5 also concerns subordinate legislation. The committee will formally consider motion S5M-01594, on approval of the draft Council Tax (Variation for Unoccupied Dwellings) (Scotland) Amendment Regulations 2016. Only the cabinet secretary and committee members may speak during the debate. I ask the cabinet secretary to speak to and move the motion.

Motion moved,

That the Local Government and Communities Committee recommends that the Council Tax (Variation for Unoccupied Dwellings) (Scotland) Amendment Regulations 2016 [draft] be approved.—[Derek Mackay]

No member has indicated that they want to speak on the motion. I invite the cabinet secretary to sum up and—this is what it says in my brief—respond to the debate. I suspect that you will not be doing the latter, cabinet secretary, but you have the opportunity to sum up.

I welcome the consensus. There appears to be agreement on the issue. I will say no more.

I am delighted to hear that, cabinet secretary.

Motion agreed to.

That concludes consideration of that affirmative instrument. The committee will consider its report on the SSI at its meeting on 26 October.

I thank the cabinet secretary and his officials for attending the meeting today.

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Acquisition of Land (Rate of Interest after Entry) (Scotland) Amendment Regulations 2016 (SSI 2016/258)

Agenda item 6 is—members will be delighted to hear—more subordinate legislation. The committee will consider the Acquisition of Land (Rate of Interest after Entry) (Scotland) Amendment Regulations 2016. The instrument is laid under the negative procedure, which means that its provisions will come into force unless the Parliament votes for a motion to annul the instrument. Members will note that there was a breach of the minimum 28-day rule between the date of the regulations being laid and the date when the provisions come into force. However, the Delegated Powers and Law Reform Committee considered the breach to be acceptable in the circumstances. No motion to annul has been lodged.

Do members have any comments on the instrument?

Members: No.

There being no comments on the instrument, I invite the committee to agree that it does not wish to make any recommendations in relation to the instrument. Is that agreed?

Members indicated agreement.

12:11 Meeting continued in private until 12:32.