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Non-Domestic Rating (Valuation of Utilities) (Scotland) Revocation Order 2005 (Draft)
I welcome to the committee Allan Wilson, the Deputy Minister for Enterprise and Lifelong Learning, who is here to talk about the draft Non-Domestic Rating (Valuation of Utilities) (Scotland) Revocation Order 2005, which has been laid under the affirmative procedure. As is our normal practice, we will give members the opportunity to question the minister and his officials after he has made some introductory remarks. After the question-and-answer session, we will have an open debate on the motion to approve the order. Only MSPs will be able to take part at that stage, which means that members will be unable to ask for clarification from officials at that point.
Prescribed assessment, by which I mean the practice of ministers setting rateable values or a formula for calculating rateable values for certain industries, was introduced in the post-war years, when conventional valuation became increasingly unreliable. That was because, for some industries, there were few comparable properties for which the assessors could turn for rental evidence and the newly nationalised industries did not, in general, operate with a view to profit.
I have a couple of questions. I note that the majority of those who replied as part of the consultation process were in favour of ending prescription for all industries. However, four of the five respondents who expressed a view on the large docks and harbours industry were in favour of retaining prescription. That is in the notes to the statutory instrument, although I presume that those types of hereditaments are not affected by the order. Could the minister explain the position in relation to docks and harbours and say whether the majority view has been taken into account?
If you do not mind, convener, I shall ask Carol Sibbald to respond directly to that question. She is the official in charge of the consultation.
The Executive note covered both the Non-Domestic Rating (Valuation of Utilities) (Scotland) Revocation Order 2005 and the Non-Domestic Rating (Valuation of Utilities) (Scotland) Order 2005, which deals with the designated assessor regime. In the consultation for the ending of prescription, we spoke to all the bodies that would be affected and we took everyone's views on board. Some of the docks and harbours did not comment on the ending of prescription, but some of them did. In reaching a final decision, ministers took account of the views expressed.
Just to be clear, has prescription been ended for the rating of docks and harbours?
Yes, it has, for all the industries.
So they will now have their rateable values assessed by the assessor.
Yes. That will be done by the assessor on a conventional basis.
I have one other technical point, minister. You mentioned that the order is part of the process of increasing harmonisation, which I understand to be the technical term that denotes the adoption of identical practices in setting rateable values by the assessor north of the border and—I believe—by the Inland Revenue south of the border, although I may be out of date with that information. Which types of property or hereditaments are not harmonised now in Scotland?
In general, rather than harmonising individual blocks of industries, we are talking about the harmonisation of the valuation methodology. The assessors, with the Valuation Office Agency, which is the equivalent down south, meet regularly to devise schemes of valuations for hereditaments in England and property in Scotland and they ensure that they come up with similar methods of valuing. It would be difficult to give a list of which types of property are or are not harmonised. The general practice is that the assessors harmonise the method that they use in valuing.
That is something on which we might want to come back to the committee with more detail. For the purposes of the order, however, the intent is that the methodology is harmonised in England, Wales and Scotland for those industries.
Perhaps the minister could come back to us with a bit more detail. As long ago as 1995, as I recall, the then Secretary of State for Scotland opined that around 90 per cent of properties had their rateable values harmonised. Of course, if they are all harmonised, a higher business rate north of the border means that we have a higher rate of taxation north of the border.
I am familiar with the argument, but I am not the minister involved in that specific area so I would hesitate to commit my colleagues to anything in their absence. Nevertheless, I am sure that ministers will want to come back to the committee with the relevant information in respect of Mr Ewing's point, because that is obviously critical to the conduct of the independent review of such values that is currently under way.
I have two or three questions, the first of which relates to revenue generation. Is an assessment being made by the Executive in relation to an increase or decrease in revenue generation? I see from the notes that £500,000 was made available for the new designated assessor regime to be established, but will authorities experience less revenue generation over the coming years because of appeals against valuation or is there an estimate of more revenue generation? Alternatively, is the policy revenue neutral?
We are currently in discussion with the assessors about the impact of the designated assessor regime, but at this time we do not have any figures on an assessed change.
I suppose that my worry is that we are dealing with vast tracts of land that were formerly under a prescriptive regime. Now that there is the right to appeal against assessment, I am quite confident that people will exercise that right and I am worried about the large fall in revenue that could result from that. Has that been part of the equation that the Executive has been considering?
I shall explain the process. The overall money that goes to local authorities is made up of a mixture of non-domestic rate income and revenue support grant. The non-domestic rate income is not based on the non-domestic rate income gathered by the local authority; it is calculated by a formula on a per capita basis. For example, if a local authority no longer has income coming in from Scottish Water because that is now dealt with in Fife, its revenue support grant would increase so that the overall funding that goes to it is as set out in the finance order.
I am sure that Carol Sibbald will be aware that, as a Glasgow member, I am worried that Glasgow's contribution to the non-domestic rate pot is always much larger than what we receive back and that the order will worsen the equation for us. If you are suggesting to me that the change will be revenue neutral, that is fine, but I worry about the appeal mechanism that is now in place, which was not there before.
The change is intended to be revenue neutral. As I am not the minister directly in charge, I am not familiar with the statistics, However, I suspect that Tommy Sheridan would get a degree of reassurance on that point in relation to telecommunications and canals, for which prescription was repealed about 10 years ago. We will certainly give the committee the opportunity to come back on those points when we bring forward the designated assessor order, which would probably be the more appropriate time to deal with these issues.
I have two questions. First, the order harmonises the process in Scotland with that in England and Wales. Is there evidence from England and Wales that the change was revenue neutral, as you expect it to be here? Secondly, when will the designated assessor order be introduced? I note that this order comes into force on 1 April this year.
Telecoms and canals came out of prescription throughout the country in 1995. The situation has been the same in Scotland and England since then. As I explained, in relation to the overall finance that goes to a local authority, the level of non-domestic rate income gathered in does not affect the money that the Executive gives.
It might not affect the money that goes to the local authority, but it could affect the resources that are available to the Executive.
The situation is complicated by the fact that we are dealing with not only the ending of prescription but a revaluation, which has had an impact on rateable values. I do not want to digress, but I should explain that, when the poundage rate is set, an allowance is made for loss on appeals. That happens at each revaluation. We have taken into account, as far as we can based on what has happened at previous revaluations, what the potential loss on appeals will be.
I have an additional question, the background to which is the number of complaints that I have received, particularly from Glasgow, about the erection of phone masts on Network Rail's land without any consultation with local authorities or individuals—Network Rail does not have to consult. Will the new designated assessor regime impose extra responsibilities on those whose land is now being valued? Will it open up the possibility for communities to be consulted before the land is used? If not, can we work in such a mechanism so that the landowning bodies are not a law unto themselves?
Unless the minister can say otherwise, I think that that is probably a planning issue rather than a rating issue. I expect that the answer to that question is that the change will not make any difference to the planning regime.
It does not affect it.
You probably need to address that issue on another occasion, Tommy.
I accept that, but when someone's land is being evaluated, it is necessary to assess the revenue-generating possibilities of that land. If the landowner can generate a lot of extra revenue by allowing the erection of phone masts willy-nilly, I want that to be considered in the valuation. If the minister is saying that that will not be considered, I ask him why not.
It would be for planners to determine land use in that regard; it would be a matter for the assessor.
To some degree, Tommy, you are bringing together two different issues. One is the assessment of the land for rateable value and the other is planning consent. The second is a completely separate matter. I do not think that planning consent would be connected with the order that we are considering.
I accept that land use is a planning issue and I thank you for allowing me a wee bit of latitude. I am just asking that the fact that Network Rail is exempt from planning measures but can use its land to generate extra revenue be considered when the rateable value of Network Rail's land is determined.
I am sure that the assessor would take into account any economic activity on the land.
I hope so.
As there are no more questions and as no members have indicated that they want to speak in the formal debate, I ask the minister to move the motion.
Motion moved,
That the Non-Domestic Rating (Valuation of Utilities) (Scotland) Revocation Order 2005, (draft) be approved.—[Allan Wilson.]
Motion agreed to.
I thank the minister, Carol Sibbald and Nikola Plunkett.
Births, Deaths, Marriages and Divorces (Fees) (Scotland) Amendment Regulations 2005 (SSI 2005/100)<br />Non-Domestic Rating (Rural Areas and Rateable Value Limits) (Scotland) Order 2005 (SSI 2005/103)
Non-Domestic Rating (Former Agricultural Premises) (Scotland) Order 2005<br />(SSI 2005/104)<br />Valuation (Stud Farms) (Scotland) Order 2005 (SSI 2005/105)
Non-Domestic Rates (Levying) (Scotland) Regulations 2005 (SSI 2005/126)<br />Non-Domestic Rating (Valuation of Utilities) (Scotland) Order 2005<br />(SSI 2005/127)
Under item 3, we will consider six items of subordinate legislation. The Subordinate Legislation Committee did not raise any points on the instruments and no motion to annul has been lodged. Given that members have no points to raise, are we agreed that there is nothing to report on the six instruments?
Members indicated agreement.
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