Under our second item of business, we will take evidence as part of our post-legislative scrutiny of the financial memorandum to the Local Government Finance (Unoccupied Properties etc) (Scotland) Bill. I welcome Judy Orr, from Argyll and Bute Council, and Brian Murison, from Highland Council. Members have copies of all the written submissions that we have received, along with a Scottish Parliament information centre briefing. We will go straight to questions from the committee. The normal procedure is that I start with some opening questions, after which I will extend the evidence session to colleagues around the table.
Although this is not addressed in the witnesses’ submissions—which I will go into—either or both of you should feel free to answer this question. With the exception of Falkirk Council, all local authorities that responded to the committee said that they saw no evidence of the legislation having an impact on speculative or regeneration activity. Will you comment on that?
We have not found evidence of that, but it has been difficult to track any impact directly. A tax increment financing scheme area is just starting up in our Oban and Lorn area, and we expect to have regeneration activity grouped around that. However, it is at too early a stage for us to notice any effect of the empty property rates changes.
Do you agree with that, Mr Murison?
Yes. We are aware of regeneration in some areas, but there is no correlation between that and the empty properties legislation.
Argyll and Bute Council’s submission suggests that collection rates have been adversely affected. It states:
“The collection on accounts with double charge at end of January was only 79% compared with overall collection rates at that time of 93.66%.”
Why do you think that is the case?
We have found there to be a continuing issue with collection on the accounts that have the double council tax charge on them. At the end of February, the collection rate on those accounts had not changed—it was still around the 80 per cent mark—whereas our overall collection rate was up at 96.5 per cent by that stage.
The properties have been empty for a long time and in many cases their owner or landlord is absent and not living in the locality. We know from the addresses that the properties are in areas where there is a difficulty with surplus property and they do not have good resale values in the marketplace—they are not easy to sell. Therefore, it is no surprise to us that the collection rate on those properties is down. It is affecting our overall collection rate by about 0.4 per cent.
What is the impact on the council in terms of the cost of pursuing those individuals?
There is no direct impact on the council in terms of the cost of pursuing them because we have commission-based arrangements with sheriff officers, which means that we do not pay out any money unless we make a collection on the accounts. Therefore, there is no direct impact on the council’s finances except through loss of the council tax income itself.
I assume that the Highland Council figures for 2013-14 are not complete. Can you please clarify the situation? Your submission states that the collection rate on empty properties and second homes was 98.92 per cent in 2012-13, but it dropped to 52.71 per cent in 2013-14. That is a dramatic difference.
Yes. That is just the position from last November; the position as at the end of February was that a collection rate of 88.21 per cent was anticipated.
Do you expect it to be close to more than 90 per cent?
We have increased collection only by 10 per cent, so we are seeing only a 0.1 per cent reduction. We have seen nothing to suggest that the rate would be anything less than it has been in previous years.
In your submission you say:
“An emerging issue is a marginal increase in “pop-up” type shops which may be attributed to landlords seeking out short-term tenants (possibly rent free) to avoid 90 per cent EPR.”
Do you see that as being set to increase? You say that the increase in such shops is marginal, but is it of concern to the council?
Yes, it is. The increase is marginal at the moment—we are talking fewer than 10 properties—but such properties are clustered, for example on the High Street in Inverness; over Christmas, for example, we saw an influx of Christmas bazaar shops, which have moved on to become independent mobile trading shops. Those shops run for about three months then disappear. The same owners or occupiers just change the type of shop; we are seeing a pattern emerging.
How could that be addressed?
We are moving on to utilising the legislation. We have written to the landlords who own the properties and have suggested that we will charge them, given that the leases will run for under a year.
Okay. Is Argyll and Bute experiencing anything similar?
No. Our economy is not as buoyant as the economy in Inverness, and unfortunately we have not had pop-up shops—we have empty properties. However, I have noticed that the number of empty properties that are liable for non-domestic rates has been reducing year on year. It is not a growing problem.
I will ask one more question before I open up the session to my colleagues.
Long-term empty homes that are being actively marketed for sale are exempt from the council tax surcharge, but some local authorities have expressed concerns about how that is being monitored, and about the cost implications. Do either of you have concerns about that issue?
It is correct to say that, if an empty home is being actively marketed for sale or let, the double charge is implemented only after 24 months, as opposed to after 12 months. In terms of validating whether a property is being actively marketed for sale or let, we have taken quite a straightforward approach through ensuring that we have copies of the home report and can see that the property is being advertised on a website or through hard-copy adverts in newspapers.
We have had one case in which the person claimed that they had been advertising their property by putting a notice in a village shop. That was the extent of their marketing, and we did not agree that it was sufficient. We have not found it to be a difficult matter and we have not had to resort to sending out our empty-homes officer to inspect the properties or to discuss the specific issue with owners. However, our empty-homes officer is in regular contact with empty-home owners who are experiencing difficulty in selling their properties; she works closely with them.
We will implement the 100 per cent surcharge only from 1 April 2015, and we have currently identified 72 properties in the category. We have written to the owners to find out their intentions. We will continue to monitor the situation.
Thank you.
Good morning. When the legislation was first proposed, there appeared to be two policy aims: to reduce the number of empty properties and to raise revenue. If we look at non-domestic rates only, would it be fair to say that it has raised revenue for your council?
It is correct to say that the legislation has raised revenue; we can measure the specific increase in what we have charged. That revenue does not come directly to the council, but goes into the national pool. We have also seen a reduction in the number of empty properties. The legislation has been successful on both fronts.
The legislation has had those impacts in Highland, although not to a great extent.
Okay—so the legislation has raised revenue.
I will stick with non-domestic rates. What sort of impact has the legislation had in your council areas on the number of empty properties, and is there a definite causal link between the legislation and the reduction in empty properties? Could a reduction be related to the economy more widely?
I can give you the numbers. In 2013-14, Argyll and Bute had 157 empty properties, and in 2014-15, up to just a couple of weeks ago, we had 119. That is a significant reduction. The amount of the additional charge has not changed that much—it went from £184,00 to £161,000. However, I cannot say that there is a definite causal link. The economy in Argyll and Bute has been improving over that period, so it is difficult to be sure.
Likewise, Highland Council has had a reduction of 35 properties overall, but we agree that there is no apparent link. We know of areas where there has been regeneration, and we know of the issue on the high streets that I have already mentioned.
I am grateful for that.
Under an initiative that was introduced at the same time called fresh start, if somebody brought an empty property back into use there would be a reduction in rates. What impact has the fresh start initiative had in your council areas?
Fresh start has had a minimal impact in Argyll and Bute. I am afraid that I have not brought the figures with me, but it has affected just a handful of properties.
Likewise for Highland Council.
You do not have the figures with you, but could you supply them to the committee?
Easily.
Easily?
Yes.
That would be helpful.
The convener asked you about speculative and regeneration activity, and both of you said that you had not noticed anything. You also said that the impact of the legislation is difficult to track, and I suspect that it is. How have your councils attempted to track it, or is your conclusion, based on a gut feeling or hunch, that there has been no difference? Is there something specific that you are tracking?
Our economic development unit tracks start-up businesses through the business gateway, which leads to additional occupation of rateable properties, but we do not track in any systematic way the reasons why people go into those properties.
It is the same for us. We liaise with our business gateway people, but we do not monitor individual properties in detail.
Okay. You were asked about the cost of the changes to public sector bodies. Argyll and Bute Council has given the figure of £80,000. Is that £80,000 over the two years or £80,000 per annum?
It is £80,000 over the two years. In 2013-14 the figure was just under £44,000 and in 2014-15 it was just under £37,000. There was a reduction between the two years. In both years, the amount was 24 per cent of the total extra cost through the change in the charging mechanism.
Highland Council’s submission gives a figure of £73,000. Is that over two years or per annum?
That figure is for the two years and relates to 21 properties.
I am trying to work out the cost to all public sector bodies. Are the £80,000 and the £73,000 the costs purely to your councils and their associated bodies as opposed to all the public sector bodies that are located in your council areas?
For Argyll and Bute, the figure relates to all the public sector bodies that we were able to identify. In fact, there are just three: Highlands and Islands Enterprise, the national health service and Argyll and Bute Council.
So, for Argyll and Bute, the figure includes the cost to every public sector body that you could identify. What about for Highland?
Likewise.
If Highlands and Islands Enterprise, for example, had an empty property, would that have been included?
Yes.
Okay. We have covered that. Let us move on to council tax on domestic properties. I have asked most of the questions that I wanted to ask. Let us return to the collection rate, to make sure that I have got it right.
I think that you both suggested that the collection rate had been adversely affected, at least marginally. Am I correct in thinking that the overall revenue has increased, but the actual rate has dropped in pure percentage terms?
10:15
That is absolutely correct. In absolute terms, we have collected more than £500,000 in income that we would not otherwise have had because we have collected 80 per cent of the additional double charge.
Is the situation the same for Highland Council?
Yes. Obviously, we have increased our collection rate only by 10 per cent, but we have still taken increased income in the region of £210,000.
I should clarify that my figures refer only to the double charge and not to the reduction in discount. We reduced the discount back in 2005, at the earliest possible opportunity, and about £1.7 million per annum additional income resulted from that. Our collection was not impacted by that activity; only the introduction of the double charge had an impact on the collection rate.
Okay.
My last question is quite technical, but I want to get to the bottom of the collection-rate issue. Has the collection rate dropped marginally because a few more people are saying that the charge is outrageous and refusing to pay it, or has the collection rate reduced because it is exactly the same properties that are not paying and, because they are due to pay more, it appears that the collection rate has changed? Has there been an increase in the number of properties for which people refuse to pay?
I am not certain about that because we did not track those properties separately in previous years. I suspect that they were always bad payers and, of course, the doubling of the charge doubles the problem. We know that at least 0.2 per cent, although it may be as much as 0.4 per cent, has been added to the non-payers.
Are you aware of anyone saying, “We’re not paying now because it is double the charge”?
We have had a number of appeals against the imposition of the double charge on the ground that it is unfair in general—those were not appeals against the legislation. Some of those appeals have gone as far as the valuation appeals committee. We lost one case because the committee felt that the policy was too harsh, even though it complied exactly with the legislation and the way in which the council had chosen to implement it.
Does Brian Murison have anything to add from a Highland perspective?
Although we have not monitored individual properties, our feeling is that the increase is down to the regular non-payers. We have only recently issued the letters to say that the 100 per cent surcharge would start from 1 April. We got very little, if any, response to those. It was only when we issued the annual bills that we started to see an influx of appeals. To date, we have had 12 appeals, and we are dealing with those.
Thank you.
As I understand it, your two councils have taken slightly different approaches to timing. Argyll and Bute Council
“implemented a policy to double the charge of Council Tax on unoccupied properties with effect from 1 April 2014”,
whereas Highland Council removed the 10 per cent discount from 1 April 2013 and increased the charge to 200 per cent from 1 April 2015. Can you give us the thinking behind that? I realise that all the other councils have done slightly different things.
Argyll and Bute Council was very keen to implement the change as soon as was practicable because our councillors had been lobbying for the change to be made in the first place. However, we took a year from the change in the definition of “second home” so that we could update our records to ensure that we had precise numbers of properties that met the new classification. We also wanted to give good advance warning to the people who were likely to be affected.
Early in 2013-14, we decided that we would implement the policy as soon as possible, and we took the decision to do so in August that year. We then spent a lot of time reviewing the accuracy of the council tax records. First, we reviewed the second homes to ensure that they met the new classification. Secondly, we reviewed other classifications of properties, particularly those where the subject address and the contact address were different and which had not been declared as being empty and had not had an non-occupancy discount at all. However, we suspected that no one was resident in some of those homes, so we reviewed all those properties too.
By November of 2013, we had a definitive list of properties that were likely to be affected by the introduction of the double council tax charge, so we were able to contact them all individually to give them advance warning and to ensure that they were able to tell us in good time whether they met the requirements of being actively marketed for sale or let before the double council tax charge came in on 1 April 2014.
We took that whole year to do preparatory work and to ensure that people were given the contact details of the council’s empty-homes officer so that they could work with them to ensure that as many as possible could remove their properties from the catchment of the double charge.
Over that period, we saw quite a change in classification of a number of properties. The council also put a considerable amount of money aside to assist empty home owners through loans and grants—we put £3 million from the strategic housing fund into a pot to provide a carrot to the owners to do something positive with their properties. That was important.
The policy implementation in Argyll and Bute was about bringing homes back into use, and not so much about raising additional money—although that is a welcome by-product. We positioned the policy to reduce the number of empty homes, to bring them back into use and to make more affordable properties available to local residents.
Is Argyll and Bute unique in doing that in Scotland and is it at the high end of the problem?
We have large numbers of second homes and long-term empty homes. Overall, they account for more than 10 per cent of our total properties. We are unique in having that level—Highland Council is probably next in percentage terms. It is a huge issue for us and has a big impact on our communities.
The theme that I get from you is that you wanted to act as soon as possible, but you gave people sufficient time to work out the practicalities.
Yes.
Can Mr Murison tell us what happened in Highland?
The approach was probably the same, except that we extended it over two years. The idea was to introduce the policy from 2013 to bring the discount down. As both councils have extensive rural areas, the difficulty is in identifying whether properties are second homes or long-term empty homes and making sure that the databases are correct. We wanted to afford people the opportunity to bring homes back into use and we have worked that over. When we brought the policy back, we extended it to implement the 100 per cent surcharge from 2015.
Are we considering the issue too soon? Both councils seem to be in a process of change—as are other councils—that in some cases covers a number of years. When will things have settled down so that we get a better picture? It is hard to look at one year on its own. Should we go back to the issue in five years? What do you suggest?
It is too early for us to gauge the situation, because we will see the impact of the 100 per cent charge only from this coming year. The impact for us to date has been minimal. It will possibly be a few more years until we see the full extent of the change.
The position for us is now much more stable. Year on year, I expect to see a slight reduction in the numbers of long-term empty homes as more and more are brought back into use. I expect around a 10 per cent reduction year on year. That is an educated guess, based on the number of properties that our empty-homes officer typically brings back into use, which is about 60 each year.
In your submission, you said that some registered social landlords have been a bit unhappy about the changes. How unhappy were they?
We had a housing stock transfer, so the council no longer owns any council housing. The additional cost to our largest registered social landlord, which received the bulk of those houses, has been £20,000 for the first financial year. That cost will probably rise, because that RSL has a large number of properties in certain areas that are void and which it is finding particularly difficult to let.
I am interested in that. My constituency has quite a lot of housing associations; some are very good at reletting and some are not. I realise that that is not just down to the housing association but also relates to where the properties are and so on. Are there particular problems in your area, perhaps in relation to more remote houses?
Yes. The problems relate to areas where there is an oversupply in the market. Private sector landlords have also been bringing down their rents considerably. Normally, private rents are much higher than those in the social rented sector, but we have noticed that, in hard-to-let areas, some landlords have been bringing levels down to nil rents, just to get someone in to pay the council tax. That has been the exception, but it has been heavily reported in our local press. Two areas are particularly problematic—they are parts of Campbeltown and parts of Rothesay.
Is that true in Highland, as well, or are you short of housing everywhere?
In certain areas, the correlation is exactly the same.
So landlords are having problems letting in some areas.
Yes.
Do you have any evidence of avoidance and people doing artificial things? Judy Orr hinted at that in speaking about just getting the council tax paid with no rent. In some business areas, the suggestion is certainly that small businesses are being given much more property than they want, just so that the landlord can say that it is not empty or vacant. Is that situation unusual, or are there signs of that happening?
We have not seen much evidence in relation to non-domestic properties, but I am concerned that there is quite a lot of potential to say that a domestic property is a second home, although it is not, and for it to be empty in the long term. Because our area is rural, we have not employed a large number of officers to go out and inspect those properties. We have taken as valid what people have told us but, certainly anecdotally, I know of properties that have been boarded up, although we have been told that they are second homes, which cannot be the case. We will put more resource into that, but we wanted initially to take a fairly soft approach. However, we know that there is avoidance.
Does the same situation apply to Highland?
No, because as I have said, we have not moved to the 100 per cent surcharge yet, so we have not seen any particular problem with the council tax. As we have reported, the difficulty is that we are starting to see a pattern with NDR whereby shops are occupied for three or four months, people move out and then a new shop kicks in. There are suggestions that that is being done rent free and just to avoid the 90 per cent charge. Patterns are forming in which the same properties are involved.
Is it difficult for you to pin down who is liable or who the owner is?
The nature of non-domestic rates charging is that, by the time we get into a recovery situation, the occupier has moved on. The issue is tracing them then.
Thanks very much.
Richard Baker was going to ask about that issue, but he will not do so now, as you have just answered his question.
There appear to be no other questions from colleagues around the table. Would the witnesses like to make any other points to the committee?
No, thank you.
We thank you very much for the evidence that you have given. I suspend the meeting to let the next witnesses in.
10:28 Meeting suspended.