Subordinate Legislation
Local Government (Allowances and Expenses) (Scotland) Regulations 2007 (SSI 2007/108)<br />Valuation Appeal Committee (Electronic Communications) (Scotland) Order 2007 (SSI 2007/124)
Licensing (Appointed Day and Transitional Provisions) (Scotland) Order 2007<br />(SSI 2007/128)<br />Disabled Persons (Badges for Motor Vehicles) (Scotland) Amendment Regulations 2007 (SSI 2007/162)
Representation of the People (Absent Voting at Local Government Elections) (Scotland) Regulations 2007 (SSI 2007/170)<br />Local Governance (Scotland) Act 2004 (Remuneration) Regulations 2007<br />(SSI 2007/183)
Gambling Act 2005 (Premises Licences and Provisional Statements) (Scotland) Regulations 2007 (SSI 2007/196)<br />Gambling (Premises Licence Fees) (Scotland) Regulations 2007 (SSI 2007/197)
Firefighters' Compensation Scheme (Scotland) Amendment Order 2007<br />(SSI 2007/198)<br />Firefighters' Pension Scheme (Scotland) Order 2007 (SSI 2007/199)
Firefighters' Pension Scheme Amendment (Scotland) Order 2007 (SSI 2007/200)<br />Police Pensions (Scotland) Regulations 2007 (SSI 2007/201)
Valuation Appeal Panels and Committees (Scotland) Amendment Regulations 2007 (SSI 2007/212)<br />Council Tax (Discounts) (Scotland) Amendment Regulations 2007<br />(SSI 2007/213)
Council Tax (Discounts) (Scotland) Amendment Order 2007 (SSI 2007/214)<br />Council Tax (Exempt Dwellings) (Scotland) Amendment Order 2007 (SSI 2007/215)
Non-Domestic Rates (Levying) (Scotland) Regulations 2007 (SSI 2007/216)
Agenda item 3 is consideration of a series of Scottish statutory instruments. Rather than read out the names of the 17 instruments, I ask members to refer to the list on the agenda. Under agenda item 4, we will consider separately a set of regulations that is subject to a motion to annul.
Unless members are otherwise minded, I propose to put a single question on the instruments. The Subordinate Legislation Committee has drawn to our attention its comments on the Disabled Persons (Badges for Motor Vehicles) (Scotland) Amendment Regulations 2007 (SSI 2007/162), the Local Governance (Scotland) Act 2004 (Remuneration) Regulations 2007 (SSI 2007/183) and the Council Tax (Exempt Dwellings) (Scotland) Amendment Order 2007 (SSI 2007/215). A cover note on those comments is attached.
Moreover, the Subordinate Legislation Committee considered the Firefighters' Pension Scheme Amendment (Scotland) Order 2007 (SSI 2007/200) and the Police Pensions (Scotland) Regulations 2007 (SSI 2007/201) only this morning. A further paper on those instruments was circulated to members before this meeting started.
No motion to annul has been lodged on any of the instruments. Does the committee agree that it has nothing to report?
Members indicated agreement.
I suspend the meeting. We will reconvene at 3.30 pm.
Meeting suspended.
On resuming—
Business Improvement Districts (Scotland) Regulations 2007 (SSI 2007/202)
I reconvene the meeting.
Agenda item 4 is another item of subordinate legislation. The committee will debate and reach a decision on motion S2M-5784, in the name of Fergus Ewing, that the Local Government and Transport Committee recommends that nothing further be done under the Business Improvement Districts (Scotland) Regulations 2007.
Before we debate the motion, members will have the opportunity to question the Minister for Finance and Public Service Reform, Tom McCabe, whom I welcome to the meeting. I also welcome his officials, Nikola Plunkett, from the local taxation and policy team of the Scottish Executive Finance and Central Services Department, and Colin Gilchrist, from the office of the solicitor to the Scottish Executive.
I invite the minister to make some remarks on the aims of the regulations before members ask questions.
Thank you for this opportunity to say a few words in the light of the motion that has been lodged. We regard the regulations as being very important, so the opportunity is welcome. I apologise if I have delayed the committee this afternoon. The request for me to come here was obviously at short notice, and other things had already been pencilled in.
The Business Improvement Districts (Scotland) Regulations 2007 provide much of the detail on how business improvement districts will operate in Scotland from 1 April 2007. The procedures that are set out in the regulations are similar to those that already operate in England, where a significant number of BIDs are now operating—thankfully, they are operating quite successfully. The changes that we have made for the regulations for Scotland take account of comments that were made by business organisations and others who responded to our earlier consultations.
The regulations are lengthy and detailed. Their main purpose is to complement part 9 of the Planning etc (Scotland) Act 2006 and the BID ballot arrangements, which were approved by Parliament; and the section 104 order on the BIDs levy—that is, section 104 of the Scotland Act 1998—which is currently awaiting approval at Westminster.
There are two main themes in the regulations. The first is broadly to provide for the procedures that were proposed by the BIDs working and steering groups, which included broad cross-sections of stakeholder bodies from across the public and private sectors. The regulations have been the subject of wide consultation.
The second theme is to provide appropriate safeguards for the Executive and local authorities to protect the integrity of business improvement districts in Scotland. To that end, the regulations cover the following areas. First, they cover the information that the BID proposer, working in conjunction with the local authority, needs to gather and process to create a robust BID proposal. The local authority is also required to assist the BID proposer by providing information—most notably about existing and planned baseline services and about those who are liable to vote. The regulations cover the rules that govern the BID ballot, renewal ballots and alteration ballots. They also cover the safeguards that will be put in place to ensure the propriety of BIDs, which involves protection of the interests of people in BID areas, the appeals procedures and the declaration of a ballot as void, where necessary. Furthermore, the regulations cover the BID revenue account and how it is to be maintained.
Those are the main aspects of what is, as I have already said, a lengthy and complex document. If the committee has any questions, we will do our best to answer them.
Will the BID proposal that is put to each business that is eligible to take part in the vote include, first, how much it will cost in total to implement the whole proposal and, secondly, how much the levy will be for that business?
Nikola Plunkett (Scottish Executive Finance and Central Services Department):
Do you mean the proposal that they vote on?
Pardon?
That is in the schedules.
I quote from schedule 1, on the "Content of BID Proposals". Paragraph 1(1) says that
"a BID proposal shall include"
the items that are listed in subparagraphs (a) to (g), but nothing in those subparagraphs states that either the total cost of the BID or the bill—that is, the individual levy that a business is required to pay—must be included. If I was a tenant on Church Street in Inverness, for example, when I received the proposal, I would want to know how much I was going to have to pay and how much the whole thing would cost. I cannot find that—perhaps I have missed it, which is why I am asking the question. At first glance, I could not find anything in the SSI that says that the BID proposal must contain these two salient pieces of information: the total cost of the BID proposal and the actual bill that is to be paid by each business.
I understood that we had covered those points in the regulations. Even if we have not, my reaction in such a situation would be simply to say that I had no way of knowing what the levy would be, or of knowing what the overall cost would be. Therefore, so as not to go into the proposal blind, I would vote no.
So, if I were a business, I would not know how much the levy would be that I was being asked to—
I never said that. As I understand it, we have already covered that point in the regulations.
I refer Fergus Ewing to regulation 5.
Paragraph 1(1)(d) of schedule 1 says that there will be
"a statement providing details of any additional financial contributions or additional actions for the purpose of enabling the project specified in the BID proposals to be carried out, by the local authority or any other person authorised or required to do so by the statement".
Would I be correct to say that
"any other person authorised or required to do so by the statement"
implies the people who would be required to pay the bid levy?
Colin Gilchrist (Scottish Executive Legal and Parliamentary Services):
Regulation 5(2)(a) provides that the bid proposer requires to send to the local authority and the billing body a summary of the consultation that had been undertaken; the proposed business plan; the financial management arrangements for the BID body; and the names and addresses of persons eligible to vote.
Some members are unclear about which part of the instrument we are reading from.
I was referring to schedule 1. Mr Gilchrist was referring to section 5(2)(a) on page 4.
Regulation 5, on page 3, states:
"BID proposals … shall include the matters mentioned in Schedule 1"
and schedule 1 states that
"a BID proposal shall include"
the items that are listed in paragraphs 1(1)(a) to 1(1)(g), but there is in those paragraphs no requirement for the BID proposal to include either how much the total cost will be or how much the bill will be. According to regulation 5(2), certain information must be sent to the local authority and the billing body. My point is that although the BID proposal does not need to contain that information, if I were a business I would want to know how much the BID would cost and how much I would have to pay. There is nothing in the regulations to say that the BID proposal must contain that information.
I disagree. Reference has already been made to different parts of the regulations, which clearly show that that is a requirement. Requirements in the section 104 order that is awaiting confirmation at Westminster will further reinforce that.
Article 4 of the section 104 order, which was laid at Westminster on 9 March, provides that the details of the imposition, amount and calculation of the BID levy require to be included in the BID proposal.
Do we have that document?
No. It is United Kingdom legislation.
Are you saying that the effect of the section 104 order—which we do not have before us and to which the minister has not previously alluded—will require the BID proposal to contain those two bits of information: the total cost and how much each business will have to pay?
That is correct. Article 4(3) of the levy order provides that
"The calculation of BID levy for any chargeable period shall be specified in the BID proposals and the amount of the BID levy for such chargeable period is to be calculated in such manner as provided for in the BID arrangements",
once those are approved.
Why are there parallel arrangements governing the implementation of BIDs in Scotland?
I take exception to Mr Ewing's inference that we have never referred to a section 104 order. Committee members are well aware that an integral part of the package that allows us to implement BIDs in Scotland is the section 104 order that requires to go through Westminster.
With respect, I remain to be convinced. Given that that information is not referred to in the instrument, I am not convinced that it will have to be provided in the proposal. If it is, that is one defect that would be removed.
I seek clarification of a further area. Shall I do that now or will you come back to me later?
I am happy for you to continue.
Thank you. My question arises from the evidence that the committee heard at our meeting on 6 March, when Miss Plunkett, Mr Gilchrist and the minister said that if a property had a tenant and an owner, the BID levy would be allocated between the two in the BID proposal. How would the allocation be made?
I am sorry, will you repeat your question?
On 6 March, Mr Gilchrist said:
"The amount of the levy is allocated between the owner and the ratepayer."—[Official Report, Local Government and Transport Committee, 6 March 2007; c 4622.]
How?
The BID proposal must provide for the allocation of the levy between the owner and the ratepayer. The BID proposer must assess the respective benefits of the BID to the ratepayer and the eligible owner or tenant in percentage terms.
Does the law give guidance about the percentage of the levy that should be allocated between tenant and owner, or will that be left entirely to the BID proposer?
The matter will be at the discretion of the BID proposer. The draft affirmative order that deals with the rateable-value element of the vote provides that, in determining the percentages to be apportioned between the ratepayer and the owner, the BID proposer must assess the respective benefits of the BID.
We have tried our best not to be overly prescriptive, particularly in matters that would be of direct relevance to the BID. We have tried to allow for appropriate local discretion, particularly on matters such as those we are considering.
I will move on. On 6 March, I suggested that tenants who have commercial leases on a full repairing and insuring basis—as is frequently the case—will often have to pay the landlord's part of the BID levy. I argued that it is foreseeable and likely that if a landlord has a lease that entitles him to require the tenant to pay the BID levy, the tenant will be expected to do so. From my experience of commercial lease work, landlords tend not to be philanthropists. A landlord who has hired expensive lawyers like Mr McLetchie and me to execute a commercial lease, under the terms of which the tenant must pay the rent, insurance, running costs and taxes—including local authority rates—that are attributable to the property, is unlikely voluntarily to pay a charge for which the tenant is responsible under the lease. That means that in many cases, tenants will pay the whole BID levy: the tenant's part and the part that has been allocated to the owner. When I asked about that on 6 March, Miss Plunkett said:
"in England, where they did not legislate for the involvement of property owners, we found that property owners have been getting involved voluntarily and have often made quite large financial contributions."
I then asked the minister and his team what evidence there is that landlords in England are of such a philanthropic mien and are choosing to pay financial charges for which their tenants are responsible. I asked about that because—if I may be frank—I do not believe that there is any such evidence. If there is such evidence, I would like to see it. I asked Miss Plunkett:
"On what is your understanding based? How are you able to conclude today that in most cases the whole BID levy will not be passed on?"
She replied:
"It is based on what we have heard from all our stakeholders, almost all of whom support the proposed way of providing for the involvement of property owners. It is also based on our understanding of how the situation is playing out in England at the moment."—[Official Report, Local Government and Transport Committee, 6 March 2007; c 4623.]
On 7 March, I e-mailed the minister to ask again—
Could you get to your point, Fergus?
The matter is pretty relevant, convener. I am just about—
Could you get to the point?
Certainly.
On 7 March, I e-mailed the minister to ask whether the evidence to which Miss Plunkett alluded could be provided. The minister has not responded and I have raised that with Mr Elvidge; we are making the law, so we should have any evidence to which officials allude. Will the minister now let us have that evidence, and will he name, say, five landlords in England who have chosen to pay the BID levy when the tenant is legally responsible?
A number of points arise there. I want to start with Mr Ewing's statement that he simply does not believe what was said by me and the officials. I take exception to that. We do not come here deliberately to mislead a parliamentary committee. Mr Ewing should have rephrased his comments.
Mr Ewing did indeed e-mail my office on 7 March, but people who e-mail my office do not short-cut the correspondence system, which is extensive. Correspondence is dealt with in the order in which it is received. That applies to Mr Ewing's correspondence, too. That is right and proper; otherwise, it will become fashionable to try to short-cut the normal correspondence system. That is why, to date, Mr Ewing has not received a reply.
Before I give specific answers on the evidence that Mr Ewing has requested, I say to him that he is making an assumption. We do not yet have any operational BIDs in Scotland, but Mr Ewing is assuming that property owners will take the approach that he suggests. Neither Mr Ewing nor anybody else has any evidence to suggest that that is how people will behave. It is important to remember that point now, before any BIDs have come into force.
We have evidence from expert advice that has been received and from consultations that have been carried out. It will be worth the committee's while to remember that the proposals came from public and private interests—from people who took part in the various working groups. We consulted again last summer and the responses endorsed our approach. There is operational evidence from BIDs south of the border that landlords are, indeed, contributing. The Department for Communities and Local Government report entitled "Review of the Role of Property Owners in Business Improvement Districts" shows that property owners have been prepared to play a part and to make contributions. The evidence exists: in particular, the DCLG report is there for anyone who wishes to read it. When Miss Plunkett said that we had evidence, that was a reference to sources such as the DCLG report. It was not simply an off-the-cuff remark.
I have listened carefully to the minister and I am afraid that he did not answer my question. There has been no evidence of any individual case in which a landlord in England who could require a tenant to pay part of the BID levy that is exigible from that landlord has chosen instead to pay it himself. No evidence whatever to that effect has been produced.
Have you read the DCLG report, Mr Ewing?
No such evidence has been produced. If the minister wants to refer to any specific page of any specific report, or to any specific business that has, when it has been able to require its tenant to pay the BID levy, chosen not to, I ask him to do so. I asked him on 6 March and 7 March and I have asked him again today, but he has not given an answer. I therefore conclude that there is no evidence.
The minister has referred to a report, which he cites as evidence. That was the minister's answer to the question.
I have two points to raise with the minister. Fergus Ewing mentioned the section 104 order. Can the minister confirm that that is mentioned in the Executive note that accompanies the regulations?
Secondly, I want to ask about financial contributions and about whether people know the amounts. Paragraph 1(1)(d) of schedule 1 seems to cover what Mr Ewing was asking about. Do any other parts of the regulations clarify the issue further; or is further clarification not required?
On the first question, I can confirm that the Executive note does mention the section 104 order. Miss Plunkett may be able to refer to other sections for clarification.
Because the levy is a reserved matter, all matters regarding the levy are covered in the section 104 order. That part of the schedule refers to other relevant donations, from whomever, that the BID could accept in addition to the levy, which is in the section 104 order.
Okay. That has clarified the matter. My second point concerns subordinate legislation—I am sure that you would expect me to raise the matter. The Subordinate Legislation Committee raised the issue of the joint vote, and you wrote an explanation for us that we were happy with when we met this morning. We thought that any points arising from it were more a policy matter to be raised at this committee.
On the joint vote, you say:
"There is no mechanism provided for resolving disputes between persons entitled to exercise a joint vote. If there is disagreement as to how a joint vote is to be exercised, the parties will not be able to cast a vote."
Obviously, if there were only two such persons and their views were different, they would just cancel each other out. You continue:
"It will therefore be for the parties concerned to seek to resolve their differences in order to enable a joint vote to be made."
Is there any likelihood that there could be three parties in a joint vote? If that were the case, would not it be easier to say that, if there were a two to one split—as there could be—the decision would be in favour of the majority? It seems silly to say that there would be no vote if there were three parties and the split was two to one.
I do not know the exact answer to that question, but I strongly suspect that, in such a situation, one of the parties could, to try to resolve the dispute, easily refer the matter to one of the expensive lawyers that were mentioned earlier. I do not know how the issue would be resolved.
We have made it clear that, if two people have a joint vote but cannot agree, they will not be able to vote. If the balance was two to one, the result would depend on how the one person chose to react. If they felt that their interests were being infringed and, therefore, did not want the vote to be cast in that way, they could decide to take legal advice of their own. At the moment, that is why the matter has been left as it is.
Is it the intention of the current Executive to provide full funding to local authorities for their share of the cost of BIDs?
Do you mean BID pilots or BID areas?
It is not necessarily the case that a local authority would incur any costs in relation to a BID in its area. It may do, and it may choose to provide financial or in-kind support voluntarily, but it is not our expectation to put a new financial burden on local authorities.
I will go further. It is not our expectation that this will be some kind of new mechanism for public subsidy; rather, it is a mechanism that will allow businesses to have a more direct influence over their trading environment and their own area. We have given money to BID pilots and have tried to pump-prime the process, but as the process has moved on, we have made it clear that the process should stand on its own two feet and should not attract public funds.
In many cases, city centre partnerships have a big local authority influence, and it may well be city centre partnerships that propose bids. The local authorities may be the owners of some of the buildings; therefore, they may have a substantial part to play in the BIDs. I ask again whether it is the Executive's intention to provide finance to the local authorities.
Absolutely not. It is part and parcel of their duties as local authorities to ensure that the business environment is as good as it can be. Involvement in a BID area may mean that that environment can be enhanced. However, as far as I am concerned, that is part of their responsibility as local authorities and would not, in itself, attract additional finance.
I will pursue some of the issues that Mr Ewing raised. Regulation 2 requires the local authority to prepare
"a document showing … the name of each non-domestic ratepayer"
and, where the property is unoccupied, the owner of the business. Am I right in thinking that the document that is produced for a BID ballot or consultation—the list of names—is, in effect, the electoral roll?
It will probably be based on the valuation roll.
It will be the valuation roll, not the electoral roll.
I use the term "electoral roll" loosely. For the purposes of conducting a BID ballot, is the document that lists the non-domestic rate payers, which is mentioned in regulation 2, effectively the list of those who are eligible to vote in the BID ballot? Is that the purpose of compiling it?
Yes.
Yes.
If I read the regulations correctly, regulation 2(1)(a) refers to the
"non-domestic ratepayer and the … rateable value of each relevant property which is occupied, or (if unoccupied)",
the owner. It does not refer to the owner of a property that is tenanted—that is, a landlord. Is that correct?
Yes.
So a landlord of a tenanted property will not be on the list. Is that correct?
They will not be on that list, no.
The landlord of an occupied property—a landlord who has a tenant—will not be on the list. Is that correct?
Yes.
If a landlord who has a tenant is not on the list, and the list is, in effect, the electoral register for the conduct of the BID ballot, how can the landlord vote?
We acknowledge that it is not straightforward to identify property owners. The document that is mentioned in regulation 2(1)(a) will be the starting point for most BIDs. Many BIDs will not involve property owners anyway, so the list is all that they will need. For those BIDs that want to involve property owners, the onus will be on the BID board to identify the relevant property owners using, for example, the land registry. We do not have a definitive list that we can give to a would-be BID board and say, "There you go. That's your list of property owners." The onus will be on the board.
With respect, I do not fully understand that. You said that, if a property has a tenant, you might not know who the landlord is, but you seek to impose on local authorities a statutory requirement to state who the landlord is if the tenant gives up the lease and quits the property. How is it that you can know who the landlord is if the property is empty but not know who they are if the property is occupied?
If the property is unoccupied, liability for rates will revert to the owner.
Not necessarily. That assumes that the property is rated. The owner might get relief on an empty property.
My point is that, if a tenant gives up a lease on a property, the council, for the purposes of assessing rates that it might be required to levy on empty properties, will have to ascertain who the landlord is. That being the case, why would it be so difficult to identify the landlord of a property that is occupied? Why is one more difficult than the other? Frankly, I would have thought that it would be easier to identify the landlord of an occupied property because all that the council would have to do is to go to the tenant and ask, "Who do you pay your rent to?" Is that right?
Yes, and that is perhaps what the BID board could do, rather than—
But you said that the list is the electoral register. Also, in the discussion with Mr Ewing, we heard that landlords will be consulted and balloted, if I understood that correctly.
To be fair, Ms Plunkett also said that it was a starting document, which can be added to, not a final document. Is that correct?
Yes.
So, it is not the electoral register. I asked specifically whether it was and the answer that I was given was, "Yes, it is."
At a particular point, it will become the register, but there is not a full stop after it.
So, it is not the definitive electoral register.
It will be at a particular point, but not at the point that you just described. It is a starting document, as was said.
But there is no other provision regarding the document. Where are the other provisions in the regulations that say that new names can be added to the list as and when they are found?
The onus is on the BID board to identify the relevant parties. Given that the local authorities already have an extensive set of valuation roll data, it makes sense for them to get the BID board started on that task. That is what is provided for.
I would have thought that the purpose of regulation 2 would be to get the local authority—the official body—to produce the register of electors from the official records.
But at that point it is about obtaining information from a local authority for the purpose of developing BID proposals. At that point, all the BID board is doing is getting the first draft of who it wants to talk to, going to talk to them and working up its proposals.
Where do the regulations prescribe who is on the register of electors if that is not the list that is compiled under regulation 2? Where do the regulations specify what is, in effect, the definitive list of voters in a BID ballot?
Again, the onus is on the BID board to identify the relevant property owners, if it wishes to involve them.
So, you are saying that the people who make the BID proposal, who have a vested interest in its outcome, are the people who make and determine the definitive list of voters in a BID ballot. Is that right?
If they did so fraudulently, there are procedures for declaring the ballot void.
I am not suggesting that they would do it fraudulently. It seems to me that the whole purpose of regulation 2, which is, apart from the omission that I have identified, well conceived, is to establish the definitive list of people who can vote, which is perfectly laudable. The outcome of the ballot will determine the liability to pay what is a tax. It is only fair that there is a definitive list and that you know at the outset all the people who are eligible to vote. If you do not know that, you do not know whether you have achieved the requisite degree of approval to carry the BID proposal and, in effect, create a legal liability for payment of the levy. Where is the definitive list produced? You are telling me that the proposer compiles the list of voters. Is that correct?
We are saying that the proposer gets information from the local authority. That is what the regulations say. We are also saying that that is a starting point for the list. It would be in no one's interest deliberately to exclude owners. It is not the responsibility of the local authority to draw up some kind of electoral roll. In the final analysis, it is the BID board—the BID proposer—that has the responsibility for compiling the final list, which is then put to the people who are involved in the BID.
With respect, that might be your intention, but it is not what the regulations say.
Do the regulations specifically preclude that from happening?
I suggest, with respect, that we are being presented with regulations that govern the establishment of and registers and voting procedures for BIDs. Given that they extend to 25 pages—dear knows how many regulations there are, because I have not counted them all—it is not unreasonable for us to expect to see a definitive voting list. Your starting point is that a council can tell the BID proposer who the landlords of unoccupied properties are, but not who the owners of occupied properties are. To me, that seems quite bizarre.
I refer you to regulation 6(1)(b)(ii), on the instructions to hold a BID ballot, which says that a local authority shall
"provide the ballot holder with the names and addresses of each eligible person entitled to vote".
That is at the point of ballot. I wonder whether that is what you are looking for.
That leads me to the next question. What is the meaning of the term
"eligible person entitled to vote"?
On eligibility, I refer you to the Planning etc (Scotland) Act 2006.
Yes. Section 39(2) of the 2006 act provides that
"When submitting BID proposals to the local authority, those who have drawn up the proposals are also to submit a statement as to which eligible persons are to be entitled to vote in the ballot."
It is a pity that we did not discover that provision 15 minutes ago.
I return to my first question: if we now know, as a result of regulation 6, that the local authority knows, and is required to know, who all the landlords are—
With respect, Mr McLetchie, you were here 15 minutes ago, just as we were.
Why are those landlords not referred to in regulation 2? The council must know their names in order to comply with regulation 6, as you have just told me, so why are they not among the people who are listed in regulation 2?
Regulation 2 refers to an early stage of the BID proposals. The difference is that that provision prompts people to say, "Do I want a BID in my area, and is it viable? I think I want to take some first steps."
Consultation.
Yes.
So why will you not consult the landlords?
The expectation is that they will be consulted. I am not sure that it would necessarily be appropriate for a local authority to do a lot of legwork to identify those landlords at such an early stage in a proposal for a BID that might or might not be viable.
Ultimately, the BID board is responsible, rather than the local authority. We are not placing an onerous burden on local authorities. The BID proposer—the board—will cover the proposal, and it is those people who are expected to pursue the entire initiative.
Okay. In relation to the business of the transfer of liability from landlords to tenants, is there anything in the section 104 order that has been laid at Westminster that prohibits a landlord from transferring liability for payment of the BID levy to a tenant?
No.
So, as Mr Ewing pointed out in his questions and as I pointed out several times in the debates on the Planning etc (Scotland) Bill, clearly, a landlord cannot be compelled to pay a BID levy. Is it correct that, under a normal, full repairing and insuring lease, a landlord is not liable to pay a BID levy? I mean that he is not legally liable—I am not talking about voluntary contributions.
The section 104 order will impose a liability on the landlord to pay the landlord's allocation of the BID levy.
But, under a standard, full repairing and insuring lease, does the section 104 order prohibit the landlord from transferring responsibility for payment of that liability to the tenant? Is there any prohibition on the use of the normal rules of freedom of contract in commercial leases, which would transfer the liability in the same way that a landlord ensures that all rates assessments and so on are transferred to a tenant?
No.
Is it correct that a landlord who suitably contracts under the terms of a normal, standard, full repairing and insuring investment lease—such leases are commonplace in Scotland—effectively does not have to pay a BID levy because he can contractually transfer the responsibility for payment of that levy to his tenant?
That could happen in some cases.
Have you studied the terms of full repairing and insuring leases in a number of shopping centres or malls as part of the development of your proposals? Have you considered the normal contracted terms between landlords and tenants?
I think that we took advice from our stakeholders on that particular point, and the feeling—
Did you take advice from your lawyers?
We consulted people in the public and private sectors who would be interested in BID proposals. On more than one occasion, the advice that came back very strongly was that the route that we were proposing was the route that they strongly preferred.
I am not talking about voluntary contributions; I am trying to establish—as I repeatedly tried to do in the course of the debates on this subject—that there is no prohibition on the contracting out of the transference of liability from landlord to tenant.
We have acknowledged that.
I am also asking whether, in relation to the existing full repairing and insuring leases for current tenancies of commercial properties in Scotland—those that are in what I would call fairly standard full repairing and insuring terms—a landlord's BID levy can be transferred to a tenant. Is that the case?
Yes, it can.
So, basically, a landlord in Scotland who has an existing or new full repairing and insuring contract will not have to pay a BID levy, unless he voluntarily chooses to do so. Is that correct?
Yes.
So, when I said in the debate that the aspiration to have landlords pay their BID levy was no more than that—an aspiration—because people could contract out of it and the Executive could not prevent them from doing so, I was absolutely correct.
You are crediting yourself with quite a bit of foresight. With experience, we will be able to see how landlords have behaved. However, the experience of landlords' behaviour in other areas does not suggest that their behaviour in Scotland will be as you suggest that it will be. That is what I indicated to Mr Ewing earlier.
I will leave it at that, other than observing that we have not seen any specific landlord in any specific tenancy south of the border, which means that we have not seen any examples of any landlord's behaviour.
To be fair, the DCLG report that I referred to earlier relates specifically to the role of property owners in BIDs.
Does it have specific examples of a landlord in a particular development?
I think that it does. The DCLG's research covered a number of BIDs and considered the way in which property owners voluntarily engaged, how much money they put in and what their behaviour has been. I cannot remember whether the report contains case studies, but I know that it contains a number of pieces of relevant evidence.
In other parts of the world, it is property owners who are the driving force behind this sort of initiative—
No wonder; they do not have to pay.
I ask you not to interrupt, Mr Ewing.
What Mr Ewing says is not the case. We have referred a number of times to behaviours that we have seen in other parts of this country and in America and Australia, and those behaviours are not of the sort that Mr Ewing has alluded to.
Is it not the case that the liability for a BID levy on someone who is leasing a property would be only a small percentage of the overall liabilities that a tenant would accept, even if they signed up to the sort of lease contract that Mr McLetchie described?
Yes, it would be an extremely small part of their liabilities.
I think that that exhausts members' questions, so we will move on to the formal debate. I invite Mr Ewing to move his motion.
In moving the motion to annul the regulations, I make the following case.
It is clear from the evidence today and on 6 March that BID levies are a tenants tax, because many tenants in city and town centres will have to pay not only their own allocated share, but the share that is allocated to their landlord. That is because it is commonplace for commercial leases in Scotland to pass on such matters from the landlord to the tenant. I know that because, before I entered this place, I gained about two decades' experience of engaging in such work. The clauses are pro forma and routinely pass on the landlord's liability in respect of taxes—whether local or national—to the tenant.
A tried and tested pro-forma clause, which can often extend over two or three pages, is used for the clear purpose that the landlord wishes to ensure that the tenant pays for such matters. That is for negotiation between the parties, as Mr Gilchrist said at our previous meeting. However, my riposte is that although the matter is for negotiation, such a clause is almost invariably found in commercial leases.
On 6 March, Mr Gilchrist said—and he had a point to an extent—that short leases might not contain such a clause. However, many—probably most—of the commercial premises in high street locations are let under commercial leases, for the good reason that there is a clear relationship that has been established in law and worked on over decades. It is accepted that tenants of high street premises routinely enter into commercial leases.
I tell the minister from my experience—I do not know whether Mr McLetchie agrees, but I suspect that he might—that a tenant has very little chance in such negotiations of persuading any landlord to remove the clause. In practice, the clause remains, and the tenant can either sign up to the lease or not do the deal. That is the commercial reality. The minister and his civil servants have admitted that that means that although the proposal will allocate the tax between the tenant and the landlord, in practice, many tenants will have to pay all the tax. That is why I call it a tenants tax.
Tenants in city and town centres who operate retail or office premises often pay very high rents and business rates. The Scottish National Party's position is that those rates have been too high. In the past eight years under this Executive, higher business rates than in England have been paid in Scotland. After eight years, the Executive eventually decided that that decision was a big mistake. It would have been better if lower rates had been agreed to at the outset, before Mr McConnell imposed the higher tax. However, I will look forward, as we must. The SNP is not persuaded that, just when we end the higher tax that tenants in Scotland have had to pay, it makes sense to impose a new tax on them. For that reason, we believe that the proposals do not represent a sensible means of proceeding.
In addition, it should be made clear that BIDs will not be able to generate the action that many of the public would like in our city centres. In my part of Inverness, trees grow out of some buildings' fascias and plants grow in gutters. People would like buildings to be cleaned. However, improving buildings remains the responsibility of property owners, so a BID will not make that happen.
Small businesses have a concern—it was expressed to the committee by bodies during the passage of the Planning etc (Scotland) Bill—that local authorities will be in the driving seat. I note from the regulations that that is so. The minister has made it clear that local authorities will not be expected to contribute as of law and that is the clear implication of paragraph 1 of schedule 1 to the regulations, which says that a local authority may make an additional contribution. In other words, the minister has said that it is expected that there would not be a "public subsidy", to use his phrase. That means that, unlike BIDs as developed in the United States of America, the state would not pay a share. There would not be a carrot—only a stick. Businesses would pay for the whole BID, which seems to be against the original concept of BIDs.
In addition, businesses were concerned that BIDs would be used by local authorities to put forward schemes that may involve matters that should really be covered by local authority services. The regulations do nothing to tackle that fear. In my city of Inverness, for example, there are a number of small traders in the old town in the city centre. It is expected that that would possibly become a BID area, although there can be more than one under the proposals. However, Tesco, which has acquired a somewhat infamous reputation in Inverness, is not located in the old town area of the city centre. Therefore, if the BID boundaries include only the old town, Tesco will pay nothing while the small city traders will pay a new tenants tax courtesy of the Labour-Liberal Executive. I do not think that they will look on that kindly.
The minister may say that it would be a matter for the ballot to determine whether a BID was wanted, and he would be correct. However, how much is it all going to cost, and how complex will it be?
I would like to make many other points, but I do not want to detain members any longer. I conclude by saying that the proposals are a muddle and a mess. On 6 March, the minister appeared to accept that the proposals were flawed, saying that they are not a "Shangri-La". Of course, he may now say that they are perfect, but most people will disagree, especially those in the business communities who, when asked to pay for a BID, will not know what their bill is and may not know how much the whole scheme will cost, because that information will not necessarily be communicated directly to them—it will be communicated only to the local authority. They will deliver a resounding no to the new tenants tax from what is—for now—a Labour-Liberal Executive.
I move,
That the Local Government and Transport Committee recommends that nothing further be done under the Business Improvement Districts (Scotland) Regulations 2007 (SSI 2007/202).
Thank you, Mr Ewing. I invite the minister to respond.
Do we not get a shot?
You will get an opportunity later.
There are various ways in which I could respond to Mr Ewing's elongated contribution, which was not based on the legislation that we are considering; it was more of a political statement, which was highly inaccurate and showed clearly the anti-business agenda of the party that Mr Ewing represents. If a successful company such as Tesco had been listening to the comments that were made about its operation in Inverness, it would have much to worry about. If that is the SNP's approach throughout Scotland, any company that achieves success will have a lot to worry about.
Mr Ewing referred to Tesco in Inverness, but he failed to mention that there is already a BID pilot in Inverness. The last time that I looked, we had not corralled owners into a pen and starved them for a week to ensure that they agreed to a BID pilot—they did so voluntarily. It is an unfortunate reflection of Mr Ewing's comments that he is unaware of business intentions in his own town. Perhaps he should spend less time offering inaccurate remarks to this committee and more time listening to his constituents. Clearly, he is minded not to do that.
Mr Ewing was hugely inaccurate in his comments about business rates in Scotland. When all things are considered, including the poundage and other factors in business rates, Scottish businesses have always paid less than other areas in the United Kingdom. Their competitive advantage is now even higher.
I know what businesses in Scotland have to worry about: when the SNP tries to perpetrate its 3p local income tax and when the huge gap in local services is still there, there is only one place that the SNP will go—to the business community. We will then know what a true tenants tax is, as the SNP hammers business and creates a disincentive to work and to grow our economy in Scotland. That is what Mr Ewing has explained to us clearly this afternoon.
The regulations are the subject of wide consultation and are based largely on experience in other parts of the United Kingdom, which can now be shown to be clearly successful; more than 30 BIDs are operating south of the border. In the final analysis, the decisions would involve property owners, tenants and people within the BID. This is a local initiative for people who want to improve the trading environment in their area. Those people will take the initiative and will make the final decision. The regulations are not being introduced in a prescriptive way that is determined centrally—they are an enabling piece of legislation. If people at any level anywhere in Scotland do not want to take up the initiative, they are not required to do so.
Before I make some criticisms of the regulations, I would like to praise the Executive for one provision—the requirement that there be a description of baseline services against which a ballot is conducted. That regulation flows from an undertaking that the minister gave during consideration of the Planning etc (Scotland) Bill, in response to an amendment that I lodged in committee. I thank the Executive for taking up that important principle. I regret that the regulations do not contain another important principle—that people in a BID should not be required to pay for something that people in an adjoining area are getting for nothing. An amendment that I lodged to the Planning etc (Scotland) Bill sought to prohibit such an outcome. Unfortunately, that provision is not included in the regulations, but it is a good principle that might be revisited at some point in the future.
If we leave aside the more partisan policy points, Mr Ewing's analysis of the legal position of the landlord-tenant relationship in commercial leases in Scotland is absolutely correct and has not been seriously disputed by anyone who has given evidence to the committee. When the primary legislation was going through Parliament, I said that the Scottish Executive proposition that somehow it could compel landlords to contribute to the cost of BID arrangements was a delusion, because by doing so it would disturb an investment property market that is a UK market. I said that we could not have a two-tier property market in Britain, in which people had to differentiate between the returns from their Scottish portfolio of properties and the returns from their properties elsewhere. That has proved to be the case, because the section 104 order that we discussed earlier does not include a ban on contracting out of the arrangement. The notion that landlords could be compelled to make a contribution is a total delusion. Frankly, the Executive was kidding Parliament when it suggested that that could happen. We are left with a provision for contributions on a voluntary basis, which I do not think will apply.
I am not agin the concept of not prohibiting contracting out, because the fundamental principle that we must establish is that of freedom of contract between landlord and tenant, which applies north and south of the border. The Scottish Executive was trying to interfere with that principle. Only in the light of harsh reality, after a few home truths were pointed out to it at earlier stages of the legislation, has the Executive been forced to acknowledge that this is in no way, shape or form a compulsory levy on landlords and that there is no prohibition on transfer of liability from landlord to tenant under a new lease or an existing full repairing and insuring lease.
That is the situation that we have reached; I said at the outset that we would reach it. It is a great pity that the Executive does not acknowledge that more, instead of clinging to the wreckage of its proposal and hoping that someone, somewhere, will put a voluntary contribution into the pot. I said at the start that that was a delusion and so it has proven to be. The whole BID proposal is misconceived. I voted against all the BID provisions during the passage of the Planning etc (Scotland) Bill and, with the exception of the endeavour to establish a proper baseline, I do not approve of the regulations. I am opposed to the BID concept and I will not support the regulations that seek to implement BIDs.
In listening to the debate, I could not make my mind up about one point. Are Fergus Ewing and my friend David McLetchie vying for the role of the new Jeremiah, or trying to see who can be more like Jeremiah?
The minister confirmed that, in a full repairing and insuring lease, it would be possible for a landlord to contract out his or her liability for a BID levy. As David McLetchie just said, such contracting out is surely part and parcel of normal contract law for businesses. It is a commercial decision and is part of the commercial negotiations in which landlords and business tenants engage. What is wrong with that? I do not know how Fergus Ewing can perceive that as a sort of Achilles' heel in the legislation, which has suddenly been discovered—that is a bizarre perception.
I do not support Fergus Ewing's motion. I think that the Scottish Executive is introducing useful legislation. Let us not forget that the regulations are about improving business districts—they are enabling legislation. I want to see real encouragement for improving businesses in Scotland and the regulations are a way to do just that.
The debate has tried to make a mountain out of a molehill. The issue that is being debated is a relatively small aspect of the proposals for business improvement districts. The cost for any business to take part in a BID would be only a small proportion of its outgoings. In any case, any participating business would have had the opportunity to participate fully through a debate and a ballot. A BID would go forward only if a majority of businesses, in terms of numbers and rateable value, was in favour of it. That would mean that a majority of businesses in an area believed that the business improvement district would be to their commercial advantage.
Fergus Ewing and David McLetchie wish to deny an investment tool to Scottish businesses that is available to many businesses in other parts of the world, including England. I just do not know what point they are trying to make.
Further, if business people are going to be concerned about levies or taxes, it seems to me that most of them would worry not about business improvement districts but about the nightmare scenario of the SNP coming to power, with the £11 billion gap in its plans. If Fergus Ewing is worried about impacts on businesses, perhaps he should look to his own party and get the SNP to drop the various uncosted spending pledges in its programme. I support the regulations and will oppose Mr Ewing's motion.
No more members wish to contribute, so the minister may respond to the debate.
I will be brief, convener, because we have had a full session.
Mr McLetchie said that people in one area would pay for something that others would get for nothing. That claim misses the whole point of the BID concept. BIDs are designed to add value and would be at the discretion of business people in an area, who would vote on them.
At no time did we say that there would be compulsion in the process. Any assertion that we indicated that we would be able to compel people not to comply with the terms of their legal arrangements is simply not true. We have never tried to disturb that legal situation. Indeed, the basis of Mr Ewing's criticism is that we have not tried to disturb it. He would quite like it to be disturbed and for us to interfere with it, but we have said that we simply would not do that.
It is unfortunate that the debate has moved away from the regulations that we are here to discuss. It has been an opportunity for members to make considerable political points. I am interested in the symmetry between the Conservatives and the SNP—I have always thought that the two names were interchangeable, so perhaps the term "tartan Tories" would be the most appropriate.
I have only two points to make, neither of which will trespass on party-political terrain. I have left that to the minister, who has done very well.
What about your opening remarks?
The convener did a good job, too.
The minister says that there will be no compulsion. However, section 40 of the Planning etc (Scotland) Act 2006 states that a BID can go ahead if
"25% of the persons entitled to vote … have done so"
and if, in relation to
"25% of the aggregate of the rateable values",
people have voted. That means that a BID can go ahead if 75 per cent of persons have not voted or if, in relation to 75 per cent of the properties, going by rateable value, people have not voted. All the businesses that do not vote for the proposal, or that do not vote, will have to pay for the BID, so there is compulsion. It is a tenants tax. With respect, minister, to say that there is no compulsion is misleading.
I want to tackle the minister's rather disappointing remarks about my attendance in my constituency. When I was in Inverness city centre yesterday, going round shops and speaking to businesses, as I do frequently, none of them mentioned BIDs or was aware that a pilot scheme is running. That may be for the good reason that they have not been asked to pay a penny piece. The minister used the word "pilot", but the scheme is not a pilot at all, because a BID is a scheme in which businesses pay but, in the schemes that the minister described, the state or the taxpayer has paid. Therefore, there has not been a pilot. Unsurprisingly, as no business has been asked to pay anything, the question of businesses being corralled—to use the minister's word—into supporting the BID does not arise, because there has been no BID.
I wanted to put that on the record. I do not wish to repeat my main arguments, as I think that I put them reasonably coherently in my opening remarks. Therefore, I will rest at that.
I take it from your remarks that you do not intend to withdraw the motion. Therefore, the question is, that motion S2M-5784, in the name of Fergus Ewing, be agreed to. Are we agreed?
No.
There will be a division.
For
Ewing, Fergus (Inverness East, Nairn and Lochaber) (SNP)
McLetchie, David (Edinburgh Pentlands) (Con)
Watt, Ms Maureen (North East Scotland) (SNP)
Against
Jackson, Dr Sylvia (Stirling) (Lab)
Martin, Paul (Glasgow Springburn) (Lab)
McMahon, Michael (Hamilton North and Bellshill) (Lab)
Muldoon, Bristow (Livingston) (Lab)
Rumbles, Mike (West Aberdeenshire and Kincardine) (LD)
The result of the division is: For 3, Against 5, Abstentions 0.
Motion disagreed to.
We will report to Parliament accordingly. I thank the minister and his team for attending.
Before I close the meeting, I repeat my thanks to committee members and clerking staff for their support and work in the past four years. During those four years, we have held 116 meetings and taken evidence from 533 witnesses, which makes us one of the busier committees in this session of Parliament. We have been the lead committee on eight parliamentary bills and we have held committee meetings here and in Motherwell and had a videoconference with a witness in Ethiopia. The committee's longest meeting, which lasted for seven and a half hours, took place on 18 January 2005, from 2.08 to 9.40, to discuss the UK Railways Bill. That is probably the longest committee meeting in the Parliament to date and is a record that we may well hold for some time, although, at times today when Mr Ewing was speaking, I thought that we were going to beat it.
It has been a pleasure to convene the committee in the past four years. Although we all want different outcomes from the election that we are about to face, I am sure that we all hope for energetic engagement with the people of Scotland and a strong turnout in the election.
Meeting closed at 16:44.