Landfill Tax (Scotland) Bill
The next item of business is a debate on motion S4M-08609, in the name of John Swinney, on the Landfill Tax (Scotland) Bill. I invite members who wish to speak in the debate to press their request-to-speak buttons now, but I indicate at this stage that we are extremely tight for time and it is likely that I will be able to give back-bench members only three minutes. I call John Swinney to speak to and move the motion. Cabinet secretary, you have no more than 10 minutes.
15:16
I welcome the fact that we have reached the stage 3 debate on the Landfill Tax (Scotland) Bill, which is the second bill establishing devolved taxes in Scotland under the powers in the Scotland Act 2012. The bill sets out the provisions and rules for a Scottish landfill tax that will replace the United Kingdom system of landfill tax from April 2015.
The devolved taxes will be administered using powers that are set out in the third bill establishing devolved taxes, which was introduced last week—the Revenue Scotland and Tax Powers Bill. As I explained to Parliament in June 2012, the arrangements for collection of the landfill tax will be undertaken by revenue Scotland working in conjunction with the Scottish Environment Protection Agency. The new body will be established and its powers will be granted through the Revenue Scotland and Tax Powers Bill.
I turn to the purpose of the Landfill Tax (Scotland) Bill. I want to see resource efficiency at the heart of our economy. The zero-waste agenda in Scotland is moving thinking about how resources are used and reused from the margins to the mainstream. Our priority for the future is supporting innovation and new ways of doing business as we move towards a more circular economy.
Putting the value of resources at the heart of our economy is an important priority for the simple reason that we live in a changing world, which is placing new pressures on how we manage the resources of this planet. The pressures from human population growth are huge and growing. According to the 2012 revision of the official United Nations population estimates and projections, the world population of 7.2 billion in mid-2013 is projected to increase by almost 1 billion people in the next 12 years, reaching 8.1 billion in 2025, with further rises beyond that.
That population is becoming increasingly affluent and urban. That means that our demands for resources are changing. We can no longer afford to throw material away in landfill sites. The actions that we are already taking are helping businesses to save money, create jobs and deliver economic growth.
Scotland’s targets on climate change and waste are among the most stretching anywhere in Europe. We are leading by example. We have shown multimillion pound support for innovation in renewables and low-carbon technologies. On collaboration, Scotland recently became the world’s first national Government to join the Ellen MacArthur Foundation’s group of 100 global leaders committed to accelerating a more circular economy.
We believe that our open, collaborative, international approach to tackling resource issues will deliver real benefits for Scotland. It will bring new domestic industries in reprocessing and manufacturing and new supply chain opportunities for resource managers, and it could create up to 12,000 new low-carbon jobs and up to £1 billion of additional economic activity.
Before devolution, we recycled less than 5 per cent of our household waste. Today, the figure is more than 40 per cent. That increase in recycling has saved more than 4 million tonnes of carbon emissions since 2001.
We are seeing a similar transformation in food waste, as 1 million households in Scotland now have access to a food recycling service whereas five years ago there were no such services. Our waste regulations, which will come into force in two weeks’ time, will also drive a step change in how businesses recycle. That will be a significant source of change and will show how we have used the devolved powers to maximum effect, taking decisive action to guarantee high-quality recycling.
By passing the Landfill Tax (Scotland) Bill this afternoon, the Parliament will be helping Scotland to keep the momentum as we make our economy truly sustainable by making landfilling prohibitively expensive. That will help to mitigate climate change, support economic diversification and create jobs in the process. Those are all substantial and desirable economic aims.
The landfill tax can be seen as the first and the most successful of the green taxes, and it continues to change waste management practices. The Scottish Government has given careful consideration to proposals for the landfill tax, and our proposals broadly reflect the existing United Kingdom landfill tax provisions, which are well understood by the waste industry and which are working well.
I put on record my thanks to the Government for the way in which it has engaged with me on a matter concerning my constituents in Blanefield. We are grateful. Last week, I received a letter from Richard Lochhead regarding owners who have contaminated property, through no fault of their own, which said that the Government will produce regulations to deal with the issue properly in due course. I put on record my thanks and the thanks of the people of Blanefield for the way in which the Government has dealt with the matter.
I welcome Mr Crawford’s comments. He has advanced the interests of his constituents in the Blanefield area using all means available to him through the legislation. We will continue that discussion as we formulate the regulations that will implement the bill.
The public consultation on our proposals ran from October last year through to January 2013, and we asked consultees about two changes to the landfill tax. The first main change that we propose for the fund is the taxation of illegal disposals of waste. We had several reasons for bringing that forward.
First, illegal dumping is a problem with significant environmental impacts. It is an environmental crime and is rightly pursued and prosecuted as such. The additional penalty of a tax charge on illegal disposal should act as a powerful disincentive and prevent dumping.
Secondly, illegal dumping undermines legitimate waste operators, including landfill operators. Our proposals will support and encourage the great majority of enterprises in the industry that operate responsibly.
Thirdly, by clamping down on tax evasion in this way, there is an opportunity to gather additional revenue without increasing the tax burden. The Scottish Environment Protection Agency’s knowledge of landfill activity and the industry will be crucial in identifying and prosecuting such cases. SEPA will bring together its tax and environmental protection regimes to achieve more efficient and effective compliance. That proposal has been welcomed by stakeholders.
The second key change that the bill brings about is the introduction of a Scottish landfill communities fund that meets the needs of Scotland. I have already made the Parliament aware of my intention to introduce a proposed enhancement to the tax credit arrangements under which the Scottish landfill communities fund will operate. At present, credits are capped at 6.8 per cent of the total tax liabilities of any operator in a year. As I made clear during the stage 1 debate, we propose to increase that cap by 10 per cent, to 7.48 per cent of an operator’s tax liability. That is intended to encourage operators to make higher contributions to the separate Scottish fund than would otherwise be the case.
As we landfill less, it is inevitable that less money will be available to the fund over the next decade. Increases in the credit cap will not offset that decline in the amount of material going to landfill and, therefore, in tax revenues. I will therefore ensure that the regulations and guidance are drafted so that as large a proportion of fund receipts as possible goes to projects, while the administration costs of the scheme are kept as low as is consistent with satisfactory management. I place on record my concern about the degree and level of the administration costs that are associated with the existing landfill tax scheme. My objective will be to reduce those significantly as part of the regime that we will put in place.
The landfill communities fund has been successful in leveraging match funding and helping communities that are affected by landfill. It is my intention that the Scottish landfill communities fund, which will be introduced in April 2015, will maintain its private funding status. That will allow projects that benefit from the fund also to seek match funding from the Government or the European Union, for example, which can often make a difference to the viability of a project.
I have also given consideration to the regulation of the Scottish landfill communities fund. It is my intention that regulations will provide for SEPA to regulate the fund from April 2015. By making the organisation that will be responsible for collecting the tax responsible for regulating the Scottish landfill communities fund, regulation of the fund and tax administration and collection will be more tightly controlled and more efficient than is the case under the current system.
There are two further points that I wish to make. First, we propose that key elements of the landfill tax, such as tax rates, potential exemptions for hazardous waste, detailed arrangements for tax credits, the operation of the landfill communities fund and the list of the types of waste that will fall into the lower and the higher tax bands, will be set out in secondary legislation. Taking that approach will enable the Scottish Government to consult properly on lists of waste materials and on the operation and administration of the tax. I note that the Delegated Powers and Law Reform Committee has commented on our proposals and is broadly content with them.
The second issue is the overall effect of the landfill tax on the Scottish budget. As Parliament is aware, that will depend on the block grant adjustment mechanism, which is the subject of on-going discussion between the Scottish Government and the UK Government.
I am confident that we will have the legal and administrative systems in place in good time to collect a fair and efficient landfill tax in Scotland from April 2015. We will also have a tax that is appropriate to the distinctive nature of Scotland, that addresses the real issue of illegal dumping and that applies a distinctive approach to tax credits and to the landfill communities fund into the bargain. I look forward to taking the steps to put those measures into legislation.
I move,
That the Parliament agrees that the Landfill Tax (Scotland) Bill be passed.
There is no time in hand. I call Iain Gray. You have a maximum of seven minutes, but I would like you to take less than that if possible.
15:26
In the stage 1 debate, I referred to the landfill tax as a new tax. In his closing speech in that debate, the cabinet secretary corrected me—it is, of course, not a new tax, although it is new to us.
We should acknowledge that the landfill tax is not only a tax that already exists but one that, on the face of it, is that thing that is usually anathema to Labour members, and which is often anathema to Scottish National Party members, too—a Tory tax. It was introduced by John Selwyn Gummer back in 1996, although I fear that it is not the thing for which he will be remembered.
Mr Swinney referred to the fact that the landfill tax also bears the distinction of being the first of those taxes or levies that, these days, seem to be something of a bête noire to Mr Gummer’s successors in the Tory party in Westminster—a green tax. It was an early—indeed, the first—response to the realisation that we could not continue using the resources of our planet without thought and polluting it with carbon emissions without a care.
Mr Swinney eloquently explained why that imperative should exercise us no less today than it did 20 years ago. Indeed, all the evidence indicates that we have been too slow to respond and that the consequences have been ever quicker to emerge. The most recent Intergovernmental Panel on Climate Change report was the most urgent and damning yet on how our climate and our planet are changing.
We in Holyrood cannot be complacent about our own part in the problem and the obligation to find a solution. For example, we have set ourselves demanding targets for reducing carbon emissions, but we have repeatedly failed to achieve them, and we have not always proven ourselves willing to take the actions that are needed to match our rhetoric.
Would the member accept that even in the worst-case scenario that is set out in “Low Carbon Scotland: Meeting our Emissions Reduction Targets 2013-2027. The Second Report on Proposals and Policies”, we will do more than the most ambitious Governments in Europe—Germany and Denmark—by achieving more than a 40 per cent reduction in emissions?
I think that the minister has more confidence in RPP2 than I do, but let us see what happens as time unfolds.
That said, on diversion from landfill and increases in recycling, there has been tangible progress, to which the cabinet secretary referred. To that degree, we can claim that the landfill tax has been a success. At the time of its introduction, 54 million tonnes of municipal waste were sent to landfill per annum UK wide. By 2012, the figure had fallen to 19 million tonnes. Therefore, the tax that we inherit is a successful one, which is why it has support from across the chamber and those of all shades of political view. In legislating to pursue landfill tax as a devolved tax, the most important thing must be to create a framework that ensures that the tax continues that success. After all, by the Scottish Government’s own calculation, landfill still emitted in 2011 the equivalent of 600,000 tonnes of CO2 into our atmosphere.
What the devolution of landfill tax does then is to give us the opportunity to consider how it operates and how we might use and change it so that it even more effectively and further reduces waste. It seems common sense that there is a law of diminishing returns here, with the gains made from a serious effort at recycling and reusing being easy progress to secure in the early years, and as time goes on there being a necessity to try harder and be smarter about how we deploy measures such as the landfill tax to get further gains.
Therefore, it is a pity that about something as basic as the rate itself and how many rates there might be, we still know very little. The cabinet secretary has said at every stage that he is minded to set a rate that is no lower than the one that he will inherit in April 2015, although he will not confirm that for us until September next year. At stage 1, there was considerable debate around waste tourism and whether differential rates would lead to reduced income as landfill was exported to England or, conversely, whether waste would be imported to landfill in Scotland. I do not think that we ever really got to the bottom of that, with the cabinet secretary expressing a view that it becomes an issue only if there is a differential of £15 per tonne, although committee witnesses suggested that £10 per tonne would provoke such an effect.
That issue matters because it implies a rather limited capacity for us to use the new powers to choose our own rates and it seems to me to reflect a rather cautious approach by the cabinet secretary. Perhaps it is for the same reasons that we still do not have an indication of whether the Government favours an escalator in rates. That has been significant in the landfill tax’s success in the past, as there is surely a connection between its effectiveness in reducing waste and the fact that we are heading for a rate 10 times the original one introduced.
For the moment, we remain in the dark on whether the Government has any plans to introduce new rates to differentiate further between types of waste or, indeed, move any categories of waste between existing bands. The landfill tax is a fairly blunt instrument and an opportunity seems to have been missed to explore properly whether and how we could sharpen it. However, as regulations follow the legislation, we will no doubt return to those issues because there is a pressing need for action on waste and carbon, and we must do more than simply frame the bill.
On the positive side, I am pleased that if and when the changes are made, they will now be subject to the affirmative procedure. I am glad that the cabinet secretary listened to representations to that end. I regret that he did not find a way to meet on the face of the bill Michael McMahon’s concerns about the danger that the landfill communities fund might be diverted from the communities that are most affected by landfill. However, overall, the landfill tax is useful. It will now be appropriately devolved and it is potentially a powerful tool for the Parliament in pursuit of our environmental agenda. We shall certainly give the bill our whole-hearted support at decision time this evening.
I now call Gavin Brown, who has five minutes or less.
15:33
I think that the bill commands broad support across the chamber. It was a pretty good bill at stage 1 and it has been strengthened marginally during the stage 2 process in that the order-making powers in relation to the liability of controllers and the power to vary disposals have been changed to become subject to the affirmative procedure. However, the bill would have been marginally strengthened again today by having the provisions relating to the Scottish landfill communities fund on the face of the bill. From listening to the cabinet secretary, though, in the previous debate and subsequently in his opening speech in this debate, I think that he and the Government are broadly in the same place as the Finance Committee. I hope that that translates into regulations of the type that he discussed.
Obviously, we welcome the increase to 7.48 per cent in the credit available. The aspiration of having lower administrative costs is commendable and we hope that it becomes the case in practice. I put on record my view that the cabinet secretary did engage on that issue. All that I would say in passing is that I wonder whether there is a way of ensuring that, when the consultation happens, residents of the communities that are most likely to be affected are able to be a direct part of it. Those organisations that regularly contribute to consultations are pretty adept at doing so, and I wonder whether there is any way of levelling the playing field, so to speak, so that communities that are definitely affected but are perhaps not good at voicing their concerns can be heard through that process. Perhaps the cabinet secretary could say something about that in his closing remarks.
Although there is nothing wrong with the bill, it is worth while to reflect on a couple of areas in which the Government will have to do further work when it comes to secondary legislation and the regulations. Waste tourism has already been touched on today and was heavily focused on in the committee process and the stage 1 debate. In my view, the analysis of waste tourism is still a little underdeveloped. Resources ought to be put into that at a Government level so that we can get to the bottom of whether it is likely to exist. We had strong representations to the committee about how sensitive small differences could be, and strong representations in the chamber from those who felt that waste tourism would not be an issue as it would not exist at all.
The issue matters because whether and the extent to which waste tourism exists will have an impact on the rates that the Government might put forward and that we might set as a Parliament and on decisions on whether it is worth having more than the two bands that we currently have. It also matters because it is a factor in whether we play about with what is in each band or in what would be in each band if we moved to having three bands, for example. It would be useful to hear from the Government what it intends to do as regards waste tourism in dealing directly with the UK Government. The Government said that it will continue to have discussions on the matter, but in paragraph 4 of its response to the committee’s report, it stated:
“The Scottish Government has had no direct discussion with the UK Environment Agency on this matter.”
That might have been superseded since the response was produced but, if not, it is important that the Scottish Government takes those discussions forward so that we can get to the bottom of the waste tourism issue.
The next issue on which it is worth while to reflect a bit more is the taxation of unauthorised disposals. The cabinet secretary mentioned that in his speech and, again, I think that it is welcomed by members throughout the chamber. A tax charge on illegal dumping sends out a signal to those who do it and potentially will bring in a stream of revenue for the Scottish Government to use on suitable measures.
You are in your final minute.
However, it is worth while to think more carefully about the ultimate policy objective of that. Is it simply to tax the same level of investigations as we currently have through SEPA or is there a policy plan to have some sort of crackdown or increase the scope and breadth of its work? If it is the former, that is good. If it is the latter, that is probably preferable, but we will have to think carefully about the resources that will be required in order to do that. The Chartered Institution of Wastes Management said:
“SEPA would require additional resources in order to bring such activities into the tax regime and to apply any criminal sanctions.”
I am afraid that you must close.
It is worth while to reflect on that. We will certainly support the bill this evening.
We turn to the open debate. I am afraid that I can only give speeches of three minutes to four members. I apologise to the fifth member, whom I will not be able to call, and I make a plea for closing speeches to be shortened.
15:38
It is always good to welcome a new tax, although I take the point that the landfill tax is, in fact, a replacement tax and that it is probable that many people will see little immediate change. I accept that it is a relatively small tax and that we hope that it will become smaller over time. Even with it, only about 15 per cent of taxes that are paid in Scotland will come under this Parliament’s control. However, it is still an important tax, not least because it brings together environment policy and revenue raising. It is much to be welcomed that the tax and the fines to be paid by those who carry out unauthorised disposals are to be introduced.
Obviously, as with all taxes in Scotland, we need to be aware of what our neighbours and competitors are doing. We might want to have a higher landfill tax for the good of the environment, for example, but there is little point in having that if it only shifts waste across the border and we suffer a loss of revenue. Therefore, the statement that Scottish rates will mirror UK rates and that the Scottish rate will be no lower than the UK rate in 2015 is pretty fair in the circumstances.
The rate of tax is still to be decided, of course—that has already been mentioned—but a number of red herrings are swimming around in that regard. Going forward, there is no certainty about UK tax rates, so neither businesses nor individuals can have any more faith in a UK Administration than in a Scottish one. In fact, it could be argued that John Swinney is much more boring—I am sorry; I meant to say more stable—than George Osborne, so we can expect more sensible tax decisions in Scotland than we might get in the UK.
We still have to wait and see whether there will be sensible decisions on the block grant adjustment. The odd thing about the landfill tax is that, if it is successful, the tax take will fall, and that must be taken into account when the block grant adjustment is made. All three block grant adjustments for the three taxes that we are taking over are the subject of negotiation between the Scottish and UK Governments.
The Revenue Scotland and Tax Powers Bill, which has been mentioned, was introduced on Friday, and I am certainly looking forward to considering it in detail in the Finance Committee. Tax avoidance is a topical issue, so we have the opportunity to put down some markers on that. Trying to achieve fairness can lead to complex legislation and that, in turn, can mean loopholes for those who can afford expensive tax advice, so we need to emphasise simplicity and tax legislation that is clear to all, including the courts. It is also encouraging that revenue Scotland is expected to cost around 25 per cent less than the cost of the same work being done by Her Majesty’s Revenue and Customs.
In conclusion, the Landfill Tax (Scotland) Bill is the second of the proposed tax bills stemming from the Scotland Act 2012. I very much welcome the fact that such control is coming to Scotland. We have to accept that we have limited room for manoeuvre on landfill tax, but we need to tackle the huge problem of waste that we face, and the bill gives the opportunity to do so.
15:42
Like the land and buildings transaction tax, the Landfill Tax (Scotland) Bill has been very technical, but it has had a remarkably straightforward and consensual passage on to the statute book.
It is important to observe that, although they have never been a major obstacle to the smooth passage of the bill, some concerns remain that many aspects of the tax are to be contained in subordinate legislation. To an extent, that approach has created a lack of clarity and certainty about issues such as rates of tax and the power to change the list of materials to be taxed, as Iain Gray pointed out.
Although the use of subordinate legislation has been somewhat contentious, members will know that I have been particularly exercised about the potential for the landfill communities fund to be raided for purposes that are beyond communities that are directly impacted by having landfill sites located near them. There can be no doubt that the landfill communities fund’s purpose is to provide benefits from the taxes that have been raised from landfills where there is a clear and recognisable disamenity to local communities.
During evidence taking in the Finance Committee, I became concerned that organisations with a good appreciation of environmental issues indicated that they have designs on the resources available from the fund and are seeking to siphon off some of the moneys to help projects that are no doubt worthy but are entirely unrelated to the communities around which the landfill tax is generated. The suggestions that those groups put forward to review the scope of the landfill communities fund rang alarm bells with me, so I am glad that, despite the cabinet secretary’s rejection of my efforts to have the issue addressed in the bill, he has moved from where he was at stage 1 to accepting the validity of my concerns and agreeing to develop in guidance the points that I have made about ensuring that the connection between disamenity and funding is made.
As I said at stage 1, any change to the current scope of the landfill communities fund would be fundamentally unfair and would violate the principles of environmental justice that we hope to deliver. There is no doubt that communities that are near landfill sites face more environmental problems as a result of landfill than those that are not. People who live near landfills have to deal with odours, dust, litter, noise and often visual intrusion, and changing the latitude of the fund would leave their communities with less money to mitigate the effects of landfill.
Opening the fund to broader environmental objectives coupled with the envisaged reduction in landfill tax receipts will inevitably produce less funding to landfill communities in the long run. It is only fair that the communities that are the dumping ground for waste should receive the maximum possible benefits from the taxation of those landfill sites. At the end of the day, the money is raised at the expense of communities near landfills, so the money should be dedicated to those communities.
I thank the cabinet secretary for taking the issue on board. It is because of his efforts that I have absolutely no difficulty whatsoever in voting for the Landfill Tax (Scotland) Bill.
15:45
As convener of the lead committee, I first thank the clerks, officials and witnesses who helped the Finance Committee in its deliberations as the bill progressed.
As we know, the Landfill Tax (Scotland) Bill will encourage and promote high levels of recycling and simplify the landfill tax system by making it more straightforward and easy to understand. As Scotland continues to build on the success of recycling and climate change policies, the amount of waste going to landfill will decrease, which is to be expected as we work towards achieving our climate change targets.
In evidence to the Finance Committee, the Cabinet Secretary for Finance, Employment and Sustainable Growth, John Swinney, said:
“My expectation is that, in the coming period, we will see a long-term reduction in the revenue from landfill tax. We accept that the success and effectiveness of recycling policies, which are part and parcel of the Scottish Government’s wider approach to achieving the emissions reductions that are required under climate change legislation, will result in a reduction in receipts from landfill tax. Clearly, we will need to deal with that as a Government.”—[Official Report, Finance Committee, 19 June 2013; c 2835.]
The bill also includes provisions for the taxation of illegal dumping, strengthening business opportunities for landfill operators to dispose of materials properly and effectively in accordance with the wider regulatory infrastructure. It will also bring all the activity into the Government’s wider environmental agenda for more sustainable waste disposal, while deterring criminal activity.
Although the Scottish Government has not made a specific estimate of the expected tax receipts from landfill in 2015-16, the Finance Committee recognises the significant difference between the predictions and projections for landfill tax receipts in Scotland, which we discussed in detail at stage 1.
In October, the Cabinet Secretary for Rural Affairs and the Environment launched “Zero Waste—Safeguarding Scotland’s Resources: Blueprint for a More Resource Efficient and Circular Economy”. That plan builds on the success of Scotland’s zero waste plan, identifying actions to shift the focus on to waste prevention and resource efficiency, thereby improving productivity and competitiveness. The strategy sets out how
“In a circular economy, we keep products and materials in use for as long as possible, extract the maximum value from them whilst in use, then recover and regenerate new products and materials at the end of each service life.”
The action plan aims to reduce waste in Scotland by 15 per cent over the next decade to improve competitiveness.
This bill will help Scotland meet its world-leading targets on climate change by establishing a tax system that supports the use of taxes and charges in environmental policy. That approach will compensate for environmental impact and encourage recycling by aligning tax with the aims of the zero waste plan, promoting high levels of recycling and diverting material resources from landfill into more sustainable forms of use.
The bill will also help businesses by ensuring that market distortions caused by illegal operations do not undermine legitimate business ventures, and it will simplify and streamline the administration and collection of landfill taxes by establishing a system that is simple, efficient and easy for landfill operators to understand and comply with. Collection and enforcement will align with the principles of better regulation. A tax credit scheme is incorporated that provides an incentive to operators of landfill sites to contribute financially to projects that meet environmental and social objectives.
15:48
An important argument in favour of increasing levels of fiscal devolution is that it can incentivise economic activity that brings more revenues to this Parliament. However, this particular piece of fiscal devolution works in the opposite direction since, ultimately, we want to collect as little tax as possible by incentivising people to move away from landfill.
That move has profound consequences for the block grant adjustment, which should basically be as small as possible. The bill’s financial memorandum predicts that landfill tonnages in Scotland will
“significantly decrease over the coming decade with a corresponding reduction in receipts.”
That is a necessary consequence of the laudable targets outlined in the zero waste plan, which proposes long-term targets of recycling 70 per cent of all Scotland’s waste and only 5 per cent of remaining waste ending up in landfill by 2025. The Scottish Government estimates that landfill tax receipts will fall from £107 million in 2015-16 to around £40.5 million in 2025—that should be our guiding figure when it comes to negotiations on the block grant adjustment.
Once we have this devolved tax, we need to drive it forward for economic purposes without worrying about the revenue consequences because the whole aim of the bill is to have less revenue, but we must also recognise the constraints facing us. Those have most commonly been expressed in terms of illegal dumping and waste tourism.
Sometimes the factors pull in opposite directions. For example, setting the rate for asbestos at zero would be good in stopping illegal dumping but would encourage waste tourism from England, and setting rates too high would encourage waste tourism from Scotland to England. The issues are complex, and careful deliberation is needed. It is therefore entirely right that the affirmative procedure should apply to the relevant secondary legislation.
Matters are a lot clearer in relation to the tax on illegal dumping. That is unreservedly good, as is the enhancement to the landfill communities fund, of which the cabinet secretary reminded us. Of course, we are disappointed that the Government rejected Michael McMahon’s amendment, which took the right approach in insisting on a link between a project and a landfill site. I hope that the guidance will embody that principle in some way.
The principles of the bill are sound when it comes to incentivising new technologies that take us away from landfill and challenging illegal dumping. The bill falls short, however, in that there is no certainty about the rates or whether there will be an escalator. Those matters are within the control of the cabinet secretary, and I hope that we will hear about them as soon as possible, if not today.
I apologise to Jean Urquhart, whom I have been unable to call. Gavin Brown, you can have a maximum of four minutes.
15:51
This has been a pretty good, if short, debate, which did not differ enormously from the debate at stage 1. That reflects the fact that very little has changed in the bill since then.
A highlight of the debate was John Mason’s attempt to compliment the cabinet secretary on his personal qualities—I hope that John Mason never finds it in his heart to pay me a compliment, given the strength of his compliment to the cabinet secretary.
The prediction of landfill tax receipts is worthy of greater investment of time from the Scottish Government. In paragraph 12 of its response to the committee’s report, the Scottish Government set out its forecast for receipts between 2015-16 and 2024-25. The table looks pretty good, but the Government noted that the forecast
“has been produced internally by the Scottish Government and has not been independently verified”,
and went on to say:
“Tax rates are assumed to remain as they are at present. No allowance has been made for receipts from taxing illegal landfilling at this stage.”
It would be helpful if the Scottish Government published the work that it has done in a bit more detail, to give the outside world some background about the modelling that it used and information about what would happen to the projected receipts if certain things changed, such as the rate of the tax, how tax rates increase, and whether there are two or three rates. That would help us to take matters forward.
I think that I am right in saying that modelling by the Scottish Government and the Office for Budget Responsibility thus far has been on the tax as it currently stands. It would be useful to know what sort of tax the Scottish Government intends the landfill tax to be and what rates it proposes. We would then be able to get predictions on the tax from the OBR and from the Scottish Government that enable us to see what would happen if changes were made.
When the cabinet secretary makes his closing speech, it would be helpful to hear for how long he intends to set the tax when he sets it for first time. What approach does the Scottish Government intend to take? A number of witnesses to the committee made suggestions or requests in that regard. For example, the Convention of Scottish Local Authorities made a formal request in its written submission for the tax to be set for a five-year period. Other organisations suggested shorter periods. It would be useful to know the Government’s intention, so that we can try to give a degree of certainty to the people who will be affected by the tax.
In paragraph 2 of its response to the Finance Committee, the Scottish Government gave the impression—I do not know whether this is correct—that it intends to set the tax on a year-by-year basis, when the draft budget is published each year. It would be helpful to know whether that is the case or whether the Scottish Government intends to provide a degree of stability and certainty by setting the tax for a longer period.
There is much to commend in the bill. There are issues to consider—waste tourism, the taxation of unauthorised disposals, the landfill communities fund and the tax rates that will be set—but I reiterate that we will support the bill at decision time.
I call Iain Gray. I apologise that I can give you only five minutes.
15:55
This has been a short but interesting debate. It has also been a bit of a Donald Rumsfeld debate because a lot of known unknowns have been discussed. We do not know the rate at which the tax will come in. We do not know whether there will be an escalator or new rate bands. We do not know whether there will be any recategorisation of any type of waste. We do not know what the constraints are under which we will have to work to avoid waste tourism.
We also do not know the administrative arrangements for collecting the tax. We know that SEPA will be part of the system and responsible for it, but the cabinet secretary has made it clear that the way in which it does that will be down to revenue Scotland, a body that does not yet formally exist.
As Michael McMahon’s amendment was rejected, we do not know how the landfill communities fund will be distributed. The cabinet secretary has also made it clear that we do not how the block grant adjustment will work, although in all fairness that is not something he can decide by himself—I understand that.
I was quite taken aback by Mr Mason’s apparent categorisation of the cabinet secretary as boring. I would certainly never—
I wonder whether the member will accept my main point, which was that we can put more faith in John Swinney than we can in George Osborne.
The degree to which we have to put faith in Mr Swinney is exactly the point to which I am coming. I thought that Mr Mason was rising to apologise to the cabinet secretary, but perhaps he will do that privately.
Because of all the things that we do not know, I think that the cabinet secretary has been intriguingly enigmatic about the detail of the bill. I say to Mr Mason that it is true that we will have to take a lot of the cabinet secretary’s reassurances on trust. For example, throughout the bill process, he has insisted that the Scottish Government will be able to levy the tax more efficiently than has previously been the case. That would be extremely welcome, but I am not sure that the cabinet secretary has demonstrated why or how it will be possible, particularly because we do not yet know what the administrative arrangements for raising the tax will be. That is something that we have to take on faith.
We also have to take on faith that the cabinet secretary believes in the principle that communities that are most directly affected by landfill sites will be the ones that benefit directly from the tax credits, as they do at the moment. That is important because, as I have said already, the fund is likely to reduce.
Communities such as mine in East Lothian have benefited significantly in the past from those tax credits. Although I would be the last not to have faith in the cabinet secretary, he said that he wants to ensure that the communities that suffer get the benefit of the fund and then he said that he also wants to take account of the wider impact on the environment. That seems to be a complete contradiction. It is the former that we need to secure, and Mr McMahon’s amendment would have done that. I still regret that the cabinet secretary did not feel able to support it.
In closing, I return to a point that I made at stage 1. A particularly welcome aspect of the Landfill Tax (Scotland) Bill is that it has its origins in the Calman commission and the Scotland Act 2012 that followed. It is therefore a significant demonstration of the fact that devolution is a flexible and dynamic constitutional arrangement.
During stage 1, I pointed out that it was the latest in a long line of changes to devolution, from the devolution of rail infrastructure through to the devolution of the Scottish welfare fund. On that occasion, I could hardly believe it but the cabinet secretary wilfully misrepresented my argument by suggesting that I was arguing that devolution was now complete and could never develop. That was not my point.
My point was that the bill demonstrates that devolution is the kind of dynamic and flexible settlement that the people of Scotland want: it allows us to sustain the benefits of shared risk and opportunity by being part of the bigger United Kingdom while making Scottish decisions—both administrative and fiscal, where that is appropriate—that enable us to be most effective, for example in reducing waste and landfill.
We will support the bill at decision time. We look forward to working with the Scottish Government as it develops the detail of secondary legislation on guidance and as we debate further how we deploy this new power most effectively for the benefit of Scotland.
16:00
It is a mark of the fact that there has been no real division on the substance of the debate that Mr Mason has been harangued by Mr Brown and Mr Gray. We should take considerable comfort from the fact that the Opposition has had so little to disagree with—although Mr Gray made a valiant attempt at making himself disagreeable—that we have managed to reach a substantive amount of agreement on the bill.
Let me deal with a number of the points that have been raised in the debate. In his argument for fiscal devolution, Mr Chisholm made an important point about the block grant adjustment mechanism. Mr Chisholm’s argument—if I can paraphrase it—was that, when there is fiscal devolution, we should be the beneficiaries of or responsible for any of the consequences of those fiscal decisions. I agree completely with that analysis.
When we come to the arrangements around the block grant adjustment, the principle that Mr Chisholm enunciated is important. When we have fiscal responsibilities under the settlement, we should be able, as the Administration, to retain the proceeds of those decisions as part of that block grant adjustment mechanism. That is certainly my view and it is one that I will take into discussions on the block grant adjustment.
Mr Gray, in one of his fairer remarks in the debate, made it clear that I cannot unilaterally decide the block grant adjustment mechanism—not yet anyway.
Mr Brown thought that there would be benefit in further explanation of our forecast. I have already made it clear to Parliament that the Scottish Government will establish an independent forecasting organisation to assist us in tax planning in Scotland. We need to do that to reflect the particular requirements of Scotland.
As Mr Brown will know, in its first attempt at a forecast of landfill tax for 2014-15, the OBR predicted that it would generate £145 million—a number that I found literally inexplicable. That has subsequently been revised down to £99 million, which is a reduction of 32 per cent. A variability in tax prediction by the OBR of 32 per cent is quite an alarming figure. That is why we will proceed with that aspect of our plans in due course.
Does the cabinet secretary accept that one reason for having a three-year lead time was so that we could look at the twice-yearly estimates until a position of stability was reached? Given the announcements two weeks ago from the OBR, the estimate appears to be a lot more stable now.
It is a lot more stable now because the original estimate was complete baloney. If the member goes back to the December 2012 forecast, he will see that literally within nine months the OBR took £40 million off its forecast. Its first forecast was just nonsense. The point that I am making is that accuracy in these estimates is important for wider financial planning.
I wonder whether that would encourage us to take other OBR forecasts, for instance for oil and gas revenues, with a very large pinch of salt.
We have to take care on a lot of those issues. Mr MacKenzie knows that the Scottish Government has a different view from the OBR on oil and gas predictions. Ours is based on industry evidence and investment plans that are being undertaken.
Mr McMahon has perhaps been the most divisive figure in the debate, since he forced us into a division today—I say that in the most respectful way possible. In the stage 1 debate, through stage 2 and into stage 3, he has pursued a clear argument on the proceeds of the landfill communities fund. I compliment him for his tenacity in that argument. I reassure him that the Government’s approach, the work that we have undertaken and the discussions that have taken place away from the parliamentary channel will all be reflected as we proceed to the formulation of the guidance and regulations.
Mr Brown said that we need a level playing field in the way in which people can submit views to the consultation process, and I very much take that point to heart. We need to ensure that we have an open process of discussion that enables us to address the questions and establish the most effective way of proceeding.
The Government will give further clarity as we set out the detailed provisions on the implementation of the landfill tax legislation. I can confirm to Parliament that preparations are well under way for the establishment of revenue Scotland. The further detail that we have filled in on the powers of revenue Scotland in the Revenue Scotland and Tax Powers Bill, which was introduced to Parliament last week, will be an important and helpful clarification in the debate.
My final point is on an issue on which Mr Gray and I are on a similar type of journey. He argues that the bill represents the accumulation of more powers for the Parliament. I am all for more powers for the Parliament and I want to ensure that the Parliament has all the powers that are required to ensure that we make a difference to the quality of life of people in Scotland.
I see that we have been joined by Jackie Baillie, who in her usual fashion is muttering at my side on these questions. I simply say that welfare issues, which Ms Baillie comments on for the Labour Party, are just the issues that I want us to be able to resolve here in the Scottish Parliament. That would allow us to do things very differently from the way in which the House of Commons plans to do them.
I am delighted to close the debate, and I look forward to support for the bill at decision time.