Local Government (Empty Property Relief)
The next item of business is a debate on motion S4M-03397, in the name of Gavin Brown, on local government. Mr Brown, you have up to 10 minutes.
10:27
I bring to the chamber our deep concern with a part of the Local Government Finance (Unoccupied Properties) (Scotland) Bill. Our particular concern involves the changes to empty property relief under the non-domestic rates regime. Although the changes will protect industrial property and listed buildings, they will almost extinguish the discount for empty commercial property, taking it from the—broadly accepted, to be fair—50 per cent down to 10 per cent.
We have three main concerns about the policy. First, it will not make any positive difference, it will not achieve the policy objective and it will not get empty properties back into use. Everyone in the chamber and most people across Scotland wish empty properties to be brought back into use. However, the prescription from the Scottish Government simply will not work and will not have any impact.
Secondly, not only will the policy not make a positive impact, but it is fairly clear that it will damage our economy and make it more difficult for it to grow when the upturn begins.
Thirdly, the policy has a cost to the public sector—something that was missed by the Scottish Government when it introduced the proposal. The bill suggested that the cost to the Scottish Government would be minimal because it has only 12 properties to be concerned about. That idea was knocked on the head the first time that the Finance Committee considered the bill, when it was gently pointed out that Scottish Enterprise has several hundred empty properties, and the cost to that agency alone could be pushing £500,000.
Underpinning all that—it is the reason for a lot of the negativity and the bad ideas—is the fact that the Government undertook no formal consultation on the measure. It consulted formally on all other parts of the bill, including a part that will cost only £750,000 a year and affect only one council. That part of the bill was deemed worthy of consultation, but a proposal that will affect thousands of properties, will affect every public sector agency in Scotland and will cost the business community millions of pounds a year was not deemed worthy of consultation by the Scottish Government. The Scottish Government has to explain to us clearly why the proposal was specifically excluded from the consultation on the bill. This has all happened when sales of commercial property in Scotland have slumped by 40 per cent in the first quarter of 2012.
My first substantive point is why I do not think the measure will achieve the policy objective. Paragraph 4 of the policy memorandum states that
“Reform of empty property relief will provide incentives to bring vacant commercial premises back into use and raise additional revenue for the Scottish Government.”
That is a fairly loose definition of the word “incentive”. Clobbering them with a tax does not sound to me like an incentive to bring properties back into use.
The policy has two objectives: to bring vacant properties back into use and to raise additional revenue. Most people—even people who are not sceptical—feel that most of the Scottish Government’s emphasis is on the latter; it is about the money.
However, helpfully, Derek Mackay, the minister in charge of bringing forward this part of the bill, gave evidence to the Local Government and Regeneration Committee a short while ago. When I read the Official Report of the meeting, I was interested to see that Derek Mackay had stated:
“If it were just about income generation at the expense of the business community, we would not be progressing it.” —[Official Report, Local Government and Regeneration Committee, 30 May 2012; c 1070.]
The Scottish Government and the minister in charge of the bill therefore accept that, if all that the measure does is raise additional revenue, it should not be taken forward. To win the argument today, and in the coming weeks and months, the Scottish Government therefore has to demonstrate clearly how the measure will bring vacant commercial property back into use, because, by its own admission, the measure should not be only about additional revenue; indeed, the Government would not introduce the measure if that was all that it was about.
We have asked repeatedly how many properties would be brought back into the fold. It turns out that the Government has made no attempt to model that. The bill team stated:
“we cannot say that we have seen any evidence in Scotland on whether the incentive works”.—[Official Report, Finance Committee, 2 May 2012; c 1070.]
In addition, having observed four years of evidence in England and Wales, the bill team was unable to present any evidence that the measure might have had any impact south of the border.
To correct the record, when the First Minister answered my question on the matter at First Minister’s question time, he said that 5,500 properties would be brought back into use as a consequence of the bill. I put the question to him very specifically. However, the 5,500 properties are the number of commercial premises that would immediately be hit by the tax. That does not mean that a single property will be brought back into use. The figure of 5,500 properties is the number that would be clobbered by the tax.
There is a basic misunderstanding on the part of the Scottish Government about why the properties are empty. They are empty because of market conditions and lack of demand. I accept that there will be exceptions, and during the evidence sessions individual members pointed to examples in their constituencies, but the vast majority of landlords want to let their properties. That is the meat and drink of what they do. If they are not letting out a property, they are not generating an income. Landlords want tenants, but the market is weak. The measure punishes landlords who have been unlucky and who have been hit by the downturn and the recession, without doing anything positive to bring the properties back into use.
The direction of travel in Wales seems to be the opposite to that in Scotland. The Welsh Government, which has had such a measure in place since 2008, has had a business rates review undertaken by an independent group. The independent report, which was published last week by the Wales business minister, said:
“We have not come across any examples in Wales where property owners have intentionally left property vacant; indeed pressure from insurers and the risk of holding vacant property are ample enough incentive to re-let.”
There we have it. The measure will not bring empty properties back into use. There is no evidence whatsoever that that will be the case, and there is a fundamental misunderstanding by the Scottish Government about why those properties are empty.
That is bad enough, but on top of that, the measure is quite likely to cause damage to the economy. Various properties have been demolished in other parts of the United Kingdom. In some cases, it was cheaper to demolish the property—no rates were paid at all as a result of that—than to pay the additional tax. A report by Lambert Smith Hampton on behalf of the Royal Institution of Chartered Surveyors said:
“there has been an increase in the demolition of perfectly sound properties ... largely as a result of their liability to Empty Property Rates”.
Therefore, there could be demolitions.
A reduction in speculative activity is also likely. If we want more premises, including commercial properties, to be built, there must be speculative activity, but the Scottish Government’s measure will choke off the development of new business space because substantially more will have to be paid for vacant rates. That is a big deterrent for speculative commercial development. It has an impact on the viability appraisals and is an extra contingency to be built in at a time when the sector is finding things extremely difficult. Our view and the view of industry is that the industry does not need extra punishment, and certainly not at this time.
The measure sends out a signal to the world and the business community at large that the Scottish Government will impose new taxes on a whim without consultation. I think that I am correct in saying that empty property relief was not mentioned in the Scottish National Party’s manifesto, which was published not that long ago and on which, admittedly, it won a fairly healthy majority. I stand to be corrected on that, but I had a good look through the manifesto. Why was the measure not mentioned in that manifesto if the SNP intended to introduce it? I am pretty sure that the First Minister will not mention it to the business community in the United States as something that the Government is proud of bringing forward. I am sure that that will be deeply hidden from everyone everywhere.
The measure will damage the economy and will not do anything to bring empty properties back into use. That is the key for the Scottish Government. Can the Government demonstrate at all that the measure will put properties back on to the market? There will also be costs to the public sector; we can return to that later.
I am very happy to move,
That the Parliament is concerned by the Scottish Government’s plans to substantially reduce empty property relief for non-domestic rates through the proposals in the Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill; is deeply concerned that the Scottish Government has introduced this proposal with no formal consultation and without making a business and regulatory impact assessment; notes the Finance Committee’s report on the Bill’s financial memorandum, which concluded that, “the Committee finds it surprising that the [Financial Memorandum] makes no attempt to estimate the number of commercial properties that will be brought back into use as a result of the Bill’s empty property relief proposals”; believes that reducing the tax relief for empty properties will have a detrimental effect on business and the economy; notes that there will be significant costs to the public sector, and therefore calls on the Scottish Government to abandon its proposed changes to empty property relief for non-domestic rates.
10:38
I welcome the opportunity to debate the Government’s proposed reform of empty property relief for commercial properties, as set out in the Local Government Finance (Unoccupied Properties etc) (Scotland) Bill, which also includes a provision to allow for increases in council tax charges on certain long-term empty homes to help councils in encouraging more owners to bring their empty properties and houses back into use.
In itself, the Government’s proposal in the bill will not change commercial empty property relief. The bill will simply create the enabling power to increase or, indeed, decrease the rates discount for empty commercial properties by future regulations.
Does the minister accept that the policy memorandum quite clearly states why the Government is doing that, and that the Government immediately intends to reduce the discount to 10 per cent across Scotland?
I am happy to discuss that further as I continue, but the fundamental power that we are seeking in the bill is the enabling power to vary those reliefs. The member referred to a decision being made “immediately”. We are not immediately making a decision. There will be further consideration of the bill and specific regulations in due course by the Parliament. The regulations will be considered by the Parliament in the same way as the small business bonus scheme and the United Kingdom’s first and only renewable energy relief regulations have been considered. The process is accepted by all parties in the Parliament.
Empty premises currently receive a 100 per cent discount for the first three months and a 50 per cent discount for an indefinite period thereafter. Industrial and listed properties receive a 100 per cent discount for the duration of the period in which they are empty.
It is our intention to vary the 50 per cent discount that empty properties receive after the first three months to 10 per cent from April 2013. We have no plans to change the discount for industrial and listed properties. Gavin Brown made fair points about experience in England, and lessons have been learned from the policy that was deployed there.
There are two driving forces behind the policy. First, we think that it will incentivise some landlords and property owners and managers to bring commercial properties back into use. There is evidence that rents remain stubbornly high even when there is demand to occupy properties.
I do not want to preach, but I have personal experience, which perhaps the minister does not have. I have been the owner of office property that was unoccupied for the simple reason that companies had amalgamated. I was desperate to find a purchaser for the property, as were my partners. We did not leave it empty out of choice; we could not find a purchaser. We still had to pay rates. Mr Brown talked about property owners who are in such a position.
What message is the policy sending about the Scottish Government’s understanding of business or its desire for Scotland to be regarded as a business-friendly location?
I do not deny that Annabel Goldie has experience in the area. I have experience in leading a public-private partnership in Paisley, in Renfrewshire, to try to regenerate the largest town in Scotland. I am sorry to say that landlord support and engagement was part of the issue—and is an issue in trying to regenerate town centres throughout Scotland.
Scotland will still have the most generous package of reliefs in the United Kingdom. That is partly due to the help of the Conservatives under the previous Administration, when we introduced the small business bonus scheme, which has been successful. The Government has continued the scheme, but the Conservatives opposed the most recent budget, which featured the scheme.
The second driving force behind the policy is to raise income—that is absolutely the case. In the face of swingeing UK cuts, we have had to balance the books and reflect on the contribution that £18 million will make to local government, to help with funding in the public sector. Gavin Brown asked why there was no assessment, which is a fair question. It was deemed that such an approach would not be proportionate, given that the policy will bring in £18 million in revenue in the context of the £2.4 billion that is generated through business rates income.
Will the minister give way?
I am four and a half minutes into my speech and I should make progress.
Over the five-year period before revaluation, £750 million will still be dedicated to empty property relief—indeed, even after the reduction in relief the figure will be only marginally lower that it currently is. The small business bonus scheme and other reliefs, which amount to £0.5 billion every year, will continue.
If members think that a reduction in rates relief is the wrong policy, I wonder why Labour introduced such a policy in 2008 and why the Conservatives and Liberal Democrats—the Liberal Democrats are again not in the chamber—retained the policy objective. If there is evidence that the policy has failed in England and Wales, why has not the policy been reversed?
We want to learn lessons from what has happened in England and Wales and ensure that the policy can be deployed in a way that supports sustainable economic growth. However, we cannot disentangle the evidence, because the policy was introduced in England in 2008, at the time of the bank lending issue, changes in shopping patterns and the recession. The VAT rise that the UK Government introduced—with a £1 billion price tag for Scotland, of course—also affected the commercial world. It is fair to say that it is difficult to draw conclusions from the experience in England. However, the policy has been sustained in challenging financial times.
By working through our regeneration and town centres strategies, we can ensure that there are incentives to use empty properties. Empty property relief is part of the rating system, on which we will consult during the summer. It is a property tax. Many would ask why it is just the active premises that pay that tax and subsidise closed premises in the overall tax take.
We are not dismissing the concerns of the private sector. I am listening to a wide range of stakeholders on the proposed reforms to empty property relief. I emphasise that there is flexibility in our approach, which the Parliament and the committee can consider when it comes to looking at the regulations. The assessment of the policy will continue. There is no rush to make a decision. We have outlined a flexible approach and we will continue to listen to people. We will also use agencies such as Scottish Enterprise to promote properties, with the new property database that was announced recently, to give maximum possible exposure to the empty properties that exist.
Whatever we do, the Scottish Government will ensure that we have a competitive edge over our counterparts in the rest of the United Kingdom.
I move amendment S4M-03397.1, to leave out from “is concerned” to end and insert:
“welcomes the measures that the Scottish Government is taking to help tackle the prevalence of empty properties afflicting Scotland’s high streets by creating a new incentive, which links to the Scottish Government’s regeneration strategy and future town centre review, to bring these premises back into economic use; notes that, even after reform, empty property relief will remain significantly more generous than that available in England and, in particular, that Scotland will retain 100% relief for industrial properties; notes the considerably greater impact on Scottish business of the UK Government’s VAT rise, which is expected to cost Scottish business £1 billion, and congratulates the Scottish Government on the wider package of business rate relief measures, worth over £500 million per annum, that has ensured that Scotland remains the most competitive place to do business in the UK.”
10:46
I welcome the debate that the Conservatives have stimulated. I also agree with most of the motion. However, I want to give the Scottish National Party the chance to do the right thing and to give us the proper evidence.
We have before us a proposal that is at best not proven. There are huge concerns about its potential impact—particularly on our business community—and huge uncertainty surrounding the SNP Government’s projected costs. The figure of £18 million has been completely rubbished by so many commentators that it needs to be explored.
We understand the principle behind the proposal, but we are in tough times and it is our job in this chamber to ask whether the proposal will help or hinder our town centres. It is simply not good enough to be given Government assertions. We need evidence—robust evidence—and that is simply not on offer from the SNP Government.
The Finance Committee, having explored the evidence presented to it, produced a damning report. It asked questions, it interrogated the evidence and it concluded that the proposal had not been properly considered or justified. That matters. The Parliament should not pass legislation without rigorous scrutiny and proper justification. I have read a series of explanations from ministers as to why they did not conduct a business and regulatory impact assessment. The explanations are simply not credible.
When the SNP Government was elected last year, it said that it would govern as if it was a minority Government. We all know that if it was a minority Government, it would sit down and talk to members across the chamber and it would listen to the business community. A minority Government would be more focused on ensuring that the proper evidence was in front of us all when we debate this legislation.
There is still time. My amendment acknowledges the Finance Committee’s disappointment in the lack of an assessment.
I make the point again that the Government is taking a flexible approach. We will listen to stakeholders, to the committee and to the Parliament. We are listening—we have not set in stone what we propose to do. We have outline proposals. We will continue to listen if there are any constructive suggestions.
Without a business and regulatory impact assessment, the Government is listening without having properly considered the evidence. That is the key issue.
The Government amendment is an act of self-congratulation; if there were a prize for that, the minister would surely be in the top three. However, this is a serious issue. It is simply not acceptable for members to be asked to support the bill without proper scrutiny, given the major concerns that have been submitted to the Parliament.
Evidence from England has to be considered. The number of unoccupied properties has risen as the economic downturn has gripped. Properties have been demolished rather than let. That means that when the economy picks up, those properties will not be available. It has been suggested that companies are becoming insolvent rather than being stuck with higher business rates.
In Wales, as has been mentioned, our Labour colleagues have gone for a completely different approach. They have commissioned a detailed independent expert report. It acknowledges that although business rates are a major source of taxation, the changes to the current business rates regime would not be a panacea for wider economic challenges. Crucially, it highlights the complexity of the property sector. We are not getting that sense of understanding from the minister.
There is also the impact on the public sector. For all the minister’s supposed assurances to the committee, he cannot be definitive about the impact on the public sector either.
The figure of £18 million is illusory. We know from the evidence to the Finance Committee and the Local Government and Regeneration Committee that the business community is deeply worried about the proposals. Yesterday’s comments by the Scottish Chambers of Commerce testify to that. The Federation of Small Businesses has called for an investigation into whether property rates relief acts as a block to or a driver of economic activity. There are too many unanswered questions.
The reassurance that we have heard again this morning—that nobody need worry because the Scottish Government is consulting on the detail of the rates—is arrogant and worrying. That approach completely prejudges the outcome of parliamentary scrutiny. We have not yet had the Local Government and Regeneration Committee’s report or the stage 1 debate on the bill. There is no transparency in the process, which is run by ministers. The SNP has a working majority, but it should still treat the Parliament with respect. There should be full consultation on the proposals, followed by parliamentary scrutiny, not the other way round. When we deal with the regulations, the SNP’s overall majority will mean that they are simply nodded through, so there will be no opportunity to change the proposals.
Good government demands effective parliamentary scrutiny. The Finance Committee considered that there should be a business and regulatory impact assessment, and we agree. The SNP Government is incurring costs for businesses and local councils without proper consideration.
Our amendment is constructive. The Crofting Reform etc Bill was delayed to enable the Labour-led Scottish Government to consider major objections to part of it. That Government took its time and brought that bill back. More recently, the Offensive Behaviour at Football and Threatening Communications (Scotland) Bill was delayed for proper consideration.
We are in hard times and there are tough decisions to be made. There is too much at stake for us not to get it right.
I move amendment S4M-03397.2, to leave out from “, and therefore calls” to end and insert:
“; welcomes efforts to regenerate local economies and encourage occupancy in town centres but is concerned that the Scottish Government’s plans to reduce empty property relief through the Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill may not achieve its stated aim, may have a detrimental effect on business and the economy and may, in fact, cost the public sector considerable sums of money; calls on the Scottish Government to conduct a business and regulatory impact assessment (BRIA) immediately and to provide the Parliament with detailed information on how many commercial properties will be brought back into use as a result of these proposals; also calls on the Scottish Government to delay further consideration of the bill until the Parliament can consider the findings of the BRIA and other evidence, and urges the Scottish Government to consider other measures to incentivise local government to invest in economic development, such as allowing councils to keep a proportion of business rates raised through increased economic activity.”
We now move to the open debate. Time is tight, so speeches should be a strict four minutes.
10:51
How I yearn for the days when the Labour Party and the Liberal Democrats had a functioning majority in the Parliament. They used to listen to Parliament at every opportunity and never, ever used their majority to just nod things through or to ignore criticism or suggestions from the Opposition. Selective rewriting of history has just taken another bold step forward, although not quite as bold a step as the Conservatives appear to have taken. It is always good to hear Conservatives advocating U-turns on budgets, as they have made that something of an art form at Westminster of late. Whether on pasties, grannies, caravans, regional pay or the oil and gas exploration tax, you name it, the Conservative Party announces it in a rush and then U-turns the moment it realises that it has bungled.
The Conservatives talk about proposals not being in manifestos and damage to business, but it was the Conservative Party that hiked VAT to 20 per cent, a measure that I do not recall seeing in the Conservative Party manifesto and which has caused damage to businesses the length and breadth of Scotland. Frankly, if there is a prize in this Parliament for a brass neck, Gavin Brown has certainly earned it—and then some—today.
Sarah Boyack referred to the Finance Committee, of which I am a member. Her comment that the committee’s report on the bill is damning does not reflect the constructive approach that committee members took, with notable exceptions. The Government and the bill team have made it clear throughout that the approach is not set in stone and that they are willing to engage with stakeholders throughout the process. Marianne Cook from the bill team said in evidence that ministers had indicated that they will be “flexible” over the reform and will listen to stakeholders, including those from the business community.
The minister has said that he is listening, but the Opposition parties have not made a lot of constructive alternative suggestions.
Will the member give way?
Gavin Brown or his colleagues can deal with that point later. He will not impinge on my time, when he had 10 minutes to talk about that earlier.
At present, the cost of empty property relief over a five-year period is £0.75 billion. When that figure is highlighted to people in my area, they question whether the money is being used appropriately. As for the claim that properties are being demolished, it rather contradicts the point about people wanting to let or sell them. It also suggests that the buildings in question are brand spanking new business centres; I know that individuals in my region are sitting on a number of properties in a significant state of disrepair simply because they are receiving rates relief.
As the minister is seeking constructive suggestions, I will offer him one. At the moment, Northern Ireland is looking to offer 50 per cent relief to businesses that occupy long-term empty properties. Perhaps the minister and the Government could consider that constructive proposal as a further incentive to let these properties.
10:55
I declare at the outset that I am a member of the Local Government and Regeneration Committee, which is in the latter stages of producing its report on the Local Government Finance (Unoccupied Properties etc) (Scotland) Bill—to give it its Sunday title.
We all want our towns and city centres to thrive, to be full of businesses and to provide jobs and opportunities for local people. However, there are serious concerns that these proposals will not help us to achieve that and, in some cases, might make the situation worse. Concerns of that nature should be reflected in the work on any piece of legislation and, indeed, preparations for such legislation should be comprehensive. However, as Gavin Brown’s motion makes clear, that has not been the case with regard to this bill. I am primarily concerned about the lack of a full and proper consultation process and believe that a BRIA or even a pilot study should have been carried out. It is only right to expect such preparations to be made—as is customary—but that has not happened in this case.
The lack of consultation is clearly noted in the Finance Committee’s report and has been highlighted in the Local Government and Regeneration Committee’s work on the bill. Indeed, the Finance Committee’s report also notes that
“no attempt”
has been made
“to estimate the number of commercial properties that will be brought back into use”
under these proposals, a situation that the report rather diplomatically describes as “surprising”. Moreover, the figures given to the Finance Committee were based on limited information about Scottish Government properties, with no account taken of Scottish Enterprise or national health service properties.
As Sarah Boyack has pointed out, some of the evidence comes from England, where such a scheme has already been put in place. As the economy has struggled, the number of unoccupied properties has risen; indeed, some properties have even been demolished and people in Glasgow whom I represent have suggested that the same might be a consequence in that city.
Given that this point might well be reiterated again and again by Opposition speakers, I must point out that the issue of demolitions in England refers specifically to industrial properties. Under our proposals, such properties would still be exempt.
People in town centres are worried about this issue.
Despite the fact that groups such as the Confederation of British Industry and Scottish Chambers of Commerce have indicated that, for the most part, commercial properties are not left empty deliberately, no account has been taken of the current economic climate, which has put further barriers in the way of filling such properties. Indeed, Annabel Goldie mentioned that point earlier.
I know of a number of potential start-up businesses that have not received support from banks to allow them to look for new properties, and the Government should be actively pushing banks to do everything they can to support businesses in finding and funding properties. The banks are happy to take advantage of low interest rates, and the liquidity trap is allowing them to fill their vaults while properties stay empty. We should provide support to allow other properties to be modernised and redeveloped as well as penalising those who are intentionally and for their own personal gain not letting out their premises.
We all want our towns and city centres to be regenerated and to flourish. However, to achieve that, we need tried and tested legislation that is built on proper preparation. Let us begin that process by getting detailed information on the number of commercial properties that will be brought back into use by these proposals.
10:59
Today we heard a first: Gavin Brown and the Conservatives have concerns. After that I stopped listening, of course, as there was not much else in his speech. However, that alone was something—that they have concerns about something in their communities other than themselves and their cronies.
My own deep concerns are about our town centres, and one particular town centre. I want the opportunities that this reform offers them. Mr Brown said that it will not make a difference or bring empty properties back into use, but just because he said it does not make it so. After gloom and doom, he offered nothing, even though the Conservative-led Westminster Government has a similar scheme down south.
Mr Brown also stated that landlords will not want to let properties. He clearly does not live in the real world.
Will the member give way?
I will after I have finished this point.
Mr Brown clearly does not live in the real world, because in high streets across the country there are shops that have multiple sub-lets. Some people with no interest in town centre regeneration have property portfolios and do not actually want to fill their properties. Mr Brown may come in now.
George Adam is a remarkable man. He did not listen to a word I said—he switched off—but he has spent the past minute quoting me, which is quite impressive. Can he offer any evidence that this Government policy will bring empty properties back into use?
There is potential to bring 5,500 properties back into use. The alternative is that, as Mr Brown suggested, we do nothing and leave our town centres the way they are, with no hope or vision for the future. That is what the Tories constantly come up with. If we continue to do nothing, the cost and impact will be that, in 2012-13, £152 million will be used to subsidise empty shops. We will spend £152 million to keep shops and businesses closed. That is not right or correct in a modern and dynamic Scotland. What incentive does that give faceless absentee landlords on our high streets, who sit on properties while having no interest in town centre regeneration? Reform of empty property rates will revitalise our town centres and provide that incentive. It will work alongside other regeneration strategies and groups in our communities. It is important to our town centres and to our local economies, which work locally with the authorities and partner organisations to ensure that we can have vibrant and sustainable town centres.
Derek Mackay has much experience of this in Paisley town centre, as he mentioned. He knows, only too well, the challenges that this issue holds, and he has worked on it as a councillor and now as the Minister for Local Government and Planning. In Paisley town centre, from Paisley Cross to New Street we have more than 65 different landlords, which makes things extremely difficult. The public constantly ask how we will get people into the shops. It is a difficulty, but this measure alone will ensure that people have to keep their eye on the ball and do something with their properties, instead of sitting and waiting for things to get better.
The public pride themselves on their town centres and they want to make a difference. Recently, we had an event in Paisley to commemorate the Renfrewshire witch hunt of 1697—not 1979 as The Herald said. During that witch hunt, seven unfortunate souls were tried and put to death for witchcraft. The event, whose organisers I brought to the Parliament, took place in the town centre and was extremely busy. It made a difference, but what a difference it would have made had the high street been full of shops.
Every decision that I make here is based on what good it can do for Paisley. I believe that the bill passes that test. The status quo is not an option and, like the Tories, offers nothing.
11:04
Throughout Scotland, town centres that were once the vibrant and thriving hubs of local communities are increasingly in decline. Closed-down notices and boarded-up shops and office units are now sadly an all-too-familiar sight, as town centres grapple with a potentially lethal cocktail of challenges that range from the economic downturn and competition from out-of-town retail units to online shopping and town centre parking charges. Those factors have all contributed to a decrease in footfall that threatens the viability of our town centres.
It beggars belief that the Scottish Government should compound those challenges by proposing to levy what is in effect an additional business and town centre tax in the form of the reduced rates relief on empty properties, and, in doing so, become the principal architect of the potential demise of our town centres. If the Minister for Local Government and Planning and the SNP Government have their way, this measure could be the last nail in the coffin for our town centres. It is totally unsustainable for the minister and the Cabinet Secretary for Finance and Sustainable Growth to continue their rhetoric about having an ambition to reinvigorate our town centres and to reduce the number of vacant properties on our high streets while they ignore the clear and unambiguous message from Liz Cameron of the Scottish Chambers of Commerce and a host of others who represent business and retail, which is a highly property-intensive sector.
Margaret Mitchell paints a pretty grim picture of town centres in Scotland. If that is the case under the current regime, why is the status quo so acceptable?
If we let the business rates incentivisation scheme and the bonus scheme—our ideas—kick in, the status quo has a chance of survival. However, the Government is setting such a high bar for businesses that are trying to be economically viable that it is economic madness.
The message is simple. The reason why we have so many empty properties at present is more due to a lack of demand than to prohibitively high rents. If we are to address the problem, the solution must involve stimulating demand. The Scottish Government’s plan to slash the value of empty property relief will do nothing to stimulate demand, and will serve only to increase the financial burden on property owners at a time when we should be working with them to ensure that the supply of property is appropriate for modern town centres. That should be simple enough to understand even for this Government, which on this issue is gaining a reputation for its failure to grasp even basic abacus economics.
The Government has been rumbled. If it thought that an empty property cash grab on business could be slipped through without business and retail being able to mount effective opposition, the minister and his colleagues must now realise that they have got it badly wrong. The policy is poorly judged and should be abandoned.
I suggest that instead, at the very least, the minister should seek through the forthcoming national review of town centres to engage in a constructive dialogue with local businesses and property owners in an effort to identify a credible solution to the plight of empty properties in our town centres.
11:07
I welcome this debate on reducing empty property relief for non-domestic rates. I remind members that we subsidise vacant properties by more than £150 million per year. I believe that the empty property rates reform will revitalise town centres and bring more than 5,000 properties back into use.
In Bellshill, in my area, we have revitalised the town centre and brought properties back into use. However, there have still been instances in which we have gone to owners and asked them to let their shops, and they have said, “No—we want to keep them empty because it suits us.” That has to change.
As the minister said, the Government will listen to stakeholders, who will have many opportunities to engage in the process prior to the regulations being brought in. I remind Tory members that the Con-Dem Government in England has failed to reverse similar changes that were made in 2008. Tory members up here are saying, “Don’t do it!”, but down in England they have failed to reverse those changes.
Empty property relief will remain more advantageous in Scotland than in England and Wales, and Scotland will still remain the most competitive place in which to do business in the UK. The small business bonus scheme has reduced taxation for two in five commercial properties.
There are several provisions in the bill. It allows the Government to make regulations to alter the non-domestic rates regime by varying the reliefs that are available for certain empty commercial properties. It also allows the Government to make regulations to alter the level of council tax relief that is available or increase the level of council tax that is payable on long-term empty homes. No one has spoken about that.
In his speech, which I listened to, Gavin Brown failed to mention the subject of long-term empty homes. The proposed change will allow many houses to be brought back on to the market. There are many houses lying empty that could be used to reduce waiting lists. The extra income could be used by councils to build more houses. I compliment the Government on giving extra money to North Lanarkshire Council that will ensure that more than 1,000 council houses are built over the next number of years; I am sure that John Pentland will mention that. For 30 years, no such houses were built. I am surprised that no one has mentioned the issue.
Is it possible that that has not been mentioned because it is not in the motion, which is about non-domestic rates?
It is still in the bill.
The Tories have been rumbled. Despite the rhetoric of the Conservatives in the Scottish Parliament, the Con-Dem Government has failed to reverse similar changes that were made in England in 2008. I am aghast at the point that the Tories have gone on about.
11:11
It had been my intention to start by saying that I was sure that everyone would agree that long-term empty properties are a waste of resources, but I will now proceed by saying that that is my opinion. Let me take the example of a pigeon-infested property in Craigneuk in my constituency, the continued deterioration of which is unacceptable. When I wrote to one of the well-known banks that has a branch on nearly every high street the length and breadth of Scotland, it defended its inaction by saying that it was not the sole owner. At least it did not use a lack of funds as an excuse.
I believe that something needs to be done, and I give the Scottish Government credit for trying. Although there are problems with the approach that it has taken, I do not agree with the conclusion of the Tory motion. As is so often the case, it is a matter of getting the right balance between the carrot and the stick. The bill, as far as it goes, is about wielding a big stick. It does not say much about providing help to bring properties back into use. In fact, it is all very woolly and vague. We are being asked to vote on a skeleton of a bill, and to trust ministers to put flesh on the bones by issuing regulations. Is it not ironic that a Government that argues for maximum devolution keeps asking this Parliament’s elected members to concentrate power in the hands of ministers?
I am sorry to interrupt the member’s speech, which is very enlightening, but I must clarify that we are not seeking power for ministers; we are seeking the power to vary by regulation. The regulations will be presented to Parliament for consideration. Members will still be able to scrutinise and, indeed, object to the regulations.
The other issue with the bill is that it seems to be about income generation at least as much as it is about tackling empty properties. Those two purposes can be at odds with each other. Doing well at one means doing less well at the other. We have heard that the proposed scheme could raise £18 million. That figure is admitted to be a maximum, which is one way of saying that it is a fantasy figure.
How many properties will be exempted? Some of the properties in question are very difficult to let or need significant renovation. If they are included in the scheme, it might not be for long. The English experience is that, in such circumstances, demolition—which has happened in one of the town centres in my constituency—can be a cheaper option.
If money is needed for renovation and the banks are not lending, will support be given? When properties are council owned, we will be robbing Peter to pay Paul. The bringing back into use of properties will reduce income. The scheme will involve the spending of significant amounts on administration, adjudication, monitoring and, perhaps, assistance. How much of the £18 million will be left?
We must also take into account other adverse consequences. For example, demolition might hinder economic recovery; there is evidence that rate rises result in job losses, as the National Assembly for Wales has highlighted; and hard-pressed firms might be forced out of business. Will the adverse consequences outweigh the benefits? We simply do not know, because we do not have studies to answer the questions and we do not know what the minister is planning to introduce by way of regulations.
I urge the SNP to support our amendment, to undertake a business and regulatory impact assessment, and to take time to reflect before pushing ahead with the bill.
11:15
I welcome the debate and thank the Conservatives for bringing it to the chamber. Like many other members, I am concerned about the many empty shops in my constituency. It is a particular problem in Cumbernauld and Kilsyth. In that regard, I welcome the fact that there has been Scottish Government support to help to revitalise the town centres in my constituency. There has been town centre regeneration fund support for Kilsyth, and other support such as the small business bonus scheme, which has seen 63 per cent of shops pay zero or reduced rates. That practical support for small businesses is keeping them alive and open, and it suggests that the inference in the Tory motion that the Scottish Government is anti-business is something of a nonsense.
However, despite that support, there are still far too many empty properties. I see that clearly in my constituency. The much-maligned Cumbernauld town centre needs investment but, above all, it needs more amenities. I question where the incentive lies to achieve that in the current scheme for non-domestic rates relief. I question the logic of providing an incentive to keep business premises empty, and I question whether such a position is pro-enterprise or pro-business. We need to do more to try to bring such premises back into use. That is why I welcome the efforts that the Scottish Government is making. It is engaged in considering how to take the matter forward.
As far as changes to the non-domestic rates relief scheme are concerned, we have seen support for those efforts. Andy Willox of the Federation of Small Businesses stated:
“We also welcome the review of empty property rate relief and its effect on local high streets. We need a system which encourages vacant town centre business properties to be filled”.
That organisation, which represents small businesses on the high street, is calling for the current scheme to be looked at.
Does the Federation of Small Businesses support the bill?
The Federation of Small Businesses has said quite clearly that it supports our looking at the issue of empty property rates relief. However, I recognise that the proposal has not been welcomed across the business sector.
That paragon of progressiveness, the CBI Scotland, has also come out and commented. It made a fair point, which was also made by Annabel Goldie. David Lonsdale said:
“companies rarely leave premises empty by choice”.
I accept that that is the case; I am sure that they do not choose to leave properties empty. However, I question whether enough is done to get properties filled again. How many businesses reassess the rent that they are looking to charge for such properties and how many wait it out on the current scheme of rates relief? All too often, businesses do the latter.
I return to the fundamental point that I made earlier. I do not think that such a position is pro-enterprise or pro-business. I would have thought that the Conservative Party, as the pro-enterprise party that it says it is, would agree with that proposition, not least because the scheme that the Scottish Government is looking to take forward is largely similar to the scheme that is administered by the Conservatives in government south of the border. That point has been well made, so I will not reiterate it too much.
To that end, I will not be supporting the Conservative position. I look forward to the Government taking the matter forward, and I will support the amendment in the name of the minister.
11:19
The debate has been interesting. It was not exactly “Through the Looking-glass”, but it was a bit topsy-turvy at times. I will come to that later.
No one would seriously argue against regenerating local economies and encouraging occupancy of empty premises in our town centres. However, Gavin Brown, Sarah Boyack and others have argued effectively that the Scottish Government’s plan to reduce empty property relief through the Local Government Finance (Unoccupied Properties etc) (Scotland) Bill is fundamentally flawed. The proposal will not achieve its stated aim. In my view, and in that of organisations such as the Scottish Property Federation and the Scottish Chambers of Commerce, it will have a detrimental effect on business and the economy.
The evidence that we have heard from various sources is that the proposal will cost the public sector considerable sums rather than save money for the public purse. If the Scottish Government disagrees with that analysis, it must do more than simply assert that it is right and everyone else is wrong. It must prove its case.
Michael McMahon asks how the proposal will support the public sector. He is right to identify that elements of the public sector would pay more if relief was reduced, but all the funds that will be saved—the £18 million—will go, through non-domestic rates, to public sector projects.
In the evidence to the Finance Committee, there was no basis for bringing the figure of £18 million to the table. It was not assessed properly and will not stand scrutiny.
In recent weeks, the Finance Committee has taken a lot of evidence that has called for more robust verification and statistical analysis of the effects of public spending in Scotland. There is concern that we cannot prove that the money that we spend has the impacts that we hope for.
So to a more bizarre aspect of the debate—and I do not mean Mr Adam’s reference to witch hunts. An oft-heard refrain from the nationalists in the Parliament—if there are any nationalists left in the Parliament, given what Angus Robertson has said—is that everything that Scottish Labour does results from its having to dance to the tune of London Labour. Once that old tripe has been dished out, we are often challenged to be like Labour in Wales, which has done this or done that differently from Labour in London. It is therefore ironic that the SNP demands that we copy a misguided but well-intentioned policy that was introduced by a Labour Government in London and which the minister has confirmed he wants to emulate. It is strange that, on this occasion, the SNP wants us to ignore the fact that Labour in Wales has looked at England’s situation and taken the same view as Scottish Labour, which is that the policy will not achieve the intention.
As has been clearly exposed in evidence to the Finance Committee and in this morning’s debate, such legislation has been tried and has failed and should not be copied in Scotland. In the light of that, it beggars belief that the Scottish Government should reject calls for a business and regulatory impact assessment to provide Parliament with detailed information on the bill’s potential impact on business and to give us an indication not of the number of commercial properties that we can expect to be brought back into use, but of the number that will be brought back into use.
It is not enough for the Government to continue to assert that, because it is doing something, it will work. We must see the evidence. As it stands, the evidence is not there. It is regrettable that the Government continues to assert that it is right and expects everyone to accept that proclamation without question. It is clear from the debate that SNP members accept that, but that is simply not good enough. Parliament and the business community must be listened to. So far, that has not occurred.
Too many questions have been asked about the bill’s efficacy for us just to accept that the Government should follow England’s lead. The sounds that are heard from Westminster do not beckon us like the pied piper; they are a siren warning us to head away from the rocks. The Government should learn lessons from England and drop the proposal now.
11:24
The Scottish Government is trying to show that it is an internationalist Government that is willing to learn lessons from across the United Kingdom.
Michael McMahon rose—
Oh, come on. I have only just started.
Will the minister give way?
Okay.
The point is that the Government is not learning the lessons or listening.
When members kept referring to the demolition of buildings in England, I had to say that those buildings were industrial properties. The fact that industrial properties will continue to be exempt in Scotland shows that we have listened and learned and that it is the other parties that have not moved on. It appears that unionism is alive and kicking in the chamber, although policies of unionism that are deployed and implemented by the Labour Party and continued by the Conservatives and the ever-absent Liberal Democrats hold true except for viewers in Scotland, where there is—in those parties—denial on introducing and deploying such policies.
The issue is serious, and I have tried to be consensual in my approach in the debate and to make it clear that the Government will continue to listen to—and to learn from—the private sector, partners and parliamentarians.
I have been asked specific questions, which I have tried to answer. The debate has moved on from the debate in the Finance Committee, although I admit that a number of probing questions were asked there and that specific information was sought, much of which was provided in due course to the Local Government and Regeneration Committee, including how the formula and figures were arrived at, how the policy would be deployed and how it would affect different parts of the public sector. We were able to explain that the impact of the proposed changes to rates relief would be a maximum of £300,000 for the NHS, £400,000 for Scottish Enterprise and £1.7 million for councils. However, we should bear it mind that there will be a saving of £18 million of revenue, which will all be retained for the public sector in the face of savage UK cuts to the Scottish Government budget.
The Government’s flexibility and willingness to listen is very much on the record. I have had a number of meetings with stakeholders and I will continue to have such meetings as we approach the bill’s enactment and the subsequent regulations that Parliament will consider.
Will the minister taken an intervention?
Certainly, I will—but after I have made my next point.
Margaret Mitchell asked earlier whether we would ensure that our policy and the rates review would not be implemented in isolation, would tie in with the town centre regeneration strategy and would be worked up in partnership with the private sector. I will, of course, commit to that, because it makes sense for the rates system to be tied in to whatever incentives or town centre regeneration proposals we produce.
I merely put it to the minister that he really cannot have it both ways. Either the bill will be passed to achieve the £18 million saving, or he will delay it because it sends out the wrong message. Which is it? Can we have a definitive answer now?
That is not the case at all. We are saying that the bill will give us the power to introduce regulations to vary rates relief as we do for the small business bonus scheme, so the same kind of approach would be taken. However, we must balance the budget. The figure in the budget was £18 million, but we are trying to be flexible in asking whether there are different ways in which to deploy the policy to achieve the objective of incentivisation while sustaining us against the budget pressures that we encounter. Mark McDonald made a helpful suggestion in that regard around what is happening in Northern Ireland. Despite the rhetoric, the Westminster Government and the Welsh Assembly Government have not yet changed their policies on empty property rates relief, although they may be considering doing so.
The power that we seek through the bill will give us the ability and adeptness to change the policy that applies in Scotland.
Will the minister take an intervention?
I want to make progress.
Northern Ireland has been able to develop an incentivisation scheme—which Gavin Brown may be interested in—to bring properties back into use. If properties that have been empty for a time are brought back into use, they may be eligible for rates relief at that point. The Scottish Government is interested in that proposal and in how it could be applied here, which shows that we are prepared to be flexible about the details when the regulations are introduced.
We want to implement the policy with a partnership approach. I do not dismiss the concerns that have been expressed, but I am mindful of budget debates in the chamber in which Opposition politicians have often simply cried out for more.
I come to the Conservatives’ position. At least the Labour Party supported the public health supplement, which is a radical tax that will contribute to preventative spend. The Conservatives said that the bill is the wrong prescription at the wrong time. It says a lot that they would, to fund some of their pledges, re-introduce prescription charges. Their solution to some of the budget pressures in Scotland says a lot about where in Scotland they think the burden of taxation should rest.
Of course, we are judged by our deeds and not just by our words. The £18 million that would be saved or generated through reduced rates relief pales into insignificance compared with the £1 billion VAT bill that was landed on Scotland as a consequence of a UK Government decision. Through our policies and their application, the full package of rates relief that is over £0.5 billion a year, including empty property rates relief, will still be at a very generous £721 million after the reform, which will ensure that Scotland has an advantage in the competition to be the best place in the United Kingdom in which to do business. We will continue to work in partnership with the private sector and others and we will maintain our “listening Government” approach in order to achieve that objective.
11:30
One is left with the impression that John Swinney fired the bullets but poor Derek Mackay is left holding the gun. Derek Mackay does not appear to be terribly passionate about the policy and if there were thought bubbles coming out the side of his head, they would quite clearly contain bad things about Mr Swinney, questioning why he was left to defend the policy. He did his best, but when he came down to it, he was about as convincing as the “The dog ate my homework” excuse that one used to use in school.
Derek Mackay completely ignored—as did every SNP member—the fundamental point and question: will the bill increase the number of empty properties that are brought back into use. Everybody in the chamber wants to see more empty properties being brought back into use. No village, town or city wants the blight of empty properties. All parties across the chamber want to see things done, but let us not conflate the two issues. To want something to be done and to decide that what has been chosen will do anything are two entirely separate issues. I have to say that every SNP speaker either intentionally—or unintentionally—conflated the two issues.
SNP members again stated that the bill will bring 5,500 empty properties back into use. No, it will not. The Scottish Government bill team are not saying that and the minister did not say that. There is no evidence that the bill will bring a single property back into use. That is what the bill ought to be about and that is our objection to it. It is a burden on the public and private sectors and it could potentially damage the economy via demolitions. There is no evidence at all, and no attempt has been made to answer whether the bill will solve the problem that the Government says exists and that we all believe exists.
How credible did Gavin Brown find the minister’s assertions about why we were not going to get a BRIA?
I think that that question is what is called friendly fire. Of course the minister’s assertions were not credible. I do not think that even the minister found them credible. In fairness to the minister, he was not the minister when the policy was drawn up, and I suspect that if one was to have a private conversation with Derek Mackay, he would probably—I cannot put words in his mouth—speak common sense. Certainly, all his SNP colleagues on the Finance Committee, including Mark McDonald, who is in the chamber, and the committee convener said categorically that there should have been a consultation.
I—again—make the point to Gavin Brown that a business and regulatory impact assessment would have been on the proposition that was announced at the budget. I have repeatedly said that we are listening to the various stakeholders to see how the policy might be developed. As that engagement is on-going so, too, is the assessment. Surely that shows that we are listening, that we are looking at the potential impact, and that we are taking that on board to see how we can refine the policy. Surely that is an approach that he would appreciate.
No. The approach that I would appreciate is a full and formal consultation on primary legislation. I do not doubt that Derek Mackay is the listening type, but saying “We are listening” is not the same as having a full consultation, especially when every other part of the bill underwent a full and formal consultation.
Derek Mackay asserted that only industrial properties have been demolished. That is simply incorrect. The Lambert Smith Hampton report—published by the Royal Institution of Chartered Surveyors—to which I referred, makes it clear that properties of all type were demolished. If Derek Mackay can provide evidence that only industrial properties were demolished, I would be extremely interested to see it.
We heard also that the Government is going to be using Scottish Enterprise to promote some of the schemes that it proposes. That is great; I have a lot of time for Scottish Enterprise and I hope that it does that well. Why will the minister not ask at the same time why Scottish Enterprise is sitting on several hundred empty properties? The reason is that it is extremely difficult—if not impossible—to get tenants for those properties in the current climate. There are simply not enough tenants and if Scottish Enterprise, which markets extremely hard and has some of the most talented people in the business, cannot get properties let, what chance do other business owners and property holders have when they do not have one ounce of the marketing budget that Scottish Enterprise has?
I will start to draw the debate to a close, but do not worry, Presiding Officer—I will take longer to close than a minute. Fear not.
I got worried there.
The fundamental point is that the bill will not incentivise owners to put their empty properties back on the market. It will not incentivise anyone to do anything; it will just clobber businesses that cannot get their properties let out.
There is widespread concern about the bill across the political spectrum and we have heard various quotations and comments from business organisations. I was so robust in the motion because I believe that we should scrap the proposals. It is not just the business community or business organisations that are calling for that. Yesterday, I went to the trouble of reading all the submissions that have been given to the Local Government and Regeneration Committee, and a broad spectrum of people across Scotland are saying that the proposals should not go ahead.
The Association of Town Centre Managers Scotland said that
“Increasing the liability of property owners, in many cases, will not improve market conditions and reletting will not be any easier. The proposed legislation could make many property owners more risk averse.”
The Enterprise North East Trust stated very clearly:
“For property owners or landlords, the empty relief scheme is helpful but in no way detracts from a property owners ultimate desire to relet—it could be argued therefore, that it is currently well balanced. The removal of empty relief would, we suggest, have a negligible impact on a Landlords ability to let.”
From the council side, we have a submission from the Convention of Scottish Local Authorities, which said that
“COSLA recognises that there is a cost implication for Councils where they are in ownership of properties which are unoccupied. There are often good reasons why these properties may remain empty. Councils are active in letting out such properties as part of their asset management plans.”
If councils cannot relet properties with the resources that they have, how can some of our smaller businesses do so?
Individual councils have also written in with evidence. Glasgow City Council might have to pay £1 million. Falkirk Council development services ends its comments with:
“The proposal is not therefore supported.”
Submissions from the national health service talk about the cost that NHS National Services Scotland will have to pay, and NHS Ayrshire and Arran said that it wishes its
“concerns to be noted concerning the reduction of relief for premises that are empty.”
People from across the spectrum have raised concerns about the policy and are calling for it to be abolished. I can find almost no one who thinks that it is a good idea, and almost no one—even in the Government—who can show that it will make any impact on the number of empty properties or put any back in circulation. That is why we brought the debate to the chamber today, and why we are pushing our motion.