Chamber and committees

Delivering increased economic growth will be at the very heart of this Government’s agenda in the next five years. We want to ensure that Scotland is full of vibrant communities where it is easy to start and grow a business, where the ambition and creativity of Scottish society are embraced and where the Government acts to create the right conditions to attract the inward investment that is needed.

A key part of making intensified economic growth a reality will be getting the right framework for non-domestic rates, because we know that businesses all across Scotland are struggling. As is the case with family finances, businesses are having to respond to inflation and are struggling with energy bills, increased staffing costs, food prices and VAT. In that context, it is important to remember that this Government has already taken action to help to alleviate the pressures that our businesses currently face. This year’s rates relief package is worth close to £1 billion, and we know that that is helping to provide relief to tens of thousands of businesses all over Scotland. They also continue to welcome support such as the small business bonus and targeted retail, hospitality and leisure relief. We responded directly to calls from the self-catering sector for a dedicated transitional relief, which the Association of Scotland’s Self-Caterers has welcomed.

However, it is important that all Governments listen and that we continue to focus our efforts on alleviating the pressures that our businesses face. That is why I am pleased today to set out our plans for reform of the non-domestic rates system in Scotland.

Our current system is built on many strengths. Earlier this year, 1 April marked the first three-yearly revaluation in Scotland and the start of the second revaluation cycle based on rental values one year earlier. This year’s Scottish budget reduced all three tax rates during this financial year in order to ensure a broadly revenue-neutral revaluation cycle in real terms—one that is redistributive and not tax raising. Alongside those tax rate reductions, the budget delivered the largest relief package in cash terms since devolution, excluding the temporary support that we provided during the pandemic.

We do not want to lose the positive elements of the existing system. Nonetheless, I know that there are real concerns about the accountability of assessors and the consistency and transparency of valuations. Many ratepayers have found the rates system and property valuations to be complex and uncertain, and we are also seeing delays in accurate bills being issued. We know that businesses are already dealing with the fallout from international conflicts alongside the on-going damage of Brexit, which has been compounded by the UK Government’s increase in employer national insurance contributions. That is why we committed to working with the business community to strengthen our rates system and accountability.

I turn to the ratepayer experience. To ensure clarity, we will deliver change in how the non-domestic rates billing system works. It is an unfortunate consequence of our current fiscal arrangements that our tax decisions are confirmed only in the Scottish budget, which follows the United Kingdom budget. That leaves an incredibly tight period of time in which the Scottish Government is expected to set our budget. Notwithstanding that, however, it is unacceptable that delays in software updates have prevented ratepayers from receiving accurate bills ahead of the financial year, with bills often arriving only late into the summer months. Such delays create unnecessary challenges for businesses, making it harder to plan ahead and manage cash flow.

That is why we will take two actions in that space. We will provide improved self-service information for ratepayers to assess their likely liabilities through our online rates calculator. Alongside that, we will work with the Convention of Scottish Local Authorities and the Improvement Service to ensure that the non-domestic rates billing system works as it should. Specifically, I want to reach agreement, working with local government, on an NDR billing system that will deliver accurate bills on time, all the time.

In relation to accountability, I will address three matters: the short-term issues arising from the revaluation; improvements to the appeals process; and consideration of more significant structural change to our current model.

First, this Government has heard clearly the concerns about apparent anomalies in the 2026 revaluation. A number of examples have been raised with ministers. Although an appeals system to consider such cases through the Scottish tribunals exists, we want to be sure that there is not a systemic issue of inconsistent valuations. We are mindful that, due to the one-year tone date—something that England has thus far considered unworkable—assessors are producing draft valuations in less than eight months. I therefore announce today that the Government will establish an independent panel to undertake a rapid review of the outcomes of the 2026 revaluation. Specifically, it will be tasked with examining and reporting to ministers, within three months of its appointment, on allegedly anomalous valuations and their overall impact. Ministers will ask the panel to make recommendations on how those might be addressed.

Secondly, alongside that immediate review, we must ensure that business owners who consider their rates to be inaccurate have access to timely recourse. The appeals system is intended to allow ratepayers to request changes to a property valuation from the assessor in the first instance, with the possibility of appeal to the independent First-tier Tribunal for Scotland. It is important that the judiciary is independent in how it organises its work, but I commit today to examining how the Government can support increasing the capacity of the local tax chamber to support that process.

Thirdly, ministers have listened to the concerns about the valuation system, and I commit today to a general review of the assessor function. The review will ensure that assessors’ independence in valuation is maintained, but it will also seek to ensure that there is confidence in the system for all. Over the summer, we will begin engaging with stakeholders to develop options for reform to the structure of assessors and establish how those options could deliver improvements in accountability and transparency. I intend to explore further the potential role for a national assessor and the option of placing the Scottish Assessors Association on a statutory footing, with reporting obligations to Parliament. Such changes would require full system redesign and legislation, but I acknowledge that assurance is needed now, which is exactly why I have committed to an independent rapid review of the 2026 revaluation.

The Government is providing a package of relief, which, I remind members, is forecast to be worth more than £870 million in 2026-27. That includes the business growth accelerator and fresh start reliefs, which are the most generous schemes of their type across the United Kingdom.

However, I am mindful of concerns that capital investments can translate directly into increased rates liabilities, which can act as a disincentive to growth. Similarly, cliff edges in relief eligibility can encourage the turnover of properties or constrain expansion. We have heard that concern in the campaign led by The Courier and others, which calls for an expansion in eligibility for fresh start relief. We have already committed to a comprehensive review of non-domestic rates, which will examine the impacts and configuration of our reliefs. However, recognising the benefit to businesses of having certainty on rates and reliefs for the duration of the three-year valuation period, we have provided that certainty on some of our most significant reliefs over the next three years. As a result, our comprehensive review will start this summer, in order for any fundamental changes to be in place for the next round of revaluation.

Alongside that comprehensive review, we will identify early changes that can be made at the next Scottish budget to enhance and better target our existing package. The final decisions on such changes will be confirmed at the Scottish budget, but I can announce today that, from 1 April 2027, vape shops will be excluded from eligibility for relief.

I place on record my thanks to The Courier, The Press and Journal and the Sunday Post for their campaigning to support Scotland’s businesses. Campaigning journalism can deliver real results, and those publications should be commended for their role in that.

The Government was returned to office with a strong mandate from the people of Scotland. We must all reflect that that includes Scottish businesses, which recognise the support that the Government has been able to put in place during extraordinarily challenging times for our businesses. In returning to office, ministers are mindful of the need for greater action and impetus, to acknowledge the ongoing economic uncertainty of our times.

The Government has committed to a comprehensive review of non-domestic rates to support our businesses across the country. In addition, I have confirmed today that we will act to deliver increased transparency, accountability and clarity. On billing, we will improve access to self-service information, and we will work with local government on a billing system that works on time, first time. We will establish an independent panel to undertake a rapid review of revaluation, and we will ensure that the appeals process has the capacity to deliver timely outcomes. The assessor function will be reviewed, with options being developed over the summer. Of course, we will continue to enhance incentives for investment.

Our comprehensive review will consider fundamental changes but, in the short term, the Government will respond positively and openly to constructive ideas. Crucially, we will work in partnership with business to drive the inclusive economic growth that our nation requires in order to meet the challenges of our time.

I very much recognise the point that Kate Campbell is making. There is a level of complexity here, because most universities receive charity relief, and we currently have no plans to change that. However, many charities undertake some sort of commercial activity, and it can be challenging to distinguish between commercial and non-commercial use. I very much welcome views on the topic as part of our stakeholder engagement for the review of rates, and I will be happy to discuss Ms Campbell’s proposal with her in more detail in the coming weeks.

Perhaps it was a bit too much to expect some positivity about these announcements from Mr Hoy. However, I hope that he recognises that the Government has significantly adapted our position on support for businesses in relation to some of the outputs that I have set out today. For example, the independent panel is going to provide a rapid review of the 2026 revaluation, in relation to which I understand—and very much recognise—that there have been issues. The Government has heard that challenge from businesses and we have already engaged with them directly. The Minister for Public Finance will engage with them again tomorrow. Throughout the summer recess period, we will engage with businesses on how we can improve that approach. Of course, the independent panel will report directly to ministers.

I extend to Mr Hoy the same invitation that I extended to Mr Greer. If Mr Hoy wants to come forward with some more ambitious proposals ahead of the budget, my door is open—

I thank Alyn Smith for his welcoming of this work, in particular his mention of the rapid review and the revaluations, which I know have caused concern to a number of businesses—not all businesses, but a number of businesses. It is important that we learn from those instances and that those anomalous valuations are considered. We will receive further advice from the independent panel to that end.

The Gill review is continuing to give confirmation to that end, but the member will be aware that BJ Gill, the chair of the review, was appointed Solicitor General. I congratulate him on that appointment, but he has tendered his resignation as chair of the review, and arrangements will be made as soon as possible to appoint his successor. It is really important that the new chair of the review has the expertise and grasp of the legal framework that applies to valuation for rating and objectivity. We expect the review to complete as previously intimated to Parliament.

I welcome Kristopher Leask’s points about engagement with COSLA. We know that there is inconsistency across the country at the current time, with different systems being used. Some of that has informed software challenges that businesses have experienced. We need greater consistency for business across the country, so that we can resolve some of the matters that businesses have flagged directly to ministers.

In April 2023, the Government devolved empty property relief. That power has gone to councils, along with additional funding in the region of £105 million, to reflect the devolution of that power. That also empowers local authorities to take decisions about how they put in place that relief for local needs, reflecting the needs of businesses in their local areas. There is a level of devolution that already exists in the current system, and it is important to recognise that.

One of the points that Paul Sweeney set out in his question is that there are anomalies in the current system. Ministers recognise and understand that, which is exactly why we have committed to the review that I set out today. I am sorry if he does not feel that that goes far enough, but I set out in my statement to Parliament that we are going to look at options to enhance fresh start relief, which is a direct ask of the campaign. That is exactly why we worked to support the Labour amendment three weeks ago.

As for the delays in relation to the appeals system, I set out a number of actions that we will take in that space. We need to work with businesses and listen to them about their experiences, and the engagement led by the Minister for Public Finance, which will continue tomorrow, has been instructive.

We need to be mindful not to create a cliff edge—and that relates to some of the challenge that Paul Sweeney has set out in his question today. I am more than happy to give that commitment today. If Paul Sweeney has the specifics of the business in question, I would be more than happy to consider the matter and to pass it to my officials for a more detailed response.

There were a number of points in Kim Schmulian’s question, which I want to come to. First, I am more than happy to accept her invitation to visit properties in Glasgow. The Minister for Public Finance and I have planned a summer of engagements with businesses, to hear from them directly about their experiences. It is hugely important that their experiences form part of the review and ultimately lead to improvement in how businesses experience the support that they should be entitled to.

More specifically, on retail, hospitality and leisure, the Government’s shift in the budget was welcomed in relation to the additional funding and relief that we were able to provide in that space. As I have set out previously, around half the properties in retail, hospitality and leisure continue to be eligible for the small business bonus, which is hugely important and is making a real difference.

We will continue to engage with business throughout the summer recess, and I would be more than happy to give Parliament an update on that following our return.

Mark Griffin will know that, in my former role, I spent a good amount of time with our teaching trade unions and local government, trying to negotiate an agreement in relation to reducing teachers’ class contact. Through joint negotiation, we were able to do that, but it took time. Unnecessary stress was caused for parents and carers because we thought that we might be in receipt of some industrial action—so we had to work at pace to get to that point.

As the Deputy First Minister, I do not want to get to that stage. I want us to have a much more strategic approach to negotiating in relation to pay. Work on that was led across the Government by my predecessor and I want to continue it. I had a helpful discussion with Roz Foyer, who joined the event about public service reform that the cabinet secretary and I attended on Monday; we talked more about how we can have that strategic overview. I would be more than happy to hear any suggestions that Mr Griffin has on that.

We must work in close partnership with local government and our trade unions. The member’s point in relation to the disruption of services is well made. I will take forward the suggestions that he has made to that end in our engagement with COSLA next Thursday.

Governments across these islands face significant pressures on public finances. Those challenges have intensified in recent months due to global instability.

Last summer, we published the medium-term financial strategy, which sets out the scale of the challenge and the action that is required. That was reinforced through the spending review and portfolio efficiency and reform plans, which were agreed in January, led by cabinet secretaries across the Scottish Government.

In addition, last week, I met the IFS to discuss its report and findings in more detail, including the learnings for the Scottish Government, to inform our next steps.

I had an introductory meeting with COSLA on 28 May and I will meet it again, along with the Cabinet Secretary for Public Service Reform, next Thursday.

Although the Scottish Government has no formal role in local government pay negotiations, we worked closely with COSLA to confirm funding flexibilities and additional funding. That allowed COSLA to provide a fair and affordable two-year pay deal, which was worth 7.64 per cent across 2025-26 and 2026-27.