Chamber and committees

Will the minister take an intervention?

I will briefly address some of the points that have been raised in the debate. However, given the temperature in the room and how time has gone on, I hope that members will appreciate that I might not catch everything.

I recognise that I have maximised the potential for amendments to LBTT within the scope of the bill and that most of my amendments would be more appropriate in a dedicated tax bill. However, the Scottish Government does not introduce such bills. For example, there is no finance bill introduced each year that is associated with the budget, which is normal in many other Parliaments. Given that, I have taken the opportunity to try to better understand the Scottish Government’s position on a number of these issues.

It is frustrating—and not for the first time in this group—when the minister’s position is that he cannot speak for the Government more widely. Given that I notified the Government of the vast majority of my amendments in January, I would have thought that the minister would have been able to come to this meeting with a position and with more information.

For example, it is not satisfactory to use the LBTT review to avoid addressing the fact that Scottish Government policy, as it currently stands, is to not apply LBTT to two particular types of company, one of which is infamous for tax avoidance. Those are regulations that the Government has had in place since 2012. It sounds as though the minister said that regulations have been made in regard to one of those types of company. However, that is not SPICe’s understanding and nor is it mine.

The reality is that, as things stand, the Scottish Government has specifically exempted from paying this tax a company type that is infamous for tax avoidance yet it cannot justify why that is the case, despite the fact that I raised the issue months ago. It is frustrating that the minister is not as prepared to discuss these issues as would be appropriate.

I hear what members are saying on council tax revaluation. I heard members say that we need more time to consider that. We have had 34 years to do so, and we have spent most of the past 34 years discussing council tax in one way, shape or form. I heard suggestions that we should consider council tax revaluation in the next parliamentary session. We said that in the previous session, particularly on the back of the 2015 commission on local tax reform and the comprehensive piece of work that it produced, which is still sitting largely unactioned.

When the commission came up in a recent meeting of Parliament’s Finance and Public Administration Committee, I discovered that the domain name for the website that was set up by the Government for the commission has expired. Therefore, all the documents have been lost, and the Government needed to use the wayback machine—the internet archive—to recover them. That was a poor example of document handling, but there you go.

There was a suggestion that we need to do more work. The 2015 commission did the vast majority of the work on this for us—it was cross-party but led by the Government and included other stakeholders. That was not the only group to have done such work; a huge amount of work has been done outside the Parliament by many people who are frustrated at the lack of progress.

There has been a suggestion that revaluation should be dealt with in a separate bill. I will take that as an indication that, if I am fortunate enough to be re-elected, Mark Griffin will encourage me to immediately announce my intentions to introduce such a bill and that he will support it.

I have heard suggestions—particularly from the minister—that we have not yet decided how revaluation should work. That is fine, because my amendments do not specify how the revaluation process would take place; they just specify what the deadline would be and that there would be consideration for reliefs.

Fundamentally, the problem that members have been quite candid about is that this is often regarded as an issue that is just too difficult to solve. However, the longer that we defer addressing the issue because of the difficulty, the more difficult it becomes. We are now at a point at which, as I and others have said, most people are paying the wrong rate of tax. That is absurd, and we all agree that that is absurd. We all have the opportunity to do something about it.

Putting aside the various positions that we would take on the more substantial issue of reform and the potential replacement of council tax, revaluation would just update the valuation rolls to make sure that they are accurate. That is also a prerequisite for any substantive discussion about council tax reform and replacement. No one is suggesting that, if we replace the council tax, we would stick with 1991 valuations for whatever we replace it with.

I am frustrated about this point, particularly because, as I have said, this is—as far as I am aware—the first time that the Parliament has had the opportunity to vote on revaluation.

I will move on briefly to the various proposals that I have put forward on the additional dwelling supplement and non-domestic rates, which are my collective efforts to address the imbalance of second-home and holiday-home ownership and short-term lets relative to permanent housing.

Rachael Hamilton said that the biggest impact would be on landlords with a small number of properties, not large investors, and that is who we are talking about. We are talking about landlords, but I am really talking about the people who cannot get a home, because in communities such as the ones that I represent—particularly on Arran and up the west side of Loch Lomond—so many people have purchased houses as an investment opportunity and have become a small landlord, perhaps to provide a pension or an extra income during their working life. However, that has come at the cost of people being unable to live in the communities that they grew up in.

There is a perfectly legitimate argument that we have not built enough affordable and social housing for decades. Absolutely, we have not. I suggest that there is very little value in building more affordable housing if that housing is then purchased by those who will use it as an investment opportunity. There is no point in building more affordable housing in a community such as Luss, in Loch Lomond, if it is going to be bought by those who want to use it as a holiday home or to rent it out through Airbnb. That does not solve the housing crisis in those areas. We need to combine the construction of far more homes with measures to ensure that those homes go to the people who need somewhere to live.

I was particularly confused by what the minister said in relation to a lot of those issues, because I think that he contradicted himself. The minister said that there needs to be balance and that the situation is varied across Scotland. Of course it is; there is a significant divergence across the country. Rachael Hamilton pointed out that, nationally, we are talking about less than 1 per cent of properties being used as second or holiday homes, but, as I mentioned, in Lochranza it is 40 per cent. There are communities in the Highlands where the percentage is above 50 per cent. Why oppose amendments that would give us flexibility in the tax system to recognise that nuance? Surely, if we believe that the situation is varied across the country and that a localised approach is required, it would be appropriate for us to set a different rate for the additional dwelling supplement in a national park that is experiencing significant difficulties, versus the rate that we set nationally and in areas where there is not that challenge.

I do not quite understand the Government’s position, because it is saying simultaneously that a blunt national approach is appropriate and that a localised approach is appropriate. However, all the amendments that I have lodged that would give the Government the flexibility to take a more localised approach are being opposed. I could understand if the Government was simply opposed in principle to what I am proposing, but the argument that it has made is inherently contradictory.

I am particularly disappointed by the Government’s position on amendment 468, not only because it is an issue that I raised with the minister four months ago, but because I have been raising that issue with the Government for a couple of years now. No one has ever disagreed that the additional dwelling supplement was not intended to catch people who are buying properties on behalf of disabled relatives who can live independently but are not in a position to own the property. If the Government had been in a position to agree to that policy objective and to work with me on a different way of achieving it, I would have been happy to do that. I am always happy to co-operate with the Government, but the lack of agreement on that point of principle is going to force me to move amendment 468 and press it to a vote. The amendment is not prescriptive. It gives the Government appropriate scope to work through the technical issues that are associated with it, particularly in relation to data sharing. Those are not insurmountable or even unprecedented issues.

I will certainly press amendment 519 because the issue has affected a number of my constituents, about whom I have been engaging with the Government for some time. I do not think that I should have needed to lodge that in the bill, but, through lack of engagement from the Government up to and including at this point, I will have to press it to a vote. I hope that Parliament will address what I see as a minor significant issue for the individuals that it affects—a minor issue that the Scottish Government, for reasons that I am still not clear on, has, as of yet, failed to address.

I press amendment 519.

With a lot of the amendments, my intention is to reduce the number of properties that are second and holiday homes or that are used as short-term lets—specifically, I am looking at property that would be appropriate as permanent accommodation. I understand that the Government does not support the amendments. Will the minister clarify whether the Scottish Government believes that the current proportion of properties that are being used as second and holiday homes and short-term lets is an appropriate balance? Lochranza on Arran, Braemar and Loch Lomond and the Trossachs national park have been cited as examples. Is the balance proportionate or does the Scottish Government believe that further action is required to rebalance the housing sector in those areas? If so, what alternative is there?

I absolutely agree with the principle that Graham Simpson sets out, which is that students should benefit from the same protections as other tenants. However, I am interested in his thinking on the approach to applying rent controls to the purpose-built student accommodation sector and whether it should be covered by the geographical rent control zones that we are talking about, as opposed to other proposals that have been floated that we treat the PBSA sector as entirely separate, and perhaps as a rent control zone in its own right. This is not a disagreement in principle; I am just interested in the approach of grouping rent controls into geographical zones.

It would be beneficial for me if the minister could confirm on the record whether the Scottish Government thinks that a revaluation exercise is necessary after 34 years. If it does, how does it intend to go about that exercise?

The member is talking about a wider piece of work that needs to happen, and I always welcome more work being done on tax policy. However, we should recognise that a significant piece of work was done on this in 2015, on a cross-party basis but led by the Scottish Government. That was not the first time that the issue had been revisited since 1991. As we have heard this morning, everyone agrees that the system is absurd and that revaluation needs to happen in some way, shape or form, but no Government has ever held a vote on it. If the Parliament does not agree to do so at this opportunity, there certainly will not be another opportunity before the next election.

Can you clarify, then—I do not know whether committee members are aware of it, but I am not—what the timescale is for processing those consultation responses? Is the minister indicating that the Government intends to collate those consultation responses and come to a view ahead of stage 3 and, therefore, it would be able to lodge amendments at that point? If amendments are not lodged at stage 3 of this bill, there is no other legislative vehicle for making those changes in this parliamentary session.

My amendments in this group cover a lot of the same ground as those lodged by Pam Duncan-Glancy and Graham Simpson. That those of us reaching a consensus on this point span the whole ideological spectrum, from me and Maggie Chapman to Graham Simpson and Edward Mountain, is an example of how strong consensus is on the need to improve students’ living conditions.

My amendment 540 gives tenants in student residential tenancies the right to bring their tenancy to an end after 28 days’ notice. It is a copy and paste of the temporary provisions from the Coronavirus (Scotland) (No 2) Act 2020, thus the anomalous-looking 7-day provision for existing tenancies. Given the volume of work for the legislation team to do on the bill, I thought that it would be quickest at this stage to copy and paste the 2020 drafting in order to test the principle of bringing student tenants’ rights closer to those of other tenants. If the principle is agreed, I will tidy up the amendment at stage 3 and remove the now superfluous 7-day provision.

Bringing in that right would prevent tenants in student halls from, in essence, being trapped in their tenancies when they no longer need them, as Pam Duncan-Glancy said. For example, they might need to leave their studies due to illness, a change of family circumstances or sudden caring responsibilities. It is very rare that a student has to leave their accommodation because of a positive change in circumstances. Those who have to leave are already experiencing some difficulty.

The Scottish Government consulted on the issue in July last year. As far as I am aware, the Government has not yet published its response to that consultation—certainly not anywhere that I could locate. If the principle is agreed, I also want to work with the Government ahead of stage 3 in order to capture some of the other issues that were explored in that consultation, such as the issue of students paying fines or fees for ending a tenancy early. The impact on the PBSA business model is a legitimate concern that can be addressed, and it is entirely achievable to provide some compensation to a student who leaves before Christmas, for example, so that they do not have to pay for the full year.

My amendment 548 mandates ministers to publish a set of model terms and conditions for student residential tenancies, which would cover the topics that are listed in the amendment as a minimum. The list is not exhaustive, and ministers would have the power to make some of those provisions mandatory for relevant tenancies. That mirrors the existing model tenancy agreement that exists for the private rented sector, so the amendment continues the theme of equalising students’ experience of housing with that of other private renters.

It would guarantee a minimum standard for student residential tenancies, and it delivers on one of the Government’s own PBSA review group’s recommendations. The amendment would tackle a number of the issues that were commonly raised in that review, such as cooling-off periods, data sharing, information support and so on, and it would bring student tenants’ rights closer into line with those in private tenancies. For example, we would all consider a 24-hour notice period for maintenance and inspection to be completely legitimate. It also addresses issues such as the need for a notice of rent increases and a cap on deposit amounts.

I note the other amendments to apply rent control provisions to student tenancies. My amendment 548 would enable the Scottish Government to set a mandatory condition on rent affordability, particularly in relation to available student support. For example, it could mean that the rent in PBSA is no more than 30 per cent of the basic Student Awards Agency for Scotland living costs loan.

The sector has always claimed that its terms and conditions are already adequate, but the PBSA review and our inboxes show that the reality is quite far from that. It is important that we put in place some statutory provisions, and the bill is the only legislative vehicle with which to do that in this parliamentary session. Non-statutory model terms and conditions would go on to gov.scot and immediately be forgotten. I have lodged the amendments because we are 15 months on from the publication of the PBSA review recommendations and I see no evidence of progress, particularly on anything that would require statutory provision. As I said, this is the last vehicle with which we can do that.

My amendment 549 mandates ministers to publish a model complaints procedure for student residential tenancies, which may be made binding. It clarifies and standardises a tenant’s right to complain and make other representations to their landlord. It is another amendment that delivers on one of the PBSA review group’s recommendations.

My amendment 559 is consequential to my amendment 548. My amendment 560 is consequential to my amendment 549. Any regulations that would be made under provisions introduced by those amendments would be subject to the affirmative procedure.

I should say at the outset that I have tried to keep this as concise as possible, but it will be a lengthy contribution. Members will be glad to hear that amendments of mine do not come up again for a number of groups so, at the current rate of progress, they will probably not need to hear from me again for a few weeks.

I will start with my amendments on council tax revaluation. I imagine that members of the committee will be more aware than anyone else in Scotland of just how discredited our council tax system has become after 34 years. We are long overdue to make progress on it. My party believes that an outright replacement is required, but views vary and the bill is not the right vehicle for that. It is, however, an appropriate opportunity to make progress on a genuinely technical but fundamental issue—the valuation roll.

Regardless of our position on whether taxes are too high or too low and whether they catch the right people or the wrong people, we all agree that it is ludicrous for the system to have reached the point at which most people in Scotland now pay the wrong rate of council tax. The amendments would allow the Parliament to finally resolve the issue that has been caused by the continued use of the 1991 valuations.

Amendment 462 would make it explicit that, when council tax bands are varied under section 74 of the Local Government Finance Act 1992, the number of bands can be changed. That empowers ministers to follow the Welsh Government’s recent addition of bands to make its council tax system more proportionate and progressive.

As well as individual property values changing in the past 34 years, the range of values of residential property in Scotland has widened significantly. It is not proportionate for a house that is worth 15 times less than another to pay just three times less in council tax, as is currently the case with the average property values in band A versus band H. Updating the valuation roll but sticking with the existing set of bands would be a job half done, which is why I have lodged amendment 462.

The key amendments in the group, however, are amendments 463 and 464, which would mandate that ministers undertake a council tax revaluation exercise, with updated values to come into force no later than 1 April 2029—the 2029-30 financial year. Amendment 463 would mandate regular subsequent five-yearly revaluations. Amendment 464 would mean a one-off exercise.

My preference is very much for amendment 463, because I do not want us to resolve the issue now and then have to wait another 34 years while the problem repeats itself. However, I have lodged both amendments, because I recognise the inherent difficulties in the situation and the reason why it has taken us 34 years, and I am keen to seek the Parliament’s view on that. The amendments also specify that ministers can make transitional arrangements to make any changes in household council tax liability more manageable. There is particular reference to those with low and fixed incomes.

Amendment 478 is consequential on amendments 463 and 464 and would apply the affirmative procedure to any regulations that are made under those provisions.

As far as I and the Scottish Parliament information centre have been able to tell, the Parliament has never voted on the question of revaluation. I do not think that the issue should have become as political as it has. Fundamentally, I do not think that it is as politically fraught as we all fear. It is right that we debate and disagree on the fundamental questions of reform or outright replacement of the council tax, but we all agree that using accurate data is appropriate. We would not tolerate a system of income tax where most people were paying the wrong rate, and it cannot be justified for council tax either.

I am sure that the Government will say that an engagement exercise is under way, but no one disagrees with revaluation. We have done consultation, listening, working groups and cross-party agreements previously, but they have not moved the issue forward, because the Parliament has never had the question put to it or the opportunity to vote on it. After 34 years of the problem getting worse and coming to a stage that I suggest is now intolerable, I want to give the Parliament the opportunity to address the technical aspect. If we do that, it will give us more space to address the more substantial areas of appropriate political disagreement.

Amendments 542 and 543 are on council tax arrears. Amendment 542 would require ministers to review the scale and impact of council tax arrears and state what action they intend to take as a result. I want to give the Government a bit of a nudge to address the issue. In England, council tax arrears are written off after six years, but in Scotland it is 20 years, and that 20-year clock resets every time the individual with arrears engages with the system. Essentially, the process is never-ending. Every time that someone engages with the system, as they are obliged or pressured to do, that 20 years resets itself. Other forms of debt in Scotland are typically written off after five years, so that is a major discrepancy. The Robertson Trust has done a substantial report on the issue, which I sent to members, although that was just last night.

Amendment 543 would require ministers to review the impact of joint and several liability for council tax arrears on domestic abuse victims and survivors, and to state what action ministers intend to take. Through my casework, I am familiar with the situation, as I am sure others are, of survivors of domestic abuse ending up having to pay off the arrears debt of their abuser. We can all agree that that is completely inappropriate, but the system allows that to happen, and it is happening. I encourage the Government to review that and look at ways in which we could resolve it, because it could probably be resolved through some relatively simple measures.

Moving on from council tax to land and buildings transaction tax, amendment 465 would mandate that ministers extend LBTT liability to open-ended investment companies in a way that mirrors the liability of unit trusts. OEICs are a type of investment fund that is similar to a unit trust. The power to apply LBTT to that particular form of company was included in the Land and Buildings Transaction Tax (Scotland) Act 2013, but the regulations to activate the provision were never brought forward.

Amendment 467 is almost exactly the same, but it refers to residential property holding companies. RPHCs are just a tax avoidance scheme, and it is particularly odd that the Scottish Government gave itself the power to apply LBTT to them in the 2013 act via regulation but, in the 12 years since, it has not brought forward those regulations. I am keen to understand the Government’s position on that. I do not see any justification for exempting those two company types from paying the same tax that anybody else would pay when buying a property. Any time any of us has bought a property, we paid LBTT, and quite rightly. I cannot understand why RPHCs, which are a notorious tax avoidance scheme, do not have to pay because the regulations have not been brought forward—well, by and large, they do not have to pay, although there will be situations where they might have to for other reasons.

Amendment 547 would mandate that a new LBTT band be created for properties that are sold at the starting rate of £1 million or more. For example, just down the road from here, Newliston house is on sale at offers over £3 million if you want just part of the estate and offers over £15 million if you want the whole estate. I do not think that anyone purchasing that should be purchasing it at the same rate of LBTT as they would pay on a townhouse in the new town, for example, at £800,000 or £900,000. The system requires a bit more progressivity in it.

Amendment 466 would remove the current LBTT exemption for foreign militaries. In post-war Scotland, only one Government has had a significant presence in Scotland and that is the United States. It can more than afford to pay LBTT if it is purchasing any additional property, regardless of the views that some of us might have about whether we would want it to do so.

On the additional dwelling supplement, amendment 468 would require ministers to introduce a relief or exemption for the purpose of an additional property when it is to be used by someone who does not have the capacity to take on the obligations of home ownership but is able to live in the property. That could be done with reference to the receipt of disability benefit such as disability living allowance. The amendment is the result of casework that I have been engaged with, and this is clearly not the kind of situation that the additional dwelling supplement is designed to catch. At the moment, it typically catches individuals who purchase property on behalf of family members who have the ability to live independently but not the ability to be the home owner.

Amendment 469 would let ministers set a scaling rate for the additional dwelling supplement, so that the owner’s liability would be greater for the third or fourth property, and so on. It would progressively tax those who are most able to purchase additional property, seeking to discourage the accumulation of large portfolios.

Amendment 493 would allow for the setting of a surcharge for companies for purchasing dwellings. That would allow ministers to align LBTT in Scotland with the 17 per cent company rate for stamp duty in England. It is unusual that, although the LBTT system that we have created in Scotland is a bit more progressive than stamp duty in England, that step was missed out. There is more flexibility in the English system, because it can distinguish between an individual and a company. It would be useful to have that flexibility in the system here, regardless of the debate that we might have through annual budgets about the appropriate rate to set for individuals or companies and being able to distinguish between the two. LBTT and ADS are relatively blunt instruments.

Amendment 544 would allow ministers to apply a further surcharge to ADS in the rent control zones that the bill would establish. It would therefore disincentivise the purchase of properties in areas where there is acute housing pressure, which is particularly relevant. The reason for the amendment is to deal with the circumstances in rural and island communities, where short-term lets and holiday homes are they key drivers of the local housing crisis. I point to Lochranza on Arran, which Katy Clark and I represent, where around 40 per cent of houses in the community are either short-term lets or holiday homes. That is the driver of the housing crisis in that area, and it results in young people having to leave the community that they were brought up in because they are simply unable to find a home for themselves.

Amendment 519 would require councils to state whether they want the surcharge created by amendment 544 to be applied to a rent control area when they are recommending that it be designed under section 2. It would allow ministers to consider the local context, and reflects the fact that the measure would be more appropriate in some rent control zones than in others, in particular where holiday homes and buy-to-let, short-term lets are the main driver of the issue.

Amendment 545 would allow ministers to apply a further surcharge to ADS, but this time in national parks, and to have regard to the view of the national park authority when doing so. It recognises the unique pressure on communities in our national parks from second homes, buy-to-let landlords and properties that are being acquired and used as short-term lets in particular. At the moment, the national average is that about 1 per cent of properties are second or holiday homes, but in Loch Lomond and the Trossachs national park, the figure is five times as many, in the Cairngorms national park, it is 12 times as many, and in some communities—Braemar is probably the clearest example—it is 20 times as many.

Both national parks have set out in their strategic planning documents—in the Cairngorms, it is in section 7 of the partnership plan—the significant negative impact of that and the pressure that it puts on communities who actually live in the parks. Similar comments can be found in the Loch Lomond and the Trossachs national park’s housing strategy.

Amendment 546 would let ministers apply a further surcharge to ADS when the buyer is not ordinarily resident in Scotland. That seeks to tackle overseas property speculation. The UK has now become the world’s number 1 destination for overseas property investment, which is essentially property speculation from outside the country. It is a huge problem UK-wide.

At this point, I flag up that Revenue Scotland does not collect that data for Scotland, so we rely on UK-wide figures and anecdotal examples. That is another area that should be addressed—although not in the bill—and I encourage the Government to start collecting data on overseas buyers of property, in particular those from tax havens. The number of properties in Scotland that are being bought in what are recognised by the UK as tax havens has doubled in the past couple of years, and we should disincentivise that.

Amendment 193 moves us on to a different topic entirely, which was raised with me by local government colleagues. It would allow for housing revenue accounts for the purpose of accounting for council housing to budget for transfers from the local authority’s general fund. That is a pretty simple matter of fiscal empowerment for local authorities if they want to top up their council housing budgets to allow for extraordinary investments, if they have a particular reason for doing so.

Amendment 194 would remove the requirement for ministerial approval for local authorities to transfer from the general fund to their housing revenue account. I am not aware of a single instance in which ministerial consent was withheld when it was requested, but that requirement has created a lot of confusion in some local authorities. I have heard from officers who believed that transfers were not possible because of it. In any case, even when it is possible, ministerial consent being required for what are often routine transfers is just a huge waste of everyone’s time—the officers involved, the councillors, the minister and his officials. We should trust local government to manage its own finances and its own risks on this.

Amendment 459 would impose an non-domestic rate surcharge and prohibit NDR relief or exemptions for short-term lets. Again, reflecting on the experience of some of the communities that I represent, Airbnb-style short-term lets for tourists are driving local housing crises and pushing young people out of fragile rural and island communities.

Why not? Given that the minister’s key argument against the amendments at this stage is about the lack of consultation and discussion, and given that we have had 15 months since the review group’s recommendations and, at least in the case of my amendments—as I said, I cannot speak for other members—the Government has had four months to consider those, why has no discussion taken place?