Chamber and committees

I am very grateful for the extensive work that the committee has undertaken on this matter and I say with all sincerity that I am very keen to understand the committee’s views in response to some of those questions. My absolute priority is to ensure that we get this right. The levy could be a real force for good for the visitor economy in the parts of Scotland that choose to introduce it. The key to achieving that will be to continue working closely in partnership with local government, business and Parliament.

In meeting our commitment to ensuring that the freeze is fully funded, we will engage constructively with local government to determine what the quantum should be. That process will be on-going and decisions on the broader fiscal settlement will be taken as part of the budget process, with the budget statement being made to the Parliament next month.

We know that the council tax in Scotland is significantly lower than it is in England, for example. The freeze ultimately means that money stays in people’s pockets and they can use it to meet other costs that fall upon them. It is money that they have at their disposal to spend in their local communities in support of local businesses.

We recognise the views that have been expressed on the need to look at longer-term meaningful changes to the council tax system itself, but the freeze will, as I have said and as has been acknowledged, provide certainty in responding to the acute pressure that so many are facing in the cost of living crisis. As for determining the quantum of meeting the freeze, that work will be undertaken through negotiation and engagement with COSLA.

As I have said, we recognise that local authorities have, in previous years, set different rates of council tax, and they will have made their own planning assumptions ahead of the next financial year. That is why the process of negotiation and engagement is very important, because, through that, we will arrive at a quantum that will be fairly representative of what is required to meet the council tax freeze. We are very much committed to working in that space closely and collaboratively to identify an appropriate quantum and, through that, to achieve the outcome of a freeze for all households across Scotland.

I do not want to pre-empt the outcome of the negotiations. We are entering the process with a commitment to working and engaging closely and collaboratively to identify that figure. We will have those discussions with our local government colleagues to ensure that we meet the requirement for the freeze to be fully funded.

As you have touched on, a range of planning assumptions will have underpinned decisions by local authorities on where they might want to go with the council tax. We will allow for that opportunity for negotiation and engagement to take place, as that approach will ultimately inform how we arrive at a fair and representative quantum to deliver the council tax freeze.

We are embarking on that process. As I indicated earlier, the First Minister and the Deputy First Minister met and engaged with COSLA following the announcement on the council tax freeze.

That is an excellent question. I appreciate that that is one of the key issues that has emerged from the committee’s deliberations. Certainly, it has been raised consistently with me and my officials in our engagement with accommodation providers. As a starting principle, I hope that we can all agree that there should probably be uniformity—there should be either a flat rate or a percentage fee. Accommodation providers may well look for consistency. If we are going to have a percentage rate, then that is what should be in the bill and should be applicable across all local authorities that are seeking to use the power. Conversely, the same applies to a flat rate.

I recognise that there are strong views in support of both arguments. Clearly, a percentage rate would allow for a more proportionate and progressive approach. It would recognise that, for example, someone who is staying in a suite in a five-star hotel would be subject to a different rate than someone who is staying in budget accommodation. I am conscious that that will be a key concern. However, I also recognise questions that the industry has raised about the compliance and administrative burden that that approach would entail. I appreciate that the options for a flat rate range from a single flat rate to a tiered structure. With a tiered structure, we would potentially start to add in additional complexity, which a flat rate, rather than a percentage rate, would be seeking to remove. I think that it is important to consider the matter in detail.

I am very open to having these discussions. I am keen, on this issue and a number of others, to understand the view that the committee has formed when it publishes its stage 1 report. I am open to looking at amendments to change to a flat rate, but that would require further detailed consideration and engagement with industry. I am also happy to follow up with the committee on the matter ahead of stage 2.

There are strong arguments either way. I recognise that industry has a strong view and that local authorities have a mix of views. As I have said, I want to ensure that we can have a system in which the levy that is applied is fair and progressive and that, equally, is efficient and straightforward to administer, and does not impose undue burdens of compliance, particularly on smaller operators.

There are a number of flexibilities around how a scheme can be developed. For example, there are flexibilities relating to particular areas in the local authority and to the timescales in which the levy applies. Those flexibilities can be applied to address a range of aspects of how a levy should be administered and applied in a local area. There are flexibilities that local authorities could deploy in response to some of those considerations, but it would be for local authorities to take into account the circumstances of businesses that are trading just below the VAT threshold. I recognise that that is a consideration that many businesses, particularly small businesses and microbusinesses, have to take into account.

I reiterate the importance of consultation and engagement and of local authorities being able to set out their understanding of the impact of introducing a levy, and how crucial all that is to ensuring that this sort of thing is taken into account.

I am conscious of the need to talk about a visitor levy—I am deliberate in my use of language when talking about that. It is an opportunity to raise revenue that will be invested back into the visitor economy. To address your question about where the charge lies, there needs to be an efficient and effective way of administering the tax. In this case, just as businesses would collect other taxes, that would be the process by which the levy would operate. For example, if a charge was to be paid directly by a visitor from another part of the world, there could be difficult challenges to do with compliance and enforcement for people who live outwith the jurisdiction in which we operate.

I am keen to continue to engage with businesses, as we have been, in order to ensure that we have an administrative regime that is as efficient and as light touch as possible and that we find national consistency where we can. That is also why we asked VisitScotland to convene an expert group with representatives from local government as well as the visitor economy. That is important because it will enable those representatives to develop best practice and guidance to support local authorities in their implementation of a visitor levy, should the Parliament pass the bill and should local authorities choose to use that power.

There has been some discussion and engagement. I should say that it is not an entirely new proposal—it has been made by various advocates over a number of years—but with the announcement we have made it clear, consistent with our approach in the new deal for business, that there will be detailed engagement as we move forward. A working group that includes Scottish Government and COSLA officials is already looking at the matter.

Clearly, amendments that seek to make provision for a cruise ship levy will be determined by the pace of progress, and we will need to have a public consultation. I know that it is of vital importance to colleagues in COSLA and the Government that we are able, subject to Parliament’s agreement, to pass the bill in a way that allows the powers to come online, as we hope, in the early part of 2026. I therefore do not want to find myself in a situation in which further work is required to develop a cruise ship levy model, which will hold up the work of the bill.

If we make sufficient progress, complete the public consultation and have the required level of engagement with industry and local government on a cruise ship levy, I am open to amending the bill to include the provision. However, it is important that we get that right. I would not want to rush things unduly, but if this is going to take more time I would not want it to hold up the bill’s progress through Parliament.