Chamber and committees

Again, Mr Lumsden, you are drawing a direct link between those two things and completely ignoring the broader macroeconomic factors at play.

We are seeking to raise revenue and provide support for first-time buyers. There will be different factors that impact the individual decisions that individual landlords take. The ADS may be a factor; it is not for me to comment on that. It is clear that broader macroeconomic factors will have the most impact in determining the supply and availability of housing, as well as the investment decisions that are taken.

I only want to say that I am very grateful for the committee’s scrutiny, as always.

On the first point, I agree with you entirely on the need to recognise the broader context in which housing operates and what factors determine supply and demand. That includes the impact of what happened in 2008; the pandemic, with the associated challenges around supply chains; the cost crisis and inflation; and the challenges around recruitment and retention in the construction sector. Those factors all have a part to play, and I am very much alive to that following Parliament’s consideration of national planning framework 4. We cannot look at any one aspect of Government policy, whether it be planning or taxation, as a determining factor; broader macroeconomic elements are involved, and it is essential that we consider matters in that context.

With regard to looking at the impact, I take the example of revenue. The SFC has forecast that what will be lost in core LBTT revenue due to behavioural change will reach 50 per cent recovery, and it has anticipated 75 per cent recovery beyond that. That implies that transactions that were lost to the ADS will be made up for over time through first-time buyers and home movers.

I do not know whether Ewan Cameron-Nielsen wants to clarify any points in that regard.

I think that the Government’s position, especially when it comes to the work that we are doing on new rights for tenants and the new deal for tenants, is consistent with your analysis and critique.

In answering the committee’s questions, I am very conscious, as planning minister, of the need not to stray into that territory, too. As you can imagine, that has occupied a huge amount of my considerations in recent weeks and months, and there is a lot there that speaks to the specific points that you raise about the provision of housing and rural repopulation. However, I will stick to my public finance remit for the purposes of this committee session.

The policy lead on housing sits in a different portfolio. Clearly, the ministers for that portfolio are best placed to articulate their aims and objectives but, fundamentally, the key priorities are enhancing and protecting the rights of tenants, as well as ensuring that everyone in Scotland has access to a warm, safe home, which includes ensuring the availability of affordable homes.

As you also recognise, a significant number of factors, many of which are outwith our control, impact on that. I acknowledge that it can be quite difficult to disaggregate the various factors. However, that should not stop us from endeavouring to understand to the fullest possible extent the impact of our tax policy decisions.

We are consistent in our policy position that we want to increase productivity in Scotland and grow the number of highly skilled, highly paid jobs. We recognise that labour mobility is going to be an important part of that, in the context of our ambitions for a just transition to a green economy. That will also be particularly impactful and significant for our rural populations and communities. Those ambitions inform a range of policy decisions that we take in areas such as planning—specifically, our policy on housing and tenants—and taxation. As we have in previous years, we have maintained our residential LBTT rates, other than the ADS, to reflect the particular characteristics of the Scottish property market.

If we look at the data over the past 12 months—notwithstanding the more recent challenges of tightening in the market as a consequence of changing economic conditions—we see that there was a strong recovery in LBTT revenues, including the ADS, followed the pandemic. That suggests that our policies on LBTT are effective in getting the balance right of raising revenue in a way that is consistent, and that the tax is hitting the spot where it generates a net gain above and beyond the block grant adjustment but does not have a negative behavioural impact, which would obviously undermine our intent of raising revenue.

On the latter point, it goes without saying that, as part of the budget-setting process, in his capacity as acting Cabinet Secretary for Finance and the Economy, the Deputy First Minister will have discussions with all colleagues across the Government, which will inform policy. With regard to the impact of the tax change, I note the forecasts of the SFC for the coming years. I appreciate that, underneath those headline numbers of the revenue that is raised, there can be regional variations, and we will have to be alive to those issues and consider them carefully. However, fundamentally, as much as there is a policy intent, as I mentioned earlier, to support first-time buyers, there is also a policy intent to raise revenue. The nature of the devolution settlement is that the Scottish Parliament has limited levers at our disposal, so we have to take a balanced approach.

The Deputy First Minister set out clearly the Government’s strategic priorities for the budget: tackling child poverty, reform of public services and a just transition to a net zero economy. Ultimately, those will have to be resourced through the revenue that we raise, a significant portion of which we raise directly, together with what comes through the block grant.

Policy decisions must take account of behavioural aspects and applicability to other policy areas, but revenue raising in itself is of significant importance, because we have to raise that revenue to be able to deploy it to support a lot of those other policy objectives. I am happy to give an undertaking to consider the points that have been made about how we can provide more information and data on the behavioural impact that those tax policies have as we go forward.

There are monthly updates from Revenue Scotland on the performance of LBTT, so we monitor it very closely. I regularly engage with Revenue Scotland directly to understand the performance of the tax and some of the impacts that could be emerging. It is something that we keep under continuous review. As has happened previously in the context of the pandemic, when there is a need to adjust policy to reflect circumstances—granted, they were exceptional circumstances—that is something that the Government is able and, if required, willing to do.

Yes. We consider that in the round. It is also a very important point in understanding tax differentials between Scotland and the rest of the UK. As we touched on earlier, it could be pointed out that there are lower thresholds for LBTT than there are for stamp duty. That is reflective of the Scottish property market, but we also recognise that, in other areas, council tax is lower in Scotland than it is south of the border. We also have a lower poundage for NDR, which means that 95 per cent of our non-domestic properties have a lower tax liability than properties south of the border have.

I agree with Ross Greer entirely that it is important to look at the impact of the net revenue that we are raising and of any behavioural consequences because of the differential between Scotland and another part of the UK.

Yes. That is the point that I made to Mr Mason. I recognise that the private rented sector plays an important role for many people. We want a range of tenures to be available, but many individuals face a challenge in buying their first property or in moving from one property to another to reflect a change in circumstances, so the policy intent behind what we do with the ADS is to support first-time buyers.

As I mentioned in my answer to Liz Smith, the review was initiated in the early part of last year. However, given the review’s complexity, and in recognition of many of the issues that were raised as part of it, we are giving careful consideration to it. As I said, we will be providing our response to the review shortly. That will cover a number of issues that have been raised and that I know are of concern to members across parties.