Land and Buildings Transaction Tax (Scotland) Bill

Part of the debate – in the Scottish Parliament at on 25 June 2013.

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Photo of Kenneth Macintosh Kenneth Macintosh Labour

Thank you, Presiding Officer.

There has been very little fuss about the bill, which has broad political agreement across the chamber and broad support among home owners and businesses. However, it is worth noting for the record that, even if it is not the most earth-changing legislation, it is introducing Scotland’s first new tax in more than 300 years. The bill is another example of devolution working well, with the Scottish Parliament taking control of this property transaction tax and designing a system to suit Scotland’s needs while retaining all the advantages of working within the political, social and economic union that is the UK.

Although we have agreed today on the principles of the new land and buildings transaction tax, there is still a great deal of detail to be worked out. For example, there is the practical issue of how the collection agency, Registers of Scotland, will interact with the new supervisory body, revenue Scotland; there is the rather important matter of negotiation and agreement on how much the block grant will be reduced by when the new tax is introduced; and of course there is the question that I suspect most home buyers and businesses will most want to hear answered, which is how much they will pay and what the rates at which LBTT is introduced will be.

On the first of those points, alongside the devolution of LBTT, perhaps the most practical, immediate and positive benefit will be the move from an inefficient, unfair tiered or slab structure of stamp duty to the progressive, rising scale of LBTT. Stamp duty has long been broadly redistributive; in other words, a high rate of tax has generally applied to more expensive properties, with no stamp duty on properties below a value of £125,000. However, applying higher percentage rates to all the properties above a certain threshold has created highly marginal rates of tax at those new banding levels and has led to distortions in the housing market and in the application of the tax. The new system will smooth out those iniquities and ensure an efficient market that will be fairer to buyers and sellers alike.

When the bill is implemented, the block grant will of course be adjusted to remove a sum equivalent to the money that we currently receive from stamp duty levied across the UK. It is worth noting, at the very least, that the UK and Scottish Governments have already offered us widely varying estimates of how much the grant should be reduced by. That is perhaps not surprising, given the collapse of the property market and the consequent drop in the number of sales on which stamp duty has been levied over the past few years, but it is important that an agreement is reached that is fair not just for Scotland but for the rest of the UK, too. The Cabinet Secretary for Finance, Employment and Sustainable Growth has placed great stock in the past on providing stability in the public finances, so for that reason alone I urge him to work towards reaching agreement on the block grant reduction sooner rather than later.

I am certainly not asking members to rethink their support for the bill, but I suspect that there might be a marginal downside to devolving LBTT. I have not made the exact calculation but, given that stamp duty is a broadly redistributive tax and, I believe, the proportion of expensive properties is far higher in London and the south-east of the UK than in Scotland, Scotland will currently be among those parts of the UK that marginally gain from the redistributive effect of the stamp duty tax.

I mention that point as it is also worth noting that, when LBTT is introduced in Scotland, many of the properties at the higher end of the scale will be in Aberdeen, Aberdeenshire, Edinburgh and Glasgow. At the very least, the new system will create a tension between our support for localism and local control and our belief in a nationally applied, progressive and redistributive system of taxation.

One of the most important issues that are still to be resolved is the timescale for the publication of the new tax rates. I will not repeat all the arguments that we have just heard debated at stage 3 and which were debated at stage 2 in committee, but I hope that the cabinet secretary will bear it in mind that business in particular is clamouring for greater certainty.

The cabinet secretary has stated that his broad approach is to try to maintain revenue neutrality, but even within that policy intention there is scope for winners and losers. I believe that, when the bill was first outlined, the cabinet secretary suggested that 95 per cent of people would be better off under LBTT. If that is the case, clearly the 5 per cent who would be worse off might be disproportionately affected.

There is a particular worry in the commercial property sector that high-value commercial property might bear some of that disproportionate impact. Businesses are used to testing our words as politicians against our actions as parliamentarians or Government ministers. I urge the Government and the particular minister involved to publish his proposals as soon as possible in order to introduce some certainty.

The fact that the cabinet secretary has repeated his intention not to publish the information before September 2014—in other words, it will not be published before the referendum—has not helped assuage the anxiety. His intention suggests that it is less of a priority and it begs the question: if there is nothing to be worried about and everyone will be broadly unaffected or even slightly better off, why the delay in making the announcement?