2. To ask the Scottish Government for what reason it has downgraded its forecast of revenues from the residential element of land and buildings transaction tax. (S5T-00277)

Forecast tax receipts from residential LBTT and equivalent taxes elsewhere in the United Kingdom are regularly reviewed in light of new data and improvements to methodology. The 2017-18 budget forecasts of residential LBTT for the next four years are lower than those in the 2016-17 budget in part because of wider economic trends over the past 12 months. The forecasts for LBTT that have been published for the 2017-18 draft budget have been independently scrutinised and approved by the Scottish Fiscal Commission. LBTT is forecast to raise more than £2.2 billion over four years, of which the residential element will raise more than £1.2 billion.

The Office for Budget Responsibility has estimated that the take from stamp duty land tax in the rest of the UK is likely to fall by 5 per cent over the next three years. The Scottish Government predicts that LBTT residential receipts in Scotland for the same period are likely to fall by some 46 per cent. Given that that represents a potential loss to the public finances of some £833 million, why did the Scottish Government not listen to all the property experts who warned it that, by setting the rates too high, it would depress activity in the property market and therefore reduce the tax take? Will it now reconsider the level of tax rates?

Murdo Fraser has been consistently wrong on LBTT. In the previous financial year, we generated more resource than was forecast. It is in the nature of economic forecasts to give us a range.

The OBR has said that the UK equivalent of LBTT—stamp duty land tax—is one of the more volatile sources of receipts. In recent years, SDLT receipts have been a large source of fiscal forecasting errors. In line with that, we have revised our SDLT forecast proportionately more than that of any other major tax.

LBTT has been operating well. Murdo Fraser should not just take my word for it—he should take that of the Finance and Constitution Committee, of which he is a member.

The Finance and Constitution Committee said that the system has been operating well but not that the tax take has been in line with expectations. As the Cabinet secretary knows, for the first year, the residential tax take from LBTT was £32 million below the original prediction. He does not need to listen to just us. Why does he not listen to the First Minister’s hand-picked chair of her growth commission, Andrew Wilson, who accepts the link between the rates of LBTT and the low and falling tax take? Perhaps the cabinet secretary can tell us, given that we face three quarters of a billion pounds less for the public finances from LBTT than we were expecting, which public services will be cut as a result of his Government’s incompetence.

I say again that I have engaged with stakeholders and experts and I challenge what Murdo Fraser is saying about the composition of the tax.

It should be welcomed that more than 90 per cent of people who purchase properties pay no tax or less tax than they would have paid under the previous regime. There is economic growth. Our forecasts have been laid out clearly in our methodology document, and we will continue to analyse and monitor the housing market. Murdo Fraser will know that there is no evidence of distortion in the market, as the Finance and Constitution Committee agreed.

We will monitor the position and ensure that we are properly funding our public services, and we will refine our tax rates as required. That will be evidence based, and all the evidence to date has said that the system is operating well. Some of the financial impacts are a consequence of the economic situation.

Does the Cabinet secretary agree that, despite the Conservatives’ dire predictions prior to the introduction of LBTT, the outturn data shows that, after the effect of forestalling is taken into account, the number of transactions in all price bands has continued to increase year on year? In fact, the number of transactions in the highest property band has increased strongly, which shows that the decision to ask those in the most expensive properties to pay a bit more on property transactions to help to fund public services was correct.

It certainly is the case that the outturn figures show that LBTT raised £425 million in 2015-16, in comparison with our original pre-forestalling forecast of £381 million. It is fair to ask that we look at the nature and the composition of the transactions to see what is happening in the market, and I will commit to continuing to do that, to ensure that the tax system is having the right effect. The composition of transactions is largely unchanged compared with the composition before LBTT was introduced.