Land and Buildings Transaction Tax

– in the Scottish Parliament on 28th September 2017.

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Photo of Ruth Davidson Ruth Davidson Conservative

1. Does the First Minister think that a tax policy that brings in £55 million less than forecast is a good one? (S5F-01564)

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

I assume that Ruth Davidson is referring to land and buildings transaction tax, which is the property tax that was introduced when powers transferred to the Scottish Parliament.

Revenues that were raised in 2016-17, which is the most recent financial year, were actually 14 per cent higher than the revenues that were raised in the previous year. Yes—the revenues that were raised were lower than forecast, but that is not in any way unique to Scotland. If we look at the corresponding tax in the rest of the United Kingdom—stamp duty—revenue was 8 per cent lower than the Office for Budget Responsibility had forecast.

The issues have arisen mainly because it is difficult to predict transaction taxes but, of course, the revenues that have been raised also reflect the general economic conditions, property prices generally and—as the Scottish Fiscal Commission said in relation to LBTT—the situation in Aberdeen and Aberdeenshire.

Photo of Ruth Davidson Ruth Davidson Conservative

I was, indeed, talking about LBTT. Let us go through the numbers for Scotland.

The Scottish Government expected £538 million to come from LBTT, but in the end only £483 million came in, which was a shortfall of £55 million. According to property experts, that was due to a considerable drop in activity because of the tax.

Let us see whether we can get some clarity from the First Minister. Early in the summer, her Cabinet Secretary for Finance and the Constitution said:

“I’m not an ideologue on this issue. We want the tax to function well and if there’s a case that an amendment of the current bands could help stimulate the housing market in that range, and the revenue it raises, then I will consider it.”

With a £55 million shortfall in a housing market that is “in serious slowdown”, has not that case now been made?

The First Minister:

We will, of course, bring our decisions for the tax, and for all taxes for which we are responsible, to be scrutinised by Parliament in our budget.

Let us get into the detail of Ruth Davidson’s question. She talked about a “shortfall”. The £483 million that was raised in 2016-17 was, as I have said, actually 14 per cent higher than the revenues that had been raised in the previous year. That means more revenue being brought into use for public spending.

Ruth Davidson wants to give the impression that a shortfall against a revenue forecast is somehow uniquely to do with the structure of the tax in Scotland. Perhaps she will therefore explain why, on a like-for-like basis, there was in the rest of the UK an 8 per cent shortfall from the OBR forecast.

Let us get into the heart of the suggestions that Ruth Davidson has made. The claim is that the shortfall is because of the rates of tax at the top end of the property market. Unfortunately for Ruth Davidson—who, as we have seen in recent weeks, does not always do her homework on the issues that she raises at First Minister’s question time—the facts tell a different story. Let us look at the data to the end of August this year. Sales of properties that are valued between £325,000 and £750,000 are up by 14 per cent annually. Sales of properties that are valued above £750,000 are up by 10 per cent annually. The monthly revenues for August of this year in both property brackets were at the highest levels since LBTT was introduced.

I have an additional bit of information for Ruth Davidson. Transactions and revenues at the top of the market are actually maintaining their share of the overall market.

So, yes—predicting transaction tax revenue is notoriously difficult to do, as is shown not just in Scotland but south of the border, but revenues in the year that we are talking about are up on the previous year, and the claims that Ruth Davidson is making about the top end of the market are simply not borne out by the facts. Why cannot she just concede that, and perhaps do a bit more research and homework in the future?

Photo of Ruth Davidson Ruth Davidson Conservative

The First Minister excels in pretending to answer a question that was not asked, but let us talk about homework. If the First Minister had done her homework, she would have listened to Nicola Barclay, who is the chief executive of Homes for Scotland. I am going to read out quite a lengthy quotation from her, which I hope I have latitude for from the Presiding Officer, because of my first two short questions. She said:

“As we have expressed in submissions to the Scottish Government and Scottish Parliament, if we are to have a healthy and well-functioning housing market, we need a tax framework that enables movement up and down all price levels. However, feedback from our members shows that the present system (which varies considerably from that south of the border) is creating significant barriers.”

Here is a thing: the Scottish National Party was warned repeatedly that that would happen. Organisations including the Scottish Property Federation made it clear that the tax rates would gum up the market and reduce revenues, which is exactly what happened. This week, a specific proposal has been put on the table by Homes for Scotland, which wants to make it easier for families to move up the property ladder, and is proposing to extend the 5 per cent band to help them. I will back that proposal. Will the First Minister?

The First Minister:

We will bring forward proposals in our budget, which is the right and proper way to proceed.

However, let me pick up on a few things that Ruth Davidson said. First, I am not sure what question she was asking me, if it was not the one that I answered. I gave a very detailed answer to her question. I do not want to repeat everything that I have just said, but the point is that what Ruth Davidson is saying is not borne out by the facts. I have just quoted figures that show that property sales and transactions in the brackets at the top of the property market are not declining, as Ruth Davidson said, but are actually increasing by 14 per cent and 10 per cent, respectively: an increase, not a decrease. It therefore seems to me that the whole premise of Ruth Davidson’s question has crumbled before her very eyes.

However, we come to a broader issue—one that has surfaced in discussion at First Minister’s questions in recent weeks. We hear, day after day and week after week, Tory members coming to the chamber—sometimes declaring their business interests, but sometimes not—calling for extra spending, but again today we have the Tories also calling for a cut in tax for the very wealthiest people in our society. The Tories’ sums simply do not add up.

So, Ruth Davidson has been wrong in her central claims today and—yet again—the Tories have absolutely been found wanting. They want us to spend more, but they also want us to cut taxes. They cannot have the best of both worlds.

Photo of Ruth Davidson Ruth Davidson Conservative

I do not even know how you lot are going to pick through all the things that were not said and have been claimed there, but let us go back to the numbers. [

Interruption

.]

The Presiding Officer:

Order, Mr Swinney, please. Ms Davidson knows that “you” refers to the chair, not to the press gallery.

Photo of Ruth Davidson Ruth Davidson Conservative

Absolutely.

Let us get back to the numbers, because the First Minister says that they went up, not down. However, the embarrassment for the SNP is that the shortfall would have been much worse if it had not adopted wholesale the Tory proposal for the new surcharge on buy-to-let and second homes. The First Minister talks about raising revenue, but there was £100 million, right there. That was not the SNP’s idea: it was ours. On the very first new tax that has been administered by the Government, the First Minister has got it completely wrong. She gummed up the housing market, she blew a £55 million hole in her own budget, which would have been three times worse if she had not picked up the Tory policy on buy-to-let and second homes, and, more important, she squeezed Scottish families out of their first proper homes. Does that sound like competency to her?

The First Minister:

We can always tell that Ruth Davidson is floundering at First Minister’s question time when she starts hurling abuse across the chamber—although it has nothing on the abuse that was hurled at me and others by the Tory councillor who was taken off the teaching register because of her behaviour. Ruth Davidson will probably not want to comment on that.

I am not sure what bit of this Ruth Davidson is struggling to understand. As far as people at the bottom of the housing ladder who are looking to own their first homes are concerned, we have reduced the tax burden, because we have made LBTT more progressive than stamp duty ever was—although progressive taxes are clearly offensive to Tory members.

We have a situation in which LBTT revenue is up—it is up, not down—on the previous year, and in which transactions at the top of the market are up—again, I say that they are up, not down—so the whole premise of Ruth Davidson’s question is absolutely flawed. We will continue to put forward progressive proposals that help those who are most in need of help at the bottom, and that make sure that those who have the broadest shoulders pay a fair share.

As I said, I know that the principle of progressive taxation is one that Tory members do not like, but it is one that SNP members will continue to adhere to.

The Presiding Officer:

Question 2—Alex Rowley. [

Interruption

.] Order, please.