Sport and Leisure Sector (Barclay Review Recommendations)

– in the Scottish Parliament at on 15 November 2017.

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Photo of Christine Grahame Christine Grahame Scottish National Party

The final item of business is a members’ business debate on motion S5M-08387, in the name of Gordon Lindhurst, on Barclay review recommendations and the sport and leisure sector. The debate will be concluded without any question being put.

Motion debated,

That the Parliament notes the recommendations of the Barclay Review of Non-Domestic Rates 2016/17; recognises that the Cabinet Secretary for Finance and the Constitution responded to the review in September 2017 by announcing that some of the recommendations would be taken up by the Scottish Government and that others merited “further thought and consideration”; notes that these other recommendations include a suggestion to restrict charitable relief for arms-length external organisations (ALEOs), a review of sports club relief and the implementation of rates for commercial and recreational activities in public parks; acknowledges what it understands are the concerns of ALEOs and community sports clubs regarding the collective impact of these recommendations which, it understands, if implemented, could cost millions of pounds for ALEOs, such as Edinburgh Leisure, which provides public recreational facilities often at a fraction of the cost of other sports facilities; highlights what it sees as the important role that ALEOs and community sports clubs play in providing accessible facilities that allow people to pursue healthy and active lifestyles; notes the assertion by ministers that “the Scottish Government’s over-arching policy objective [is] to make Scots active for life” and that “we want to get and keep more Scots active”; is concerned therefore that, if the review’s recommendations are taken forward, there could be an increase on the amount consumers pay to access facilities or the facilities could be stripped back, which it believes would restrict access and ultimately impact on the policy objective and the health of the nation; notes the view that it is important to consult directly with stakeholders during the consideration of non-domestic rates, and further notes the calls for the Scottish Government to fully consider the potential effects of implementing these recommendations.

Photo of Gordon Lindhurst Gordon Lindhurst Conservative

I am pleased to bring to Parliament this debate on the important issue of the unimplemented aspects of the Barclay review, and I welcome all those who have come to hear the debate, including some councillors.

The Cabinet Secretary for Finance and the Constitution, in spite of my persistent questioning, has not yet said whether the Government is committed to the unimplemented aspects of the review or not, but eventually he will have to nail his colours to the mast. This is an opportunity for us all to reflect on the debate before that decision is taken.

Having spoken to a variety of the organisations that are liable to be affected, I know that at least some of them do not appear to have had the opportunity to make their case to the Barclay review itself. The recommendations came as a surprise—in some cases, a shock—to them. Perhaps the Government did not see them coming either. However, awareness of the potential consequences is now spreading as the debate unfolds. Different areas of Scotland, including my own Lothian region, will have different stories to tell.

Let us begin by reminding ourselves that, as the cabinet secretary is aware, the Scottish Conservatives supported a number of the recommendations of Barclay that have since been adopted by the Government. The remainder sit in the cabinet secretary’s in-tray, including one to remove charitable rates relief from private schools. That recommendation and other aspects are equally important, but today our focus is on Barclay recommendations 24 and 27.

Photo of Derek Mackay Derek Mackay Scottish National Party

Since he has touched on the point, will Gordon Lindhurst identify any of the revenue-raising recommendations that the Conservatives support?

Photo of Gordon Lindhurst Gordon Lindhurst Conservative

We will return to that at the appropriate point. As I said, tonight we are looking not at other aspects of the Barclay review or the unimplemented parts of the report, but specifically at recommendations 24 and 27.

Photo of Gordon Lindhurst Gordon Lindhurst Conservative

No, not on this occasion.

We should focus on those recommendations, rather than being deflected by questions about other matters.

Recommendation 24 says that

“Charity relief should be reformed/restricted for a small number of recipients” and that arm’s-length external organisations such as Edinburgh Leisure or Xcite in West Lothian should lose their charitable relief. Recommendation 27 says that sports club relief should be reviewed to remove relief from unintended recipients with “significant assets”.

At the heart of both recommendations lies a fundamental misunderstanding of what the organisations that would be affected provide and how they are structured. Furthermore, recommendation 24 describes local councils and the ALEOs that they have established to deliver services on their behalf as being engaged in an exercise in “tax avoidance”. The use of the words “tax avoidance” is frankly ridiculous if we consider the services that ALEOs deliver.

Barclay claims that the creation of such ALEOs has led to unfair competition between the public sector and the private sector, but we cannot and should not equate ALEOs with the private sector. Both have their place and part to play, but ALEOs, as not-for-profit organisations, deliver to many parts of the community services that would not be financially viable if they were delivered on a standalone basis. Put simply, that would not happen.

It is therefore logical that ALEOs such as Edinburgh Leisure and Xcite are registered charities approved by the Office of the Scottish Charity Regulator, because they provide public benefit. Edinburgh Leisure offers services such as the healthy active minds project, which uses physical activity to help people improve their mental wellbeing.

There are many examples of what those organisations and many other charitable organisations provide for the public good, including delivering affordable sport and leisure activities to disadvantaged families or disabled people. Indeed, many users are referred to those facilities by their general practitioners. One user of Edinburgh Leisure facilities told me with enthusiasm:

Edinburgh Leisure has changed my life.”

That is a real comment to illustrate a real issue.

Photo of Gordon Lindhurst Gordon Lindhurst Conservative

No.

It might be valid to raise the question of whether sports club relief could be more focused, but recommendation 27 is vague in saying that “clubs with significant assets” should lose relief. Who does that cover?

I visited a community sports club in my region that has one significant asset: a sports centre paid for through funding and loans. The club provides discounted sport and leisure to a disadvantaged neighbourhood. It has taken over responsibility for some infrastructure from the local authority and makes sports pitches available to local state schools free of charge. However, it runs on a fairly tight budget. If the recommendation is adopted, the club might not survive and the pitches and the surrounding area could again become derelict and fall into disuse. That illustrates what might happen if the recommendations are taken forward, with the addition of millions of pounds of business rates bills for such organisations. Ninety-two per cent of trusts that responded to a recent survey said that some leisure centres and swimming pools would close. Many would, at the very least, need to increase their charges and drop activities that are currently provided to communities at little or no cost. I have spoken to those who would be affected and those are the very real consequences that they face.

It is ironic that the £45 million of savings identified in recommendation 24 could be lost entirely if rateable properties close, the non-domestic tax take shrinks and costs rise in other areas such as the national health service, social work or the police service. All that would surely fly in the face of the Scottish Government’s own national outcomes and programme for Government priorities for getting and keeping more Scots active for life. Two thirds of adults are now overweight or obese and there is unlikely to be improvement if sports facilities close or become more expensive.

My speech merely scratches the surface of the specific issues that we are discussing—not other issues such as those that the cabinet secretary wanted to go into. There is much more to be said, but my time is up and I leave that to others. I sincerely hope that the cabinet secretary and the Government will reflect carefully on the potentially devastating consequences of taking up these recommendations.

Photo of Daniel Johnson Daniel Johnson Labour

I thank Gordon Lindhurst for securing the debate. I declare an interest as a director of a company with retail interests in the west end of Edinburgh.

That gives me a bit of inside knowledge and, indeed, experience of the rates system and what rates reviews do.

It is fair to say that the rates regime is pretty widely reviled by the business community, because it is inconsistent, opaque, arbitrary and irregular, and it is a growing proportion of a retail business’s cost base. The Scottish Retail Consortium estimates that over the past decade that proportion has increased by almost a half.

We welcomed the intention to look again at business rates in the Barclay review, but, frankly, it did not go far enough. With regard to the list of problems that I just gave, it only fully addressed the second-last item in any serious way. We also welcomed some of the details that we have already heard about. I welcome the fact that nurseries are being lifted out of business rates—I will let the cabinet secretary give me credit, or not, for that.

However, the fundamentals are still the same. Rateable values are still calculated by the assessor in an opaque way, and in different ways by different assessors in different areas, and there is no audit of that.

I had a pretty shocking meeting with the local assessor. When I asked who checked an assessor’s calculation and who checked whether they are accurately applying the information from the data that is collected to calculate people’s bills, they said, “No one—we informally check things with other assessors.” The system is opaque and inconsistent, and it leads to unfair results, which have put many businesses in my constituency out of business. They have gone from having no rates to pay to suddenly having a huge monthly bill because of the change in rateable value. Businesses such as Babies and Bumps, a well-loved cafe in my constituency, and others are facing hardship because of those changes.

However, tonight’s debate is primarily about sports clubs and ALEOs. In my constituency, two such sports clubs will potentially be impacted by the possible change to their rates bills: Carlton cricket club and the Inch park community sports club. I hope that Carlton cricket club barely needs an introduction; it is the home of Scottish cricket. Cricket is the fastest growing sport in Scotland, and yet the club has the uncertainty of the potential increase in its rates bill.

Inch park community sports club was founded out of community asset transfer. Well over 2,000 people regularly take part in sport at the club, which is committed to reaching out to marginalised groups. The club has said to me that it cannot plan for the future because it does not know what the cost base is going to be. All we know is that the situation is under review and is going to be looked at by the minister.

I have consistently asked for clarification as to what form the review will take and when we will have an answer and I have twice had a response. The first response said that there will be further consideration and engagement by the Government. When I pushed further, I was told that stakeholder engagement will take place. The bottom line is that we have no details, no timescale and no deadline.

On the wider issue of ALEOs, Gordon Lindhurst’s points were well made. I know how well used the facilities of Edinburgh Leisure are. They provide access to sports facilities to a great number of people in our community and we have to ask questions about that. The policy has the potential to undermine things that are meant to be of fundamental importance to the Government: the healthy wellbeing of our citizens and helping people to participate in sport and improve their health. Frankly, the policy puts those things at risk. The Government should end the uncertainty now and clarify the position for those sports clubs. Let us not have them paying any more money than they have to.

Photo of Murdo Fraser Murdo Fraser Conservative

I start by congratulating Gordon Lindhurst on securing this debate on what is an important subject. Finally, this Parliament is having a conversation about how we raise money for our public services.

There are a range of opinions across the chamber, but I think that we can all agree that taxation must be fair and proportionate. The recently released paradise papers have reignited the public debate about who does and does not pay their fair share. Just as thought provoking was last year’s business rates revaluation, to which Mr Johnson just referred. I heard from many local businesses in my area who felt unfairly targeted by some of the increases to which that led and, from those discussions, it was clear that the current system is failing and fundamental reform is needed.

The Barclay review was a comprehensive summary of the issues and made some sensible recommendations, but it was hamstrung from the start by the finance secretary’s requirement that any proposals be revenue neutral. One proposal that was not so sensible, however, was the call to tax ALEOs. If implemented, that would have a negative impact on local facilities across the country.

The Barclay review characterises ALEOs as tax-avoidance structures. Therefore, according to the review, the local leisure centre can be treated as equivalent to the likes of the high-profile celebrities we have heard about, who have offshore accounts to avoid paying UK tax. That is absolute nonsense. There is no equivalence between an offshore shell company and the local swimming pool. A failure on the part of the Scottish Government to see that would be unforgivable.

In my electoral area, Perth and Kinross Council has Live Active running the region’s sport and leisure facilities. It is no Mossack Fonseca-type operation. The trust is one of the longest serving in the UK, having been set up more than 50 years ago to provide and develop sporting and leisure facilities in the area. The model is simple: any profits from the gyms and swimming pools are channelled back into loss-making social programmes. Perth Live Active’s work is truly transformational.

Despite the clear social benefit delivered by Live Active, it would be targeted by the Barclay review proposals and would be hit with an annual tax bill of £1 million if its relief was removed. According to a letter that was sent to the finance secretary by Live Active’s chairman, Mike Robinson, the impact would be devastating. It would mean increased admission charges, reduced social programming and the potential closure of loss-making facilities. If the Scottish Government is serious about tackling the obesity time bomb, hiking taxes on sports facilities is not the way to achieve it.

Live Active offers free swimming lessons for vulnerable children and teaches disabled kids to cycle. It provides walking groups for the elderly and respite for carers. It provides free access to sporting activities for disadvantaged families and bonding classes for new parents. In what world does that sound like an organisation that is ripe for additional taxation? Despite the obvious social good that Live Active provides, the finance secretary is still considering taxing such projects out of existence.

We have a similar issue in Stirling, another part of my region, where the ALEO Stirling Leisure estimates the additional cost at £600,000 per annum. Andrew Bain told me today that

“the local consequences could be catastrophic.”

Photo of Murdo Fraser Murdo Fraser Conservative

I am terribly sorry that I cannot give way to my good friend on this occasion.

The SNP swim tax—that is what it is—must be avoided at all costs. I call on the cabinet secretary to visit Live Active in Perth before he thinks about saddling such an organisation with a £1 million annual tax bill. If Scotland is to reduce obesity, encourage activity and salvage any kind of legacy from Andy Murray and the Commonwealth games, the SNP needs to axe this tax.

Photo of John Mason John Mason Scottish National Party

I am happy to speak in this debate and I thank Gordon Lindhurst for bringing it to the chamber.

It is worth remembering the background to the Barclay review, which was the widespread acceptance that the non-domestic rates system could be improved, especially if it could encourage economic growth. However, there was certainly no acceptance that there should be an overall reduction in NDR. Reducing business rates as a whole would inevitably mean a less skilled and less healthy workforce, because we would have to make cuts elsewhere, which would damage the economy,

The motion raises a whole range of issues, but I want to concentrate on three in particular. First, what is a charity? My understanding of a traditional charity is an organisation such as Oxfam, Cancer Research UK or a hospice that is largely funded by donations and largely run by volunteers, with the aim of helping vulnerable folk, or even animals, here or overseas. An ALEO such as Glasgow Life would not be a traditional charity.

There is a wider issue around whether we need a review of what is and is not a charity. The Scottish Council for Voluntary Organisations suggests that allowing local government bodies to be treated as charities can put pressure on what we might call real charities. Under the definition of charities that I outlined, rates relief would not apply to what is effectively an arm of Glasgow City Council. It seems to me that the letter of the law has been adhered to but we have drifted away from the spirit of the law, and that, at some point, we need to re-examine what a charity is.

My second point concerns the issue of public money recirculating. Glasgow Life was set up as an ALEO while I was a councillor, and I refused to take a seat on the board. It was set up to save on rates, and I was opposed to it partly because it was inevitably less democratic. Previously, Glasgow City Council had a culture and sport committee, the public could approach their councillors with issues and the councillors were answerable in that regard. However, Glasgow Life effectively stopped that. ALEOs are not accountable.

Photo of Neil Findlay Neil Findlay Labour

Did the member share those concerns about democracy at the time of setting up Police Scotland and the centralised Scottish Fire and Rescue Service?

Photo of John Mason John Mason Scottish National Party

That is a bit away from the debate.

The rates saving that the city council in Glasgow proposed to make by setting up Glasgow Life, in effect, robbed Peter to pay Paul: it saved the public purse in Glasgow but cost the public purse in Scotland—there is no actual new money in the public sector as a result of these devices. Of course, the reverse is still the case: if a council starts having to pay rates, the money stays in the public purse. It is a zero-sum game.

I note that the SCVO used the term “tax avoidance”. I would not go so far as to say that the practice of using ALEOs is immoral, but it puts councils who have refused to use an ALEO out of principle at a disadvantage.

My third point is that income has to equal expenditure. The Conservatives told us that they wanted business to pay less in rates. However, if one organisation pays less in rates, another has to pay more. Are the Conservatives now saying that ALEOs should not pay and that they are happy for other businesses to pay more? Of course, alternatively, expenditure somewhere else could be cut. Would the Conservatives want to cut health or education? Would they want to reduce the number of nurses or school teachers? If not, we could raise income tax to compensate. Is that what the Conservatives want to do? No, they want to cut income tax by £140 million.

All in all, there is a lack of reality in the Conservatives’ position. To say that we should reduce income tax and business rates and increase expenditure in various areas is neither good accountancy nor good economics.

Overall, I am pleased that the Scottish Government has agreed to give further consideration to this question. As I understand it, it is still considering the issues. Of course we want as many people as possible to be active in sport and other leisure activities, and we want publicly and volunteer-operated community facilities to be in use as much as possible. However, I believe that we must create a fairer playing field for organisations and not allow artificial devices such as ALEOs to cloud the picture.

Photo of Maurice Golden Maurice Golden Conservative

As my colleagues have mentioned, there is much to welcome in the Barclay review, but there are also proposals that need to be challenged. A particularly troubling aspect is the lack of common sense in the proposed changes to charitable relief that would see crucial community services burdened with increased business rates.

We all know the challenges that we face around encouraging active lifestyles, improving mental health and reducing social isolation. Sport is something that can help with many of those issues. The vast majority of community sports clubs do not own their own facilities, relying instead on local leisure trusts. Given that local authorities account for around 90 per cent of sports investment, leisure trusts are a major part of Scotland’s sporting landscape. The proposed changes would risk that, and would put local clubs at risk. Where is the sense in that? There is none.

The issue concerns not only sport. In the west of Scotland, Paisley is competing for the title of United Kingdom city of culture, and the proposals risk the loss of an estimated £1.6 million from local finances, which is a real concern to the community at this critical time for Paisley.

The fabric of local communities is at risk. We need a comprehensive overhaul that supports businesses, charities and clubs that grow our economy, teach our children and improve our wellbeing. Let us stop the swim tax before it harms our communities.

Photo of Andy Wightman Andy Wightman Green

I thank Gordon Lindhurst for bringing this important debate to Parliament. Before I turn to the substance of his motion, I want to put the issue in context. I have long been a critic of the non-domestic rating scheme. For too long we have had ad hoc, itsy-bitsy changes. Some of the changes were hardwired by vested interests some years ago, including agricultural relief, and some reliefs have been introduced recently, such as those for charitable organisations and sport clubs.

I particularly welcome the debate because it is an opportunity to subject the non-domestic rating system to scrutiny, to which it is generally not subjected because changes come through secondary legislation from the Local Government Finance Act 1992. I was particularly exercised by the fact that the second-biggest tax that has been raised in this Parliament—non-domestic rates, which I think last year yielded £2.8 billion—was facilitated by a statutory instrument that I attempted to annul last year, just to get some debate on it.

In September 2013, Derek Mackay, who I think was the minister responsible for local government at the time, responded to the consultation that he had held on non-domestic rates. In the response’s foreword, he said:

“the Scottish Government has committed to use the period until the next revaluation in 2017 to conduct a thorough and comprehensive review of the whole business rates system.”

All reforms were to be

“in place by the next revaluation in 2017, delivering a fairer, simpler and more efficient business rates system.”

That review never took place. Instead we had the Barclay review, which in its consultation paper asked one question:

“How would you redesign the business rates system to better support business and incentivise investment?”

That is a legitimate question to ask, but it is not

“a thorough and comprehensive review” of the non-domestic rating system. The Barclay review did not ask any questions about who would set the rates, about whether local government would be given back control of this important part of its tax base, or about many other wider aspects of the system.

The Barclay review was also told that its recommendations should be revenue neutral. That meant, in practice, that any proposals that were made to reduce liabilities in any sector had to be balanced by measures that would make up for the lost yield.

It is in that context—a very narrowly drawn remit and a need to balance revenue—that the subject of Gordon Lindhurst’s motion should be considered. The proposed reviews, and in particular the review of charitable relief for sports facilities, have not been generated by a considered and diligent review of the non-domestic rating system, as was anticipated in 2013, and are not even a consequence of a considered review of charitable relief. They are a measure that has been considered very cursorily in order to make up a deficit in

respect of proposals that have to be revenue neutral.

Given that context, I have read the views of Sporta Scotland and Edinburgh Leisure very carefully. As someone who has long been critical of the non-domestic rating system and who wants a thorough review, I do not believe that this is the right context for even discussing the issue. The potential impact of the proposal could be extremely complex and should be considered extremely carefully. It is certainly not to be used as a quick measure to raise revenue in a budget that is just a month away.

I have long argued that charitable relief is too blunt a relief and that it does not discriminate effectively between the wide range of charities—just as the small business bonus scheme does not discriminate effectively between small businesses. I hope that we get to the “thorough and comprehensive review” that was promised in 2013.

In conclusion, I am not persuaded that the recommendation by Barclay is well founded, and I would have very serious reservations about voting for any statutory instrument that would introduce the reforms that are noted in Gordon Lindhurst’s motion.

Photo of Tavish Scott Tavish Scott Liberal Democrat

I thank Gordon Lindhurst for allowing Parliament to debate rates relief for sports facilities in the run-up to the Scottish budget. I also thank Derek Mackay, as the cabinet secretary, for responding to the debate. I remember what it was like to be a minister taking debates at 5 o’clock when everyone else had gone back to—I was about to say “the bar”—their offices to work hard. It is quite important that Mr Mackay is here.

I must confess that I disagree with Murdo Fraser to some extent: I did not find rates revaluation quite as exciting as the paradise papers. Maybe he needs to get out more.

On Monday this week, I met the Shetland Recreational Trust general manager, James Johnston, in Lerwick. As I was waiting to go into his office, an exercise class for older people was taking place in one of the spaces at Clickimin leisure complex. James explained to me that the class was being run in conjunction with the national health service. It was about fitness, mental wellbeing and companionship—and fun. The SRT manages leisure centres and swimming pools in Lerwick and across the outlying areas of Shetland. It provides a range of facilities, and it provides classes and services for the general public, for pupils in schools and for specific groups with particular health needs. With Shetland Amenity Trust and Shetland Arts, it works across health, wellbeing, sport, art, culture, the creative industries, heritage and tourism. It delivers on the Scottish Government’s approach to mental health, obesity, healthy living and so many more policy areas.

The Barclay review proposes removing such organisations’ rates relief. Barclay and Government ministers say that such facilities compete with the private sector, but that is not the case in Shetland, where there are no private sector alternatives. The argument does not apply to Shetland—neither, I suspect, does it apply to many parts of island and rural Scotland. Such bodies are not ALEOs, says Audit Scotland, because they do not receive core grant moneys and are not controlled by the local authority, but the financial sword of Damocles now hangs over them and the services that they provide.

In a letter to the Cabinet Secretary for Finance, the Shetland organisations made clear what would happen if rates relief were to be removed. There would be a reduction in activities on Shetland’s outer islands, charges would go up by at least 50 per cent, and some facilities and leisure centres might have to close.

I will make two specific points in relation to policy objectives that the Government has made very clear. Wellbeing work in care homes for elderly people might have to be cancelled and, according to the SRT, abolition of rates relief would also mean a reduction in interventions for young people—ironically, in 2018, which will be the year of young people. I hope that ministers will be properly briefed on the Islands (Scotland) Bill, if they let those things happen. They cannot say that they want to island proof policy areas and their financial consequences but still let that happen. I ask the Cabinet Secretary for Finance to consider making sure that what he does in his budget in relation to this and other areas is properly island proofed.

The Government cannot also simply pass all that over to local government; it cannot pass the financial buck. Shetland Islands Council’s leader is here tomorrow to meet Mr Mackay on the subject of interisland ferries, in relation to which there is a £7 million black hole that we do not want to be made worse. I hope that the cabinet secretary will not solve his budget difficulties simply by transferring the cost to local government right across the country. I would be grateful—as, I am sure, would Parliament—for an assurance from him tonight that that will not happen.

If the Government cuts rates relief funding, across Shetland £1.4 million of expenditure that it funds will have to be cut. That will cancel huge swathes of charitable work. The SRT, Shetland Amenity Trust and Shetland Arts are vital components of Shetland’s offering to its people, to visitors, to tourists and to those whom we want to attract to live in the islands. I do not want the organisations to be damaged.

That is the decision that the Cabinet Secretary for Finance faces. I urge him to take the correct decision, to recognise the wider policy commitments across sport, the arts and health and to leave the rates relief in place. Otherwise, I fear that the knock-on effects—on mental health and wellbeing, in particular—will be far reaching and, in some cases, irreversible.

Photo of Liam Kerr Liam Kerr Conservative

Conservatives welcome many of the proposals in the Barclay review, but as my colleagues have outlined, we are concerned about the implications for local services if all the recommendations are enacted.

I want to highlight the plight of a specific organisation that demonstrates the damaging impact that the plans could have. I recently had the pleasure of visiting Rossie Young People’s Trust, just outside Montrose. The organisation provides vulnerable young people with secure care and accommodation. The current system allows Rossie to reinvest the money that it saves in charitable relief back into the organisation, to improve its services and to help young people to reintegrate to mainstream schooling and the community. If implemented fully, the Barclay recommendations will restrict charitable relief and force the trust to remove front-line funding and fork out for rates instead.

We can surely all agree that the purpose of charging business rates is to raise money for strong public services, so why would the Government take money from organisations such as Rossie Young People’s Trust that already provide vital services to communities and to our children? That is not right, and neither is it logical.

Tavish Scott made some important points. We should fully support charities such as Rossie Young People’s Trust that help to reduce the cost to public services, which will no doubt struggle to pick up the consequences if charitable institutions are forced to reduce their offering. John Mason talked of robbing Peter to pay Paul: this approach would be that in action. It would destroy good operations such as Rossie Young People’s Trust and leave the public sector to pick up the pieces.

A complete overhaul of the business rates system is long overdue, but the Government is choosing a sticking-plaster approach and the injury will be to organisations such as Rossie Young People’s Trust that are integral to their local communities and vulnerable young people.

Just like the proposals to introduce a whim tax on local sports clubs, attempts to remove charitable relief would harm valued health and social services around Scotland. The Scottish National Party should comprehensively and conclusively rule that out.

The Deputy Presiding Officer:

He has just concluded.

Photo of Neil Findlay Neil Findlay Labour

If a swim tax is the best that the Tories can come up with, they are getting a bit desperate.

The Barclay review proposals would have very serious consequences for our communities, particularly in Edinburgh and West Lothian in my region. I have never been a fan of the ALEO model, but we are where we are and what has been proposed would be disastrous.

Year on year, local government has been a target for cuts from this Government. There have been 10 years of cuts and there will be further cuts of £327 million this year. In an attempt to shore up statutory services and to adhere to the demands of Government policy on ring fencing, non-statutory services are taking a disproportionately big hit. Sport and leisure are in the front line for the cuts, yet major reductions of 7.5 per cent in services have already been made in the past three years—that is £42 million. If unchanged, the Barclay review proposals would make the situation much worse, as there is the potential for another £46 million of cuts at stake. Such cuts would be a disaster for sports centres, museums, swimming pools, community halls and the rest. According to the briefings that we received, 92 per cent of trusts said that they would be forced to close facilities, and some said that they are questioning whether they would be able to exist any longer.

As I said, I have never been a fan of the ALEO model, but I understand why ALEOs were set up, which was largely to try to protect services that are provided in our communities. However, like all other financial sleights of hand such as the private finance initiative, the non-profit-distributing model and tax increment financing, ALEOs are just another bit of financial trickery. Ultimately, there is only one pot of cash, and it is through taxation that we get that cash so, no matter how the cash is manipulated, it comes back to one pot. I am sure that we will see the repercussions of NPD and TIF in the future, too, and will be back here debating them.

As convener of the Health and Sport Committee, I am concerned about anything that is a barrier to people participating in sport and physical activity, and reduced hours, closed facilities, staff redundancies, increased charges and the removal of subsidies would all reduce participation. As is always the case, it would be the poorest, the low paid, the disabled and the most needy who would suffer the greatest disadvantage as facilities close and charges rise. That is all directly contrary to the stated policy position and the rhetoric of the Government.

These cuts plus the 10 years of council cuts remind me of a scene from “The Life of Brian”, with the cabinet secretary, despite chopping off every limb of local government, saying, “Don’t worry, it’s just a scratch or, at worst, a flesh wound”. Local government is barely twitching; it has been systematically destroyed year on year by the Government, so this approach would be a near-fatal blow to some of the services that people in our communities rely on.

The Deputy Presiding Officer:

I apologise for the clock not being switched on, Mr Findlay, but you got your four minutes, in case somebody wondered whether members were getting excessive time. I call Bruce Crawford, to be followed by Brian Whittle.

Photo of Bruce Crawford Bruce Crawford Scottish National Party

Thank you for calling me to speak, Presiding Officer. Although I did not press my request-to-speak button at the beginning of the debate, after listening to some of the speeches, I felt that I had to make some comments, which will be short.

I am a former chairman of an ALEO—Perth and Kinross Recreational Facilities, which has now morphed into Live Active. I am also acutely aware of the services that the constituents whom I now represent in Stirling receive and the particular issues that will affect the organisations on my patch.

I am delighted that Gordon Lindhurst has raised the matter, because it gives us a chance to explore some of the issues. I do not underestimate the seriousness of the issues that are being raised but, frankly, some of them are being raised with a level of invective that undermines the case that is being made. I have never seen Murdo Fraser as the champion of the Speedos, and I hope that I never live to see him in a pair but, when members start categorising the measure as some sort of swim tax, that devalues the argument. Members such as Andy Wightman put forward a reasoned and thought-through argument with a sound basis, rather than just producing the sort of invective that really does not help the case if we are trying to win the argument and get whatever result we might want.

Photo of Dean Lockhart Dean Lockhart Conservative

In the spirit of consensus, will the member join me in meeting Andrew Bain, the chief executive of Active Stirling, whom I spoke to today and who expressed his concern about the consequences of the change if it goes ahead? I would be delighted if Mr Crawford would join me.

Photo of Bruce Crawford Bruce Crawford Scottish National Party

If I had not already spoken to Andy Bain about the issue some time ago, I would have been happy to join Dean Lockhart. I have been on the case for a little while as far as that organisation in Stirling is concerned, but if Dean Lockhart wants to set up a meeting and he wants me to come along, I will participate in it, because that is the sort of guy I am.

There is a bit of an anomaly in that many public services, such as hospitals, day centres, care homes and, in some cases, sports centres that are not run by ALEOs, currently pay business rates. Therefore, there is a fair degree of hypocrisy in some elements of the argument. I am not arguing for bringing in business rates for those organisations, but we need to examine the issue rationally. Andy Wightman laid out his argument in a rational way, but some of the other stuff has been pretty irrational.

Photo of Brian Whittle Brian Whittle Conservative

I am grateful to be able to make a small contribution to the debate. I thank my colleague Gordon Lindhurst for bringing the topic to the chamber.

My concern about the Barclay review lies in the potential unintended consequences of retracting the business rate exemptions for council ALEOs and especially for voluntary sports clubs. The issue is particularly relevant in the context of the recently launched diet and obesity consultation as well as the mental health strategy. I recognise the Government’s need to consider tax raising and spending across all portfolios, but I question whether removing business rate exemptions for those kinds of organisations would in fact raise any extra revenue. The reality is that the measure has the potential to force organisations and councils to rationalise services that they offer and/or to raise the cost of participation.

We are trying to increase participation and reach out to those who are in more challenging circumstances, but removing the exemption may move initiatives further away from those who need them the most. The Scottish Association for Mental Health states that the key to good mental health is inclusivity and activity. If we are to tackle obesity, type 2 diabetes, musculoskeletal conditions, cardiovascular disease and many more conditions, we have to recognise that they are positively impacted by taking part in any kind of activity. Any reduction in services will inevitably pass on the cost to our health service, which is already under significant strain.

I ask the Scottish Government, in considering the budget, to reflect on the potential unintended consequences of withdrawing business rate exemptions from ALEOs and voluntary sports clubs. Consideration of those consequences is missing from the Barclay review, but it should certainly not be absent from any responsible Government’s considerations.

Photo of Derek Mackay Derek Mackay Scottish National Party

I have found the debate very helpful and informative. I am still engaging in the subject, and this parliamentary debate is now part of that engagement, which I welcome. For the most part, the debate has been constructive and good natured, despite Murdo Fraser’s desire to get a headline for the second time on a “swim tax” and Neil Findlay’s mixing his “Monty Python” references.

It is important that we do exactly as Brian Whittle has suggested and consider the issue in the round, in terms of our health, wellbeing, sport objectives and culture, as well as considering it in the context of budgetary decisions and the reality that we have to balance the books. Some members have deliberately conflated the Barclay recommendations with Government opinion. I present Government opinion; the panel has published the Barclay report, which was largely well received. Nonetheless, I immediately rejected some recommendations—for example, the recommendation to build the tax infrastructure around agricultural land but not have a tax.

Photo of Andy Wightman Andy Wightman Green

It was notable that the Government rejected just two recommendations: one was to get everything on to the roll, so that at least we would know the value and the potential cost of exemptions; the other was to introduce non-domestic rates for industrial and food-processing premises that happen to be on agricultural land although food-processing and manufacturing facilities that are on industrial estates will pay. Does the cabinet secretary accept that it would be better to look at raising additional revenue in that area than to exempt

ALEOs from charitable status?

Photo of Derek Mackay Derek Mackay Scottish National Party

That recommendation would be incredibly difficult, bureaucratic and hard to define. In essence, it would create a new bureaucracy with no intention to tax, and it would not raise the values that would be required to contribute to other areas, so it was not worth progressing.

At the time, I said that some elements of Barclay, such as those that we have debated this evening, require deeper and further thought and consideration, so that I could engage with those who would be affected. That is what I and my officials have been doing. If there was a concern about a lack of awareness beforehand, those who could be affected are certainly aware now because of that engagement. The process—the submissions, the letters and the meetings that I have undertaken—will ultimately inform the Government’s decision.

I was criticised for not having nailed my colours to the mast; yet, equally, I was asked to engage, consult and consider. In engaging, consulting and considering, we are doing the right thing. I propose to say more in my budget speech on 14 December—as I said I would—and to have an implementation plan by the end of the calendar year. Members will see the proximity. There will be certainty, but it is correct that we are taking time to get the recommendation right, having taken actions around the poundage, the small business bonus and caps for hospitality as well as in other areas that were affected by the revaluation, which was determined by the assessors.

Daniel Johnson spoke about an alternative to the current system, and Dean Lockhart also mentioned that. I have not been presented with a better alternative system for non-domestic rates than the one that we have now. The Barclay recommendations were fairly well received with regard to the refinements that can be made, but a major challenge in those is how the assessors would conduct their assessments using the methodology. That matter will be part of the implementation plan. Frankly, I have never known the assessors be so engaged with ministers, but that is partly because I have had a shot across the bow in terms of their future operation in some of the recommendations in the Barclay report.

Photo of Liam Kerr Liam Kerr Conservative

Given that the cabinet secretary appears to have rejected a couple of the Barclay review recommendations, will he give us an idea of the criteria or other considerations that caused him to reject them in order that we can bring forward suggestions why he should reject, for example, the measures that has just talked about?

Photo of Derek Mackay Derek Mackay Scottish National Party

I thought that I had partly addressed that matter when I responded to Andy Wightman. The recommendation is bureaucratic, and we would end up putting properties on the register that we would ultimately not tax because there would be no call to tax agricultural properties other than commercial operations on agricultural land. It was not in the interests of that sector or in our financial interest to progress that recommendation. We must understand the consequences of the recommendations, and the Government is engaged in doing that.

Some members have complained about the revenue neutral nature of the Barclay review’s remit. However, it is a fact of life for me, as the finance secretary, and those in Government that we must balance the books. We may well be hamstrung by that requirement to balance the books, but it is essential that we do so. Of course, there are choices to be made in doing that.

Tavish Scott made some very important points on the islands perspective. As the Minister for Local Government and Planning and then the Minister for Transport and Islands, I took forward the agenda to empower our island communities, so I am familiar with those issues and take them seriously. Any local authority can create any relief scheme that it considers to be appropriate in order to address local circumstances, but we want to capture the issues right across Scotland.

On the issue of tax avoidance, I will mention the briefings that council leaders—I used to be one—and finance committee conveners get about in-house council operations moving to trusts and ALEOs. Those briefings are largely along the lines of saying that paying non-domestic rates can be avoided by agreeing to that action. That is not necessarily a bad thing, because the savings can be reinvested in front-line services. Nevertheless, the briefing is around tax avoidance, and that is a determining factor in creating the structures that Neil Findlay and others have said they would not seek to create in structuring public services. The situation might be quite different for an individual who hides their income to avoid paying tax. There is a difference between tax avoidance and tax evasion.

The debate is helpful in informing Government thinking as we fully consider the issues before us on non-domestic rates and the reliefs and support that we give to a valued part of public sector infrastructure. I therefore welcome members’ contributions, which I will bear in mind as I present the budget. However, members should appreciate that we must balance the books and take the right decisions to ensure that there is fairness and consistency in the rates regime. Equally, we must draw a line somewhere with the appropriate reliefs. I appreciate the engagement that I have had from across the chamber on this very important subject.

Meeting closed at 18:28.