I am pleased to open the debate on the general principles of the Non-Domestic Rates (Scotland) Bill, which was introduced to Parliament on 25 March 2019. I will set out the background to the bill and then move on to its substance, although I will keep my remarks short because I recognise that members want as much time as possible to offer their views.
The Government is committed to using the limited economic powers at our disposal to create a tax environment that supports economic opportunity. As Scotland’s second-largest tax, non-domestic rates plays a key role in balancing the need to deliver a competitive and sustainable taxation environment, while ensuring that we have sufficient resources to fund the public services that we all rely on.
The remit of the independent Barclay review was to ensure that the rates system supports business growth and long-term investment, as well as better reflecting changing marketplaces. The Barclay review made 30 recommendations. As our implementation plan outlined, we accepted the majority of the recommendations and have already made moves to implement them, including the recommendations on the business growth accelerator, which was warmly welcomed by the business community, and the fresh start relief to support town centres.
We said that we would introduce primary legislation by 2020 and the bill that we are debating today fulfils that commitment. The bill contains meaningful reforms to the rates system, with the notable inclusion of a three-year revaluation cycle. That has been welcomed by many, including the Royal Institute of Chartered Surveyors and the Scottish Retail Consortium, because it delivers justice by more closely aligning valuations with the market. The bill also gives new powers to assessors, local authorities and ministers to improve the administration of the system and to tackle tax avoidance.
A lot of hard work has been undertaken by a range of stakeholders prior to today’s debate. I pay tribute to the members of the Barclay implementation advisory group, the sub-groups that looked at billing and appeals and the working group that considered sports club relief guidance. Members of those groups have given, and continue to give, freely of their time to help ensure that these rates reforms—subject to the will of Parliament—can be implemented as efficiently and effectively as possible.
I turn to what is perhaps the most important area of the bill, which is the appeals system. Our proposed reforms to the appeals system are the most important and ambitious of the reforms that we are implementing, but they are also the most complex. If we fail to reform the appeals system effectively, we risk negating any benefit from all the other proposed rates changes.
I understand that the recent reforms to the appeals system in England have delivered a system that is bogged down in bureaucracy and red tape, resulting in possibly millions of ratepayers being unable to access a fair rates hearing. We must learn from that and make every effort to get our reforms right.
The report of the appeals sub-group, which was established to inform advice to the Scottish Ministers, was published today and offers views on the potential design of a new appeals system.
I received the report this morning and a copy has been sent to the lead committee considering the bill. I look forward to reading the report and reflecting carefully on its contents.
It is fair to say that not all the provisions in the bill have been universally welcomed; I refer specifically to the removal of charitable rate relief from mainstream independent schools. I recognise that the independent school sector is a well-established part of the Scottish education system that promotes choice for parents. However, we agree with the Barclay review that the current difference in rates treatment between independent and local authority schools is unfair and must end. I stress unequivocally that that is a change to rating and not to charity law.
I am grateful to the convener and members of the Local Government and Communities Committee for their scrutiny of the bill at stage 1. I welcome the committee’s support for the general principles of the bill. This morning, I wrote to the committee to respond to the various issues that were raised in its report. I will comment briefly on some of those points.
I welcome the committee’s recognition that the bill’s provisions aim to address weaknesses in the current appeals system. I agree with the committee’s view that getting the detail of the new appeals process right will be critical in enabling the move to three-yearly revaluations. That is why I wrote to the committee on 3 September to say that, towards the end of this year, we will produce a set of illustrative draft appeal regulations, which will allow the committee and other stakeholders to see and comment on our detailed draft proposals.
The committee considers that fees should be introduced at both the proposal and appeal stage of the new appeals process. Although I have yet to reach a conclusion on the matter, I welcome the committee’s position and views. I will reflect further on the matter, and I am sure that I will also be informed by the comments of the appeals sub-group.
I will touch briefly on assessor and local authority information-gathering powers, on which the committee supports the bill’s overall direction of travel. It is important to say that the issue is not all one-way traffic. Assessors accept that they need to get better at providing information to ratepayers in the first place to help them better understand how the valuation assessment has been derived.
The committee’s report comments on the divergence of views expressed on some key issues, such as the level at which civil penalties have been set. We recognise that, and I look forward to further discussions on those important issues during the bill’s amending stages.
I will end there to give back some time to the debate.
That the Parliament agrees to the general principles of the Non-Domestic Rates (Scotland) Bill.
I thank the Local Government and Communities Committee clerks and the staff from the Scottish Parliament information centre for all their support. I also thank the minister and the Scottish Government for their generally supportive response to our stage 1 report. Most of all, I thank the committee members—those who are presently on the committee and previous members—who worked hard to produce the report.
The committee began its scrutiny of the bill during the spring of this year. We took evidence at five meetings and our call for views generated a high volume of responses. The committee went on three visits. One visit was to an independent school and the other two were to Kilmarnock and Stirling high streets, where we met local businesses, charities and other employers to get a snapshot of local views on the rates system. The high level of informed engagement helped the committee enormously in our role of reporting to the Parliament on the general principles of the bill.
Turning to the report, I say at the outset that the committee unanimously endorsed the bill’s general principles. We took that position because of the clear support from diverse sectors—the public and private sectors and from business and the third sector—for the overall direction of travel.
I will single out two reforms for comment. The first is the proposal to speed up the revaluation cycle from five to three years and to bring the date at which revaluations are calculated—the tone date—one year closer to the date on which revaluation actually takes effect. Put simply, that means that, for those who pay rates, the amount that they pay should more closely reflect the actual current value of their property. It is hoped that that will result in fewer appeals against revaluations. Just about everyone agreed that there are far too many appeals at present and that they clog up the system, eating into the resources of councils and assessors. Appeals can take an extraordinary amount of time to resolve, which of course does not help ratepayers either.
The second reform that I want to mention relates to the appeals process. Those new provisions, too, were generally welcomed. There was a general consensus that the current system is unsustainable. However, the committee had some caveats of which the Parliament should be aware, and I will mention two. First, the switch to a three-year cycle will undoubtedly mean more work for assessors, and the profession already has a recruitment problem. That needs urgent attention, so we have asked the Scottish Government what plans it has to address the issue. Secondly, the new appeal provisions simply create a framework for a revised process but leave the details for later. The committee understands why the Scottish Government has taken that approach but, as the minister said, it means that the next steps will be crucial to ensure that we end up with an appeals system that is more efficient than the one that we have now.
I do not say this lightly—because the committee, like the Government, appreciates the importance of access to justice, especially for smaller enterprises—but, given the evidence that we received, we ask the Government to give careful consideration to introducing fees for appeals. I am delighted that the minister said that she will give the matter serious consideration. It became clear to us that the absence of fees is one of the primary factors contributing to a climate in which speculative appeals have become normalised.
The most contentious proposal is in section 12, which removes from most independent schools the right to claim mandatory charitable relief. I expect that issue to be widely discussed today, so my comments on it will be brief. The majority of responses to our call for evidence were about section 12; generally, they were from parents, teachers and, occasionally, young people with a direct connection to an independent school. They expressed their views with sincerity and strength of feeling, and set out their concerns about what they felt the change could mean for their school.
I want to mention the visit by committee members to George Watson’s college in June. I thank the college for hosting a discussion with representatives of the independent sector. As members will imagine, they put their views across to us forcefully, clearly and courteously; by the end of the meeting, the committee knew well where the independent sector stands on the issue.
However, it is important to be clear that there was a strong welcome for the proposal, including from councils. They shared Barclay’s view that the change would bring to an end an anomaly and help to level the playing field between independent and state schools. In the end, a majority of committee members were more persuaded by the latter point of view. The independent sector has been around for a long time and has always shown an ability to adapt to change. It did so last decade when the Scottish Parliament agreed reforms to charity law. Most of us believe that this is another change that the sector will adapt to.
I want to expand on the committee’s comment in its stage 1 report that the bill is “inevitably piecemeal”. That was not intended as negative commentary, but as a simple reflection on the fact that, of the 27 Barclay recommendations that the Scottish Government has largely accepted, most do not require legislative intervention. The bill is limited to those recommendations that do.
We should all take note that the bill is just one part of a wider effort to meet the Barclay goal of having a ratings system that is fairer, more efficient and more business friendly. Much of the evidence that we received was about the bigger picture beyond the parameters of the bill. The committee agrees that there is benefit in continuing the debate about how well the current rates system, including its supporting architecture of reliefs and supplements, reflects modern commercial realities.
To pick one example, we might ask whether there are aspects of the ratings system that could be re-engineered to address the problem of struggling high streets and to enable a town centre renaissance. Perhaps that is a discussion for another day, but we should keep the bigger picture in our sights over the coming months and years as we judge the effectiveness of the whole package of reforms that has emerged from the Barclay review.
Given the tightness of time today, I merely repeat that the committee welcomes the bill. I look forward to the rest of what will be a very interesting debate, particularly for the members of my committee.
I feel that I must reiterate some of the comments that I made this morning in the chamber about the timing of this debate, because we have been left with one hour and 20 minutes for a stage 1 debate on an important bill, which a large number of people outside the Parliament—stakeholders, businesses and those involved with independent schools—are concerned about. It is an issue that we need to address as a Parliament. The primary purpose of Parliament is to scrutinise legislation—we are here to make laws. We do many other important things, but they are not as important as that, and Parliament needs to learn a lesson about timetabling debates such as this one.
Having got that off my chest, I want to give a general welcome to the Non-Domestic Rates (Scotland) Bill. In some areas, it does not go far enough, and we have concerns about what is being proposed in other areas but, overall, its measures are welcome.
As we have heard, the bill seeks to implement the findings of the Barclay review on non-domestic rates. It does not implement all the Barclay review recommendations. For example, Barclay recommended a change in the tax treatment of arm’s-length external organisations—ALEOs—whereby local authorities provide leisure and cultural services by means of an independent vehicle, thus making a business rates saving. The Scottish Conservatives vigorously opposed the original plan to remove that tax concession and, last year, I was pleased when the Scottish Government announced that it would not proceed with the introduction of what we called the swim tax. I am proud of that particular slogan.
There is much in the bill that we welcome. We welcome the move from five-year to three-year revaluations, which is supported by the business community. All members will have had the experience of hearing the concerns of businesses about the increases in business rates through revaluations that are set five years apart. Although there is an appeal process in place, that has led to specific reliefs being introduced to deal with the changes arising from revaluations. Reliefs were introduced for the hospitality sector, for example, and for premises in Aberdeen and the north-east. A move towards a three-year revaluation schedule should reduce the demand for specific reliefs in the future.
The Barclay review’s proposals for a business accelerator, which would create an incentive for businesses to expand and remove the existing disincentive for speculative development by landlords, is also a positive step. The relief is intended to stimulate growth and investment and it is one that we very much welcome.
However, we have concerns about certain areas of the bill. The first is the fact that the date of the next revaluation is set at 2022, which leaves a five-year gap since the last one. It is at least worth exploring whether the next revaluation can be brought forward a year, to 2021, which would bring us into line with the situation south of the border. If it is technically possible, that move would be welcomed by business.
I am sympathetic to that view, but I think that there is interest in the business community in exploring how achievable it would be to bring forward the date of the next revaluation.
The second area of concern is the tax treatment of independent schools. My colleague Liz Smith will say more about that later in the debate, but I will highlight three concerns that I have about the measure. First, there seems to be a degree of inconsistency in proposing the removal of a charitable relief from independent schools, which are constituted as charities and do not make profits—indeed many of them are in a precarious financial position—and, on the other hand, granting a new relief to private nurseries, which do make profits. There is a clear inconsistency, in that charities that are running a nursery as part of an independent school will have their relief removed, while other profit-making charities will have a new relief granted to them.
“a long held general concern that treating any group of charities in a differentiated way for tax or other purposes, as proposed by the Barclay Review and now the Bill, introduces the potential for confusion in the minds of the public as to what it means to be a charity.”
If the Scottish Government wants to review the charitable status and tax treatment of independent schools, in my view, it should be doing so as part of a wider review of charity law, and not in the context of the bill. I know that my view is shared by OSCR.
Finally on this point, I simply cannot believe that the financial memorandum that is attached to the bill makes the assumption that there will be no additional cost to the public sector from introducing this tax grab of £7 million a year from independent schools. That money will be found only by increasing fees to parents, by cutting bursaries, or by a combination of both, which is bound to impact on the number of parents who choose to send their children to independent schools, which will put an additional burden on local authorities. That will particularly be the case in areas such as Edinburgh and Perth and Kinross, which I represent, where relatively high proportions of the pupil population are currently in the independent sector.
The last area that I will talk about is the large business supplement. The Barclay review recommended that the LBS, which is currently set at a rate that is nearly double that set south of the border, should be made competitive with the rest of the United Kingdom, to ensure that Scotland is the best place to do business. Barclay recommended that the LBS be reduced in 2020-21, or sooner if affordable.
It is disappointing that the measure is not addressed in the bill. We consistently hear from the business community that it is a major disincentive for businesses to invest in Scotland. In a parliamentary written answer that I received last week, it was revealed that there are more than 5,000 retail businesses in Scotland paying the LBS and cumulatively contributing nearly £14 million annually. It is a tax that is payable on business in Scotland and is not payable elsewhere in the UK. As David Lonsdale of the Scottish Retail Consortium stated in
The Herald two days ago, it is a levy that
“sticks out like a sore thumb.”
I hope that the issue can be addressed either in the bill or separately.
We have therefore identified those three issues as problems with the bill. More generally, business rates continue to be a major source of complaint, and it remains our view that there should be a broader look at the business rates regime and business taxation. I was encouraged by the remarks of the committee convener that perhaps we need to consider whether a tax that is based purely on property values is still appropriate when so much business is conducted in cyberspace.
We welcome the bill overall. We have some reservations about it, but we will support it at stage 1 to allow it to continue through the parliamentary process, during which we will look to see how it might be improved.
Non-domestic rates are a vital part of the funding that enables our local authorities to deliver the local services that people rely on. In the Local Government and Communities Committee’s evidence gathering in advance of this year’s
Scottish Government budget, a key issue that was raised by witnesses was the financial cliff edge that local government faces. Therefore, ensuring that non-domestic rates are effective, that they enable funding for local services and that they are fair for our businesses and those organisations in the public sector that pay them is crucial.
Scottish Labour welcomes the broad thrust of the legislation, because it will make the system more effective and fairer in terms of its coverage. However, we believe that the legislation is a missed opportunity. It could have delivered more to incentivise culture change and address the challenges that our businesses and communities are facing.
The majority of the provisions in the bill are welcome: for example, the move to three-year valuations; the removal of charitable relief from independent schools; and measures to cut down on speculative appeals. However, the details of many of those areas will be left to Government to develop and implement after the bill has been passed, and their success will depend on consultation right across Government and with stakeholders, and on joint working with local authorities.
In some instances, the Government has given itself too much power and Scottish Labour believes that the bill should be amended at stage 2 to allow Parliament to scrutinise any further actions that are taken on business rates. Furthermore, we think that the bill represents a disappointing lack of ambition from the Government. It is limited to the scope of the Barclay review, which was itself too narrow.
I highlight that the bill should have engaged further with the current struggles that our high street is facing and evidence from the business community that aspects of the rating system deter growth. I particularly commend the representations of the Union of Shop, Distributive and Allied Workers—USDAW—to the minister. Those are worth taking on board.
There are many recommendations from the Barclay review—ones that support the high street, for example—that have already been implemented because they do not need primary legislation. Is Sarah Boyack making the point that there is further work that we can do outwith the legislative process, or more that we can do that requires to be in the law?
Another area is the urgent need for incentives for low-carbon investment. We urgently need to see new infrastructure for local heat and power schemes to create new opportunities for investment and to deliver new affordable low-carbon heat projects. Last month, Glasgow’s Councillor Anna Richardson made the point that
“the way district heating systems are treated in the local tax system acts as a deterrent to them being used more widely. Unfortunately, under present rules, installing district heating systems brings in significant new non-domestic rates and that adds unduly to the cost of heating homes.”
Her point is that homes that are heated by a district system are penalised in effect. How can it be right, when we need low-carbon community networks that are affordable, that there are disincentives that make them uncompetitive with the higher-carbon technologies that we are trying to move away from?
The Barclay review called for an examination of the effectiveness of the small business bonus scheme. I understand that work on that is now being carried out. It would be helpful to hear from the minister when that will be published.
There are key reforms that Scottish Labour supports. I have already mentioned moving property revaluations from five to three years; increasing the relief available to properties that have undergone improvement or expansion; reforming the appeals system to try to cut down on speculative appeals and enable earlier resolution; and removing charitable relief from most independent schools.
We also welcome sections 23 to 27, which give the Scottish ministers the power to introduce general anti-avoidance provisions for non-domestic rates. As the committee has noted, tax avoidance corrodes public confidence in the tax system and the shared sense that everyone plays by the same rules, especially when it is carried out openly and blatantly. We need to see clarification from the Scottish Government on whether it has considered the amendment of reliefs or the small business bonus scheme to ensure that we have an approach that prevents repeat offenders from acting, and we need to see what conclusions were reached.
We also want to see implementation of the change to the revaluation cycle from five to three years. That is a business-friendly change that, if implemented effectively, could also lead to a reduction in the number of speculative appeals against revaluation. A critical issue that has emerged is that the benefits of that proposal will be realised only if the Government has a plan to address problems of recruitment and retention in the assessor profession. That came through loud and clear in the evidence that the committee received.
We are also supportive of reforming the appeals process. The current system is unsustainable and leads to lengthy and resource-sapping backlogs that are not in the interests of ratepayers or administrators. We need more action to ensure that we have the staff to deliver the changes that are required.
The committee accepted that there is no good reason in principle why businesses in most public parks should continue to enjoy automatic exemption from the business rates regime. However, there are uncertainties about the scope of section 4 and how it will be implemented, and more clarity needs to be provided when we reach stage 2.
We agree with the committee that the ending of mainstream independent schools’ eligibility to claim charitable relief is to be supported. We believe that it is crucial that there is a level playing field for the state and independent sectors. The proposal will also generate more revenue for councils. We also support the intentions behind section 5, which seeks to close the loophole that enables some second home owners to avoid council tax and rates, and section 12, which seeks to address the problem whereby an empty property is purportedly being used for a particular purpose simply to allow relief to be claimed. There is much in the bill that we support, but more detail needs to be provided when we come to stage 2.
I want to end by commenting on the discretionary powers that are aimed at granting relief to sports clubs. It is good to see acknowledgement of the positive role of sports clubs in our communities, but there needs to be parliamentary scrutiny of the guidance that the Scottish Government intends to produce.
Given the range of issues on which further clarity is required, it is crucial that stage 2 is handled in a constructive way and that ministers can answer a lot of our questions. If that is not the case, there will be a great deal of uncertainty for business. There is much that we can support in the bill, but there are changes that need to be made and opportunities that can be taken.
I will not. Thank you, Presiding Officer.
I note that this is the first time that the Scottish Parliament has considered primary legislation on non-domestic rates. Indeed, there has been no reform in more than a quarter of a century, since the Local Government Finance Act 1992. That is very telling. It demonstrates how little interest there has been in Parliament in local tax and how much power the 1992 act gave to the Secretary of State for Scotland—that power now lies with the Scottish ministers—in relation to detailed design of the non-domestic rating regime, including the rates themselves, the reliefs and other details, all of which are pushed through Parliament in secondary legislation. For a tax that, as the minister pointed out, is the second-highest-yielding tax under devolved powers, that is a remarkable state of affairs.
Therefore, the fact that we have a bill is welcome, but it is not welcome that it is so narrowly focused on a series of technical measures and that it leaves a vast number of questions unanswered. It is worth briefly reflecting on why that is. In September 2013, Derek Mackay—who was in the chamber a few moments ago—the then Minister for Local Government and Planning, published a response to a consultation document in which he said that the Scottish Government would
“conduct a thorough and comprehensive review of the whole business rates system” by 2017, which would deliver
“a fairer, simpler and more efficient business rates system.”
That review never took place. Instead, we had the Barclay review, which asked only one question:
“How would you redesign the business rates system to better support business and incentivise investment?”
That is why OSCR, for example, never paid much attention to the review. It was only after the review had been completed that organisations such as OSCR suddenly realised that the findings had some relevance to them. The review was instructed on the basis that its recommendations would be revenue neutral. In practice, that meant that any proposals that were made to reduce liabilities in any way had to be balanced by measures that would make up for the lost yield. It is no coincidence that many of the measures that are in the bill to make up for the lost yield were plucked from thin air—the Government simply looked at a list of reliefs to find out where it could get the money to pay for the review’s recommendations.
The Barclay review was not the comprehensive review that was promised in 2013; that review has still to take place. It is in that context that Green members approach the bill. I will outline our key objections and proposed reforms before concluding with a more fundamental objection. At stage 2, Green members will lodge amendments, on all of which I undertook a consultation in the summer recess. I will say a few things about some of them.
First, members will be aware that non-domestic rates are a local tax, and yet, in 1992, Mrs Thatcher’s Government removed councils’ powers to set the rate. Since then, the rate has been set by negative instrument with next to no parliamentary scrutiny. We will lodge amendments to return the rates to the level of government to which they belong—local government. There will be issues of timescales and all sorts to debate in relation to that.
Secondly, it is bizarre that we have an incomplete tax base. Barclay recommendation 28 is that all property should be on the valuation roll and those currently exempt could then be granted reliefs, which would increase the transparency of, for example, the unjustifiable tax breaks afforded to agricultural holdings.
That recommendation was made as far back as 1976 by the Layfield committee, the Mirrlees review drew Government’s attention to the issue in 2011 and the land reform review group made a very clear recommendation on that topic in 2014.
In the past two years, more than 13,000 new entries have been added to the valuation roll, to cover shootings and deer forests. The vast majority of those will be registered agricultural holdings. We are well on the way to a complete roll, and we should commit to completing the task.
Thirdly, the non-domestic rate is a flat-rate tax—it has one rate of 49p or thereabouts—that is applicable to all properties, regardless of their value. We propose that there be a progressive rate, with a tax-free allowance, just like we have for income tax.
Other changes that we will be seeking include either removing the exemption that is granted in the bill for specialist music schools that are in the private sector, or retaining it but also applying it to the four specialist music schools that are in the public sector, such as the City of Edinburgh music school.
We also want the localisation of reliefs, and the provision of backstop powers to force owners to pay, rather than forcing occupiers to pay where the owners cannot be found. We also want there to be reforms to stop multibillionaires such as Sheik Mohammed bin Rashid Al Maktoum, the ruler of Dubai, being eligible for the so-called small business bonus scheme, and to ensure that all ratepayers pay something, which would eliminate what Barclay calls the “rates deserts”.
We have one major concern: the removal of the NDR tax base from the control of its historic owners—local government—is, in our view, a violation of international law. That breaches article 9 of the Council of Europe’s European Charter of Local Self-Government, which provides legal protections for the autonomy of the tax base of the local state. This situation cannot be allowed to persist. However, because it does—at the moment, anyway—we cannot support the bill; neither will we stand in its way, so the Greens will abstain on the motion this evening.
As you always are, Presiding Officer—thank you very much, indeed.
I, too, thank James Dornan and his colleagues on the Local Government and Communities Committee for their work to date; I also thank those who contributed to the consultation.
I find myself in agreement with Andy Wightman’s analysis and many of his concerns. The bill includes a set of fairly modest proposals stemming from the Barclay review. That, too, was hobbled in terms of its breadth and its scope. We have been left with a bits-and-pieces bill.
I understand that we are dealing with a policy area that is uncomfortable territory for this and previous Governments. I remember well the business rates revaluation in 2010, which left many businesses, particularly in the hospitality sector, facing massive increases of up to, I think, 1,000 per cent in some cases, with no transition. At the time, ministers seemed largely unconcerned, and they were not concerned enough to delay the revaluation until 2016. In the bill, however, we see the imperative for having regular revaluations.
After 2010, we had the business rates incentivisation scheme, which got off to a fairly inglorious start. The Government and the Convention of Scottish Local Authorities were still arguing in 2014 about what the baseline for 2012 should be and about what the outcomes, performance and payments for any year should be.
Eventually, ministers had to fiddle the figures, short-changing Aberdeen to the tune of millions of pounds. Then they cancelled the scheme anyway. The risk in trying to fake localism is that more of a mess is created. I would rather this bill set about giving control of business rates to local authorities, for many of the reasons that Andy Wightman set out, which would give them the opportunity to form meaningful and strong partnerships with businesses in their area.
Linking to the existing roles in economic development and to business support into local colleges, each authority would have the clout to shape a more successful community. I accept that the same economic and taxation blueprint does not necessarily work in every region, and the bill does not provide for that.
The Scottish Government is scrabbling around to work out how to avoid taxing people who improve their properties, invest in machinery and install renewable energy. All those issues are inherent problems in the business rates system, and it is fundamental that the system be based on rental value.
This might seem to be a pedantic point, but the member has persistently referred to “business rates”. He and I are members of the Scottish Parliamentary Corporate Body, and I do not think that he regards us as business people in that respect. I have just looked it up and found that this building has a rateable value of £6,965,000. The non-domestic rating system is a rating system of the occupational value of non-domestic property. Conflating the system with the interests of business has been damaging to the debate that we have had over the past decade. I am sure that the member agrees with me.
I am happy to take Andy Wightman’s reprimand in the spirit in which it was intended. Having been a member of the corporate body for some eight years, I certainly bear the scars of the impact of the non-domestic rates of this building.
The issues that I mentioned are not tackled in the bill, which is why the Scottish Liberal Democrats believe that a move to a land value system could generate economic advantages and Government efficiencies, if it is linked to council tax reform. However, we do not have a major bill before us; we have a small bill.
Scottish Lib Dems hope that the bill, if it progresses, will close the loophole that allows second home owners to declare themselves a business and get rewarded with a Government tax cut. Willie Rennie has spoken strongly about concerns that holiday rental owners in parts of the east neuk of Fife are not paying their fair share.
Some of the consultation responses are right to point to the large burden that will be placed on local authorities to police the bill’s provisions, as they are currently worded. The respondents suggest making changes to the small business bonus, and I hope that the minister will respond to that. I would like to know how the review of the small business bonus and the review of micro-letting will impact on the ground. The Scottish Government has chosen one approach in the bill, while embarking on two reviews of two other approaches. Ministers are not so much putting the cart before the horse as setting three carts rolling downhill, all on their own accord. I would be interested to learn what timetable the Scottish Government thinks will best allow the three processes to be considered together.
I wish James Dornan and his colleagues on the committee all the best as they take forward their stage 2 scrutiny of the bill.
I agree with Liam McArthur about the loophole in relation to second homes.
The bill will update Scotland’s non-domestic rates system and create a more modern and equitable ratings structure. In terms of revenue, non-domestic rates are the second most important devolved tax, behind income tax. In 2018-19, non-domestic rates accounted for £2,847 million; by comparison, last year’s council tax income was £487 million less than the revenue from non-domestic rates.
The Barclay review outlined 30 recommendations that were intended to make the ratings system fairer, make the ratepayer experience better and enable economic growth. I am pleased that the Scottish Government accepted the majority of the recommendations—not least, the one on three-year revaluations—and acted decisively to implement those that do not require primary legislation.
The business growth accelerator should be welcomed across the chamber. Under the current system, when a new property is built, or when an improvement or expansion of an existing property takes place, the rateable value increases. A key business objective is to grow, which is often done by improving or extending premises, but a property expanding so that it had a rateable value of £15,001 to £18,000 would result, in effect, in a payment of rates at 36.75 pence in the pound, and 49 pence in the pound if the rateable value was more than £18,000. Therefore, if the rateable value is £15,000, nothing is paid, but if the rateable value is £18,001, £8,820.49 is paid. That cliff edge can only inhibit expansion and dissuade owners from taking long-term growth decisions due to cost. The Barclay report stated that that
“penalises ratepayers who make environmental improvements (e.g. solar panels), face requirements to improve their properties as a result of regulation ... or invest in plant and machinery.”
Although the small business bonus scheme is not being considered in the bill, its positive impact in saving businesses from going under during a recession could be improved, to allow businesses to not only survive but grow. The Federation of Small Businesses has said that repeatedly.
In addition, the demand for small business premises, which benefit from the small business bonus, has led to overheating in the rental market for cheaper properties. That incentivises companies to take their business away from high streets, where costs are usually higher. The business growth accelerator will incentivise investment and growth, introducing a 12-month delay in rate increases when an existing property is expanded or improved. Entirely new properties will become liable for rates only after 12 months. I agree with Murdo Fraser that if the UK Government were to consider taxing online retailers, that would also help our town centres and shops.
The bill includes provision for reforming the rates revaluation appeals system to reduce speculative appeals and to enable earlier resolution. In 2017, 75 per cent of appeals resulted in no change to specific rateable values. Therefore, I welcome the committee’s conclusion that the existing system incentivises the making of appeals. That is primarily due to no fees being charged for appeals and the ease with which appeals can be lodged. Accordingly, I believe that an applicant who has initially been advised that an appeal has little chance of success should have a fee imposed to militate against the lodging of a spurious appeal.
Independent schools with charitable status are currently entitled to 80 per cent mandatory relief from non-domestic rates. I agree with the majority of committee members, who considered that all independent schools should pay rates and should no longer be able to claim charitable relief. Not only would that end an unfair and unequal practice in relation to state schools; it would generate more revenue for councils to spend on local services. I simply do not accept that independent schools would suffer, because the impact on fees would be only around 1.3 per cent across the sector—far less than that of recent teachers’ salary and pension changes. I believe that that approach should apply to the entire independent sector. It is simply anomalous and inconsistent to exempt one music school from paying rates.
Scotland has the most comprehensive package of rates relief in these islands, which is worth more than £750 million in the current year, and more than 90 per cent of properties pay a lower poundage compared with those in the rest of the UK. The bill puts us on track to achieve our goals of improving our non-domestic rates system, helping businesses to grow and encouraging long-term investment.
I place on the record that I have been a governor of two independent schools.
I agree whole-heartedly with my colleague Murdo Fraser, who earlier in the debate raised Scottish Conservatives’ very serious concerns about the element of the bill that will affect independent schools. We will need to see that being changed before we can agree to the bill at stage 3.
I entirely agree with what Andy Wightman said about there being serious anomalies in respect of treatment of specialist music schools.
I also want to pick up on the point that James Dornan made about the Charities and Trustee Investment (Scotland) Act 2005 on reform of charity law. At the time of that act’s passage, some members believed that no independent schools should have charitable status, because they felt that such schools were elitist, so that special treatment should be removed. However, when the bill was voted on, it was passed unanimously because all parties agreed that the evidence that had been presented to Parliament showed that independent schools play a very valuable role, regardless of whether it was measured by educational, social or economic criteria. It is good to hear the minister agreeing with that.
The other point about the 2005 legislation is that Parliament also agreed—again unanimously—that the charity test should be tightened so that all independent schools were made much more accountable in respect of the public benefit that they offer and, crucially, that they were made much more accessible. That is an important point to remember, because it is relevant to the debate on the current proposals to remove charitable relief from such schools.
Fees in the independent sector will, unquestionably, rise by more than has been the current average annual fee increase, thereby increasing the likelihood that more parents will be unable to choose independent education. In turn, that will mean that the state sector—which is already very hard pressed when it comes to resource provision—will be asked to accommodate more pupils. The second part of the equation is that, by definition, that would then cause independent schools to become more elitist.
As I mentioned earlier, that is surely the exact opposite of what the Parliament unanimously decided in 2005 and of the Scottish National Party’s stated ambitions for education in Scotland. It would also put Scotland’s independent schools at a competitive disadvantage compared with those in England.
Also, does Parliament really want availability of independent schools’ facilities to be restricted because they will face much more serious financial constraints? Does it want one in which independent schools are no longer quite so able to offer assistance to state school pupils to study subjects that are not in their own schools’ curriculums or are unable to support local primary schools with arts, drama or sports provision?
Does the Parliament want a situation in which the independent sector is not so able to contribute to the target of 1,140 hours of nursery provision, or not so able to provide marking assistance for the Scottish Qualifications Authority, as was stated in one of the warnings that was issued to the committee?
Those are all possible scenarios, each of which would serve to undo all the excellent work that has been done by both state and independent schools to bring the sectors together to enhance education for all young people.
Worst of all, does the Parliament really want a situation whereby some smaller independent schools would close down altogether, which would adversely affect employment in local businesses as well as among their own staff? The Local Government and Communities Committee has been well told that that is a real risk.
There are some serious anomalies in the bill, and I do not think that the Scottish Government has thought them through. We will bring up those issues at stage 2. I am sorry that they have not been thought through, as is evidenced by the fact that there has been no accurate assessment of the effects of the bill. No assessment has been forthcoming in the financial memorandum, which says nothing about the true costs.
First, I apologise for being a few minutes late to the debate.
The committee’s report captures many of the key issues that were raised by people who gave evidence and submitted their views. I congratulate the committee’s convener and its members. I am pleased that the committee has focused on the concerns that were raised about the transparency of the revaluation process. It is ridiculous that, as many businesses do, a business would struggle to understand the process, and to understand how revaluation of its property has been done. The process for revaluations should—indeed, must—be totally transparent. If it is too complex and difficult for the majority of people to understand, it is clearly failing and should be challenged. I hope that we will see a culture change that puts people, and the need for them to understand the process, at the heart of revaluation.
In its report, the committee states:
“We also note widely shared views that the more transparent and intelligible the revaluations process is, the fewer appeals there will be, and invite the Scottish Government to confirm whether it sees opportunities, as the Bill continues through the Parliament, to ensure that the process will be more transparent in future.”
Whether the process is intelligible or unintelligible, we surely need to address that issue. From my experience of dealing with businesses in Fife, I can see that there has been no commitment to explaining properly how evaluation is done. That needs to change.
On staffing, many people in valuation talk about the pressure of work and the fact that while staffing levels are falling through pressure from cuts, the workload is increasing. I am pleased that the committee identified that point, and I look forward to hearing how the Government intends to address the workload pressures that contribute to retention challenges in particular. The move to three-yearly revaluation is welcome, but the committee asks what additional pressures that will put on an already overstretched service.
It is important to restate what the committee said about modernising the system for administrating revaluations and appeals. It said:
“We welcome the small steps taken so far in the Bill but urge the Scottish Government to seize the opportunity to consider further ways to streamline and modernise the process.”
I hope that the minister will pick up on that point, and on the many other well-made points in the committee’s report.
On arm’s-length organisations, I think that all members welcome the decision not to proceed with the Barclay recommendations. In reality, the recommendations being implemented would have led to massive pressure on services, and many council services that have been put into ALEOs would have collapsed.
However, the Government needs to clarify whether it is introducing a new policy that ALEOs that are being set up would not qualify for the same relief as the current ones do. I know from having been council leader at Fife Council about the pressure on the education department from many people to make cuts by making savings from putting all the schools out to an ALEO. Where would that stop? The Government recognises that there is a problem, but it needs to state clearly what its policy will be and give local authorities a clear understanding of that.
Once again, Presiding Officer, I apologise for being late for the debate.
I welcome the bill, but before I comment on it in detail, it is worth reminding members that under the SNP Scottish Government Scotland leads the way on rates relief. Scotland already has the most generous package of reliefs in the UK, which is worth more than £750 million in 2019-20, and more than 90 per cent of properties in Scotland pay a lower poundage than other parts of the UK this year.
I do not know anything about that gentleman’s property, and it would not be appropriate for me to comment on the details of someone’s personal tax affairs without looking into the matter further. However, I will certainly go away and do that.
I am pleased that the Scottish Government has already acted decisively to implement the Barclay review recommendations that do not require primary legislation. Those include expanding fresh start relief to help town centres, which is very important to my constituents in the market towns of South Scotland.
The bill reflects the Barclay review’s recommendations that are intended to overhaul and modernise the ratepayer’s experience of navigating the system, which was judged to be poor, in order to increase fairness and, of course, to promote economic growth.
The bill will put in place ambitious reforms to the appeals system, which will improve decisions and build trust. The new two-stage appeals system will facilitate better and earlier information sharing, and it will enable a “right first time” valuation in order to reduce the number of changes on appeal, and to build trust in the system.
The Barclay report acknowledged the
“strong consensus among stakeholders that 3 yearly revaluations ... would provide a better timeframe.”
I note that the briefing for the debate from the Union of Shop, Distributive and Allied Workers says:
“We believe that these changes will ensure that the rates system better reflects market/trading conditions and provide a more effective ‘natural stabiliser’ against cyclical economic effects as well as economic shocks.”
I want to say something about the measures in the bill that are aimed at tackling tax avoidance, with regard to empty properties in particular. Empty property is one of the biggest problems that we face in urban and rural regeneration, so I welcome the attention that has been given to the matter by Barclay and the bill. For example, it was suggested to the Barclay review that a well-known avoidance tactic to reduce an empty property’s rates liability is to occupy only a small part of the property as storage. That allows the owner to qualify for another relief or allows a new period of empty property relief to begin after a set period.
Section 12 of the bill deals with the first of those aspects. I will watch closely to see how that works in practice. I understand that the second aspect will be dealt with through subordinate legislation. Either way, it is important that councils use the new powers to tackle the scourge of empty property and, indeed, that they use the powers that they already possess to deal with the problem.
I note that Barclay recommended reform
“to restrict relief for listed buildings to a maximum of 2 years and the rates liability for property that has been empty for significant periods should be increased.”
The Government’s consultation said that, after two years, relief should fall to 10 per cent and that a surcharge should apply after five years, from 2020.
That would deal with a problem of which I have direct experience. I have been approached by constituents in the town of Annan who are directly affected by listed buildings that have been left to crumble. I pay particular tribute to William Hogg, who is a local resident. He led on a petition that asked for action to be taken on properties including the Albert hall, the Central hotel and Erskine church. Because I was not on the committee that scrutinised the legislation, I am unable to ascertain whether that Barclay recommendation on listed buildings will be enforced through the bill or through regulations. However, I note that the consultation proposed that it would take effect from this year, so I hope that the minister can confirm that that is the case.
I am pleased to take part in today’s debate on the Non-Domestic Rates (Scotland) Bill.
As a member of the Local Government and Communities Committee, I thank all those who have supported us during our evidence sessions and given us information.
As a former councillor, I am aware of the impact and importance of non-domestic rates. The Conservatives welcome many parts of the bill. However, we also have to think of the consequences that councils are suffering because of the budget reductions from Government. In this financial year alone, they have already had a real-terms budget cut of £168 million. The Scottish Government is making political choices, and that is the context in which we should see the bill. Many changes are proposed; some go far but some do not go far enough and will not address the chronic underfunding of our councils.
Scotland has one of the lowest growth rates of any country in the European Union and a lower employment rate than other part of the United Kingdom. If Scottish employment had grown at the same rate as the UK’s over the previous 10 financial years, more than 300,000 more people would be in work in Scotland today. That is a staggering and sobering statistic.
On our high streets, retail has been hit particularly hard; Scotland continues to fall behind the rest of the United Kingdom. The committee visited some locations and it was harrowing to hear views from retailers about how they cope with the demands in city centres.
There has already been talk this afternoon about online businesses. As we go forward, they need to be looked at.
When we looked at the amounts that are being ploughed into rates, we found that the hotel and hospitality sector are finding the situation difficult. The renewables sector is also suffering. In Aberdeen and Aberdeenshire, the Government had to support businesses because their rates bill had doubled, trebled or, as we heard, gone up by 1,000 per cent. It is unsustainable for businesses to be put in that situation. I am delighted that the Scottish Conservatives were one of the groups that forced a U-turn, as result of which £40 million was put into the hospitality sector in Aberdeen and Aberdeenshire.
Alexander Stewart has gone on at length about the situation in Aberdeenshire. Does he agree that it would have been better for Aberdeenshire to have had the powers in Aberdeenshire to deal with that problem years before it happened or shortly after it happened, rather than having had to come to central Government, in the national Parliament, to invoke a complex relief scheme?
We have to balance the economy and ensure that there is growth across the sector.
I hear what Mr Wightman is saying but I do not agree with it completely.
We know that the Government has looked at the Barclay review’s recommendations on revaluations. One of the biggest benefits will be that revaluations will take place every three years rather than every five years. That is important.
It is disappointing that, despite the long-standing promises to reform business rates, there is no firm timescale to reduce the large business supplement, which means that Scottish businesses are uncompetitive.
No. Time is pressing.
“committed to setting the poundage rate no higher than that set in England”.
However, seven years on, we have still not caught up with that. The commitment rings hollow.
We have already discussed the independent schools sector. I come from Mid Scotland and Fife, which has a large number of independent schools. I echo the concerns of my colleague, Liz Smith, on the proposal to remove their charitable relief. The comparison with the rates that state schools pay is misleading; it is only cycling money through different parts of the public sector. That should not in itself be looked upon as an area for discussion.
As my colleagues have indicated, we will support the general principles of the bill, but we have missed some opportunities to make progress and improvements. The bill fails to take Scotland’s business forward in a competitive way, and it does not give us the system that we want. We will support the general principles of the bill at this stage, but we will be seeking to amend it at stages 2 and 3.
We welcome the bill, as do organisations such as the Scottish Retail Consortium and USDAW. We will support the bill at stage 1, and we will seek to work with the Government and colleagues to improve it as it goes through the Parliament at stages 2 and 3.
We welcome the powers for Scottish ministers to introduce general anti-avoidance provisions for non-domestic rates. As Sarah Boyack said and as the
Local Government and Communities Committee noted,
“Tax avoidance corrodes public confidence in the tax system”.
We need to see tax as a good thing: our contribution towards building a better society. Tax avoidance is often seen as something that should be promoted and, in some instances, tax evasion is encouraged.
Kenneth Gibson spoke about having to deal with the whole tax system. When we see large companies offering miniscule amounts of money in lieu of their tax liability, that devalues the whole of the tax system. Indeed, it encourages others to avoid paying the tax that they are due to pay.
We agree with the committee about the change to end the exemption for mainstream independent schools that claim charitable relief. That is very much welcomed by us, as it creates a level playing field between the state and independent sectors. As many members have said today, that will give local authorities more funding. Along with the committee, we are not persuaded that there is a case for treating independent specialist music schools any differently from other independent schools.
Indeed. There needs to be more detail on many aspects of the bill. As far as independent schools go, this matter has been a cause for angst for some time, and it is important that independent schools are treated the same as other schools and are not allowed rates relief based on charitable status. While there are independent schools providing specialist musical tuition, there are the same types of schools in the public sector, such as
Scotland’s national centres of excellence. I should perhaps register an interest, as I am a former pupil of Plockton high school, which is now a centre of excellence in traditional music. It was not when I was there—and I cannot sing a note, so that is perhaps just as well. In any case, we will consider lodging amendments to strengthen that part of the bill.
Murdo Fraser spoke about further clarity being required on private nurseries, including those attached to independent schools. That is something that the Government needs to provide.
Alex Rowley talked about ALEOs and how they were used by councils that were often cash strapped in order to save money. We need to ensure that that does not backfire on councils at a time when their funding is reducing.
Many members spoke about revaluations and welcomed the change to the revaluation cycle from five years to three years, which will reduce the lag between the date at which the market value is calculated and real-time market conditions for business premises.
Alex Rowley spoke about simplicity in the system, which could lead to much fewer appeals if there were better explanations as to how revaluations were carried out. He also talked about recruitment and retention of assessors. If the cycle is to be reduced, we need to have adequate people in the system who will provide the valuations required. That means ensuring that people are trained, and that we treat those who carry out the work properly so that we can retain them. Many speakers welcomed the reforms to the appeals system.
As Sarah Boyack said, the bill could have engaged further with the current struggles on our high street. It is also a missed opportunity to examine ideas for local devolution, and the scope of rates relief to drive up things such as environmental standards—Sarah Boyack talked specifically about district heating systems—employment standards and the real living wage.
I am sorry, but I think that I am in my last seconds.
“The retail sector needs urgent action to protect these essential jobs which are a key part of our communities. Business rate reform is a central part of this, but a fundamental review of support for the sector is needed if we are to save our high streets from further decline.”
I start by echoing the initial comments of my colleague Murdo Fraser expressing frustration at the truncated time that has been given to the debate. Although there have not been many members in the chamber, a lot of people are interested, and it is a very serious piece of legislation that affects a lot of people.
Moving on from that, I thank the committee clerks for their work on the stage 1 report, as well as my fellow committee members, James Dornan, Sarah Boyack, Annabelle Ewing, Kenny Gibson, Andy Wightman and my good friend Alexander Stewart, who spoke with his usual passion.
The rates system is fiendishly complicated, archaic even, ludicrous at times, and difficult for most people to comprehend. As the FSB said in evidence, only about two fifths of business owners believe that they understand how their rateable value is calculated. That the system has been in need of a shake-up for a long time is not in doubt. However, the bill does not do that. It is a missed opportunity.
True to form, the Government set up a review, which means that it can blame someone else—in this case, Ken Barclay. Unfortunately, the mild-mannered Mr Barclay had his hands tied by a very narrow remit, which told him to make recommendations that were revenue neutral. It is my belief that that instruction led his team to make their most controversial recommendation, on independent schools—though they would deny that.
Well, he was told to balance the books. That is a fact, and it is my view that it led to the recommendation.
Much of the bill is not controversial. [
.] It is sensible, even.
There are some good ideas in the bill: changing revaluations from every five to every three years; reforming the appeals system; making reforms to close a known tax avoidance tactic for those who own holiday homes, which can be used to avoid paying any local tax on the property; introducing the business growth accelerator, which will reduce the rates bills of growing firms; and making those who conduct commercial activity in parks liable to pay business rates. However, there is nothing about dealing with the large business supplement which, as Murdo Fraser pointed out, puts businesses in Scotland—
Dear me, dear me. We will have to see the entire budget to answer that question, and we will have to see what the Government is doing to councils and whether it will slash their budgets again.
There is another missed opportunity to do something about high streets, which is something that we could consider at stage 2.
I said that much of the bill is uncontroversial, but one section has proved anything but, and has attracted the most comment. That is, of course, the section that takes away reliefs for independent schools. Liz Smith spoke with great authority on the matter. Out of a total of 367 submissions, more than 300 were on the issue of the taking away of rates relief and most of those came from concerned parents, teachers and pupils. We as a committee took evidence and we even visited the independent school George Watson’s College, in Edinburgh. However, the die was cast on the rates relief removal issue before anyone contacted us, before we heard a word and before we stepped across George Watson’s impressive portal.
Parties have positions, which means that some people just do not like the idea of parents having the choice to pay for their children’s education. However, I prefer to go with the evidence, which was overwhelmingly that independent schools are charities, that all charities benefit from rates reductions and that to meddle with that arrangement is meddling with charity law. How can we attack one section of the charity sector without looking at the whole sector? It is a policy born of prejudice and spite. The Scottish National Party has not gone quite as far as Labour, with its aim of abolishing all independent schools, but removal of rates relief is the thin end of the wedge.
I did not know a great deal about the independent schools sector before scrutinising the bill, but what I found was a sector that is proud of its charitable status, proud of its work to widen access to its schools’ facilities, proud of helping the disadvantaged and proud of having schools that are part of their communities. I visited Hamilton College in my region, whose building is that of the former Strathclyde teacher training college. Hamilton College is not a fabulously wealthy institution and, from what I could see, many of its facilities lag way behind those of schools in the state sector—elitist it is not. However, Hamilton College takes its charitable status very seriously, not to avoid paying rates but as a mission. It rents out its facilities and has a pool that swimming icon Michael Jamieson uses for his swimming academy. He is elite, but he is not elitist. Do we really want to put that type of endeavour at risk? As we have heard, the Office of the Scottish Charity Regulator made some damning comments about the bill’s proposal.
There was a proposal to make one exception to amending the status of independent schools and it involved specialist music schools. However, there is only one such school in the sector: St Mary’s Music School in Edinburgh. There was no logic to that proposal and I wonder what or who lay behind it.
There will be amendments at stage 2. We are open to ideas. We will work with other parties and outside organisations to improve the bill. We will work with the minister, if she is willing to be flexible.
I applaud and thank the members who have defended the timescale given to this critically important debate. As somebody who has been heavily involved with the bill, I believe that the more time given to it, the better.
Quite a number of points have been raised in the debate, but I will try my best to get through them. However, there is an open invitation to other parties to discuss any element of the bill in advance of amendments at stage 2.
James Dornan, the committee convener, referred to the broad welcome for three-yearly cycles. That in itself will resolve a lot of the challenges that we see in the appeals system. To address a point that was made by both James Dornan and Alex Rowley, I say that we need to both solve the appeals challenges and ensure that assessors are as well supported as possible. That is why we included £2.5 million in this year’s budget to go directly to assessors; that was the figure that they identified as the support that they needed this year and which they welcomed.
Murdo Fraser mentioned the business desire to see a tone date here that is in line with that of the rest of the UK. There are questions around the tone date for the rest of the UK because of the prorogation of Parliament, although I think that the bill to set the tone date there at 2021 is back in play. However, assessors were clear with us, and I believe that they were clear with the committee, that if we want to deliver the bulk of the Barclay recommendations and get things right, we need the timescale that is being proposed.
As I said in my opening remarks, the provisions are not about charity law or the important role that independent schools play. Liz Smith spoke about the financial impact, but that was assessed in the business and regulatory impact assessment.
It was included in the BRIA. I find it difficult to accept that the magnitude of change that has been identified would be sufficient to lead to a mass exodus of pupils. The impact of our proposals is equivalent to a 1.3 per cent increase in current average fees. That is a small increase compared to the average yearly fee increase of 4 per cent. That is why the financial memorandum is as it is—we do not believe that the policy change will result in a mass exodus of pupils to the public sector.
On any potential movement, some of the calculations that have been flying around use the average cost of a school pupil, whereas they should use the marginal cost. In the majority of cases, the marginal cost of a pupil moving from the independent sector to the state sector would be zero. Even if 3 per cent of pupils were to transfer, we do not accept the suggestion that that would leave the policy revenue neutral. The financial impact has been considered through the BRIA.
I will move on to the other points that were raised. Sarah Boyack talked about the importance of guidance, and I agree with her on that point. I will endeavour to provide the committee with as much detail as possible for scrutiny. That will start with the commitment that I have made to provide details on illustrative appeals.
Sarah Boyack also asked about the small business bonus scheme, because the Barclay review called for a review of the effectiveness of the scheme. It called for that review to commence on 1 April 2020. We are ahead of the game here: the contract for the independent review was awarded to the Fraser of Allander institute in the summer. The aim of that review is to evaluate the impact of the small business bonus scheme and whether it can be better targeted to support local investment, employment and growth. It is set to report its findings in 2020.
I do not want to sound like a stuck record, but the minister represents a constituency that contains tens of thousands of acres of land owned by the aforementioned Sheikh bin Rashid Al-Maktoum—one of the richest men in the world—who is eligible for the small business bonus scheme. Notwithstanding the review, does she agree that it is ridiculous to exempt some of the richest people in the world from paying a modest contribution to Highland Council?
Incidentally, every so often he is my temporary constituent and—[
The point is well made and I do not dispute it. That is why we have committed to the review of the small business bonus scheme. The purpose of the scheme is to ensure that small businesses can grow, develop and invest. We want to ensure that the scheme is well targeted. That is why we have contracted an independent organisation to look at its effectiveness. I look forward to receiving the review’s recommendations and implementing those that we think appropriate.
In light of the time, I will move on. There has been some talk of devolution. We have made moves to devolve elements of non-domestic rates to local authorities, including the empty property relief. However, it is worth reflecting on the initial comments that were made to the Local Government and Communities Committee by the Convention of Scottish Local Authorities. COSLA welcomed the commitment that the Scottish Government made during consideration of the last budget bill to develop a fiscal framework. COSLA’s view is that non-domestic rates should be part of a discussion around local fiscal empowerment to help shape a wider, more far-reaching transfer of powers. However, it also accepted that we have started that process, which is good. I look forward to the other recommendations from the Green Party, all of which I will consider.
Liam McArthur mentioned the interaction with regulation and short-term lets. Those are two very different pieces of work and it is important that we do not conflate those issues. That work might help us reach a shared outcome on short-term lets, but the issue of taxation is very different to the issue of regulation.
Joan McAlpine focused on the current non-domestic rates regime and identified that, in Scotland, we have the most generous rates relief package anywhere in the UK, with more than 90 per cent of properties paying a lower poundage than that in the rest of the UK this year. That indicates the value and truthfulness of the comments that I made at the outset. The Government firmly believes that a strong economy with a growing competitive and innovative business community is essential to supporting jobs, income and our quality of life. The bill will help us to get closer to that ambition.