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You make an important point. There is a common misunderstanding about the nature of a percentage system as compared with a flat-rate, or tiered flat-rate, system. It is important to recognise that a tiered flat-rate system can be designed in such a way that it is more progressive than a percentage system. A percentage system involves the visitor being charged a percentage of what they pay for the accommodation, but it is perfectly possible to design a tiered system that, in effect, charges a higher percentage on more expensive stays and a lower percentage on cheaper stays. Therefore, the idea that a percentage system is inherently more progressive is a misunderstanding.

With a percentage system, an operator who runs a small bed and breakfast might have different rates for different rooms at different times of the week and at different times of the season, on each of which they will have to calculate a percentage. They will also have to take out the non-accommodation parts of that. With the best will in the world, it is hard to see how that would not be subjective, given the cost structures, charging mechanisms and so on. There is also the issue of third-party sales. That takes us into a complicated world of multiple variables.

A small operator who has two, three or four rooms will have a million other things to worry about without having to get their head round all those calculations. Having a fixed rate for any given type of accommodation involves the operator multiplying how many rooms were filled by the rate to get the number. A fixed-rate system involves a much easier process.

We are trying to change as little as possible, because the more we touch, the more we risk breaking something or creating unintended consequences. It would potentially become a bit complicated to put in place a scenario where we referred to inflation rates and said, “Based on this scenario, you can do this, and based on that scenario, you can do that.” We want to avoid a situation where automatic uprating leads us into a world where we get some strange and non-rounded numbers being used, because that would not be helpful. We are giving some thought to what that should look like.

I imagine that, in the real world, local authorities will look at the matter and uprate their charges every three or four years, as they do with other charges in their control. We are open to a simple mechanism that allows that to be a straightforward process that they can implement. We need to allow some running time for businesses to be able to change systems and understand what is coming down the track, but it absolutely would not make sense for that to be an 18-month period, which would take us from one financial year into the next one and the one after that.

I am delving into the technicalities here, but officials will keep me right. The bill will allow a local authority to have different charging approaches in different parts of the local authority area or for different types of accommodation, but it would not allow a situation in which the same accommodation unit was charged on both bases at the same time.

Potentially, yes, but the same accommodation provider would not be charged on both bases.

That is correct, but it is important to recognise that that would require the council to decide that that was a wise thing to do.

There has been engagement with stakeholders, as you would expect, to pull together what is in the financial memorandum. We have indicated that there are a number of areas where there will be amendments at later stages, and that some of the parameters are still to be defined as we hear evidence from different stakeholders. As you would expect, the financial memorandum will evolve. There has been engagement but, at this point, the memorandum reflects our best appraisal of the numbers. They will change, depending on how the parameters that are in the bill change.

10:45

I will let officials speak about the technical aspects, but, as I indicated earlier, a business would not find itself in a position in which it would be subject to both simultaneously.

At this point, I will bring in a lawyer.

Like everything in the process, there are challenges, which we need to address based on evidence. I see the challenges that it presents. Officials can keep me right, but if I am not mistaken, charges for the per-person, per-night option would be based on the accommodation’s capacity rather than the number of people who take it up. Is that right, David?

Yes.

Yes, and, as I said earlier, we can get too concerned about that. If a chain hotel is on a percentage system, frankly, the operator will not care what the guy next door is doing. Likewise, the guy next door will not care what the chain hotel is doing, because he will simply be following the process. A visitor who books in will be charged what they get charged, based on the mechanism. I think that we can get too concerned about things not all being the same everywhere.