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As I have said, the Government’s position is that, this year, we are setting the tax at the same rate as the rest of the UK, so that we get that BGA baseline. The decisions on the tax next year will take into account all the factors that the convener and other members have raised with regard to the assessment—

We have done some work on that.

From memory, no. But, as I have said, the policy decision that has been made this year is in relation to the BGA baseline. Next year, we will absolutely consider all the factors that the committee has raised, as you would expect, when we make decisions on what level to set the aggregates tax at.

I will defer to officials on the legally permitted limits.

On the fund, it is important to recognise—officials can keep me right here—that the operators themselves benefit from the tax advantage. Many of them are signalling that they would not want to take part in the fund because, from their perspective, it does not add up commercially, even with the tax benefits that are in place. The size of the fund would reduce significantly—much more significantly than has already been indicated—with those operators not being part of it any more.

Obviously, the fund will have to be wound up at some point, because, as you have indicated, the amount of revenue coming from landfill tax continues to reduce. We have reached the tipping point whereby, if the operators are not supporting the fund any more, it starts to not be viable any more.

The fund will meet its commitments. This is a ramp-down period of up to 24 months, which will continue as the fund is wound up.

The money that has gone into—

It removes a disincentive to invest in Scotland.

Thank you, convener, and good afternoon. First, I thank the committee for arranging this session at short notice, and with an already busy schedule of business to get through in the run-up to the pre-election period.

The measures that we are discussing today are contained in the UK Government’s Finance (No 2) Bill. Finance bills are subject to an expedited timetable compared with other legislation, which has not given us much time to arrange for the consideration of this LCM.

In her budget statement on 26 November last year, the Chancellor of the Exchequer announced her intention to increase the amount of income tax due on income from property for taxpayers in England. From 27 April, the UK Government intends to separate out income from property from other types of income and increase the amount of income tax due on it by 2 percentage points. It was one of the few budget measures that was not leaked in advance, and there had been no prior consultation with the Scottish or Welsh Governments.

On budget day, we were informed that the plan was to offer the Scottish and Welsh Governments an equivalent flexibility. Both the Scottish and UK Governments agree that it is appropriate for the Scottish Parliament to give legislative consent to this measure, which amends the income tax rules contained in the Scotland Act 1998, and that is why we are here today.

Property income is defined in income tax legislation as income from rent or other receipts from estates and any interest or rights in or over land in the United Kingdom. Because it is already subject to Scottish income tax as a sub-category of non-savings, non-dividend income, the proposed change does not affect the overall Scottish income tax base. The proposal, instead, is to give Scotland a similar flexibility to the one that is being taken in England from 27 April. Under the proposals, whatever Scottish rates and bands of income tax are in place would continue to apply to income from property, but when making a Scottish rate resolution, the Scottish ministers would be able to include separate rates of income tax for income from property for Scottish taxpayers.

It is worth noting that, if the UK Government proceeds as planned and increases income tax on property income from April 2027, it will have a detrimental impact on the Scottish budget. Calculations made by His Majesty’s Revenue and Customs suggest that the changes would mean an increase to the block grant adjustment of around £42 million in 2027-28 and around £31 million subsequently. That would mean an overall worsening of the income tax net position, and, as a result, there will be a financial pressure on a future Scottish Government to use the power in order to offset that impact.

Further work is needed, but our initial analysis suggests that, if Scotland were to follow suit and increase Scottish rates by 2 percentage points, up to £32.5 million could be raised in 2027-28. That would result in a worse net position for that year by about £10 million. With that in mind, in any future discussions on the fiscal framework, we will make the point strongly that there should be no detriment to the Scottish budget as a result of the UK Government’s decision to change income tax in this way.

The UK Government’s decision to increase rates in England will result in a block grant adjustment, whether or not we consent to the additional flexibility, so my view is that it is better that we have that flexibility. I do not come here today with a proposal for how the power should be used—that is for a future Government to decide—but I recommend that we agree to having the additional flexibility.

I note that there will be keen stakeholder interest in how a future Scottish Government might use the power. I expect there to be proper engagement and thorough consideration of the wider interactions and impacts before any such decision is taken.

The position is clear, although we need to consider the matter more deeply to understand why the figure will be £42 million in the first year before dropping to £31 million in subsequent years. We think that that is to do with the way in which self-assessment works and the timing issues in that regard, but we are engaging with HMRC to get more detail on that.

In principle, you are correct. Once things have settled down, our estimations and HMRC’s estimations are broadly similar. If we choose not to raise rates by a similar amount, there will be a cost in reduced revenue for the Scottish Government.