Seòmar agus comataidhean

As I attempted to convey when I was before the committee last November, we sought to clarify the definition of

“a material change of circumstances”

in the Non-Domestic Rates (Scotland) Act 2020, and the bill seeks to further clarify what we mean by that term. That is the bill’s primary driver: it provides that clarity and certainty for the users of the non-domestic rates system.

Of course, public finances are a consideration, too, and the bill’s financial memorandum illustrates particular scenarios and the potential impact on those finances. Were that impact to materialise, it would have to be factored into how we manage our budget, year in and year out. The key point that I come back to is that, fundamentally, there is uncertainty about the outcome of appeals on the basis of a material change of circumstances, their duration and any potential impact on ratepayers or the public finances.

Effectively, the reasons that I gave for introducing the Valuation and Rating (Coronavirus) (Scotland) Order 2021 back in November apply to the bill. I am conscious that, at stage 1, we consider the general principles of legislation. When the order that was before the Parliament in November was agreed, there was recognition of the general principle of the need to clarify and provide certainty around material changes in circumstances as being clearly delineated, local and specific, and recognition of the fact that broader considerations with regard to the general economy were best captured through revaluation. As a result, we changed the revaluation process from a five-year to a three-year cycle and put in place a tone date that precedes revaluation by a single year to ensure that revaluation means that rateable values and net annual values are more reflective of the market at the time that they are introduced.

I hope that that helps to clarify the intent behind the bill.

The draft instrument is purely technical. It is intended to assist councillors in administering business growth accelerator relief.

BGA relief, which is unique in the United Kingdom, provides 100 per cent relief on new properties for 12 months after they are first occupied and 100 per cent relief for 12 months on property improvements. In order to facilitate the identification of eligible properties by councils, the Non-Domestic Rates (Scotland) Act 2020 requires that the assessor put a mark on the valuation roll to flag new and improved properties.

We keep all our reliefs under review. In response to stakeholder feedback, BGA relief has been expanded a number of times since the Non-Domestic Rates (Scotland) Act 2020 was passed. The draft instrument that we are discussing merely takes that into account and aligns the definition of new and improved properties in the act with the properties that may be eligible for BGA relief from 1 April 2022. That will enable local authorities to distinguish the properties that are eligible for the relief.

The regulations specifically clarify that property improvements include a concurrent change of use in the property and improvements associated with the installation of certain plant and machinery, including the installation of solar cells or solar panels.

Business growth accelerator relief is a flagship relief that has been praised by the business community. It was even highlighted in response to the UK Government’s recent review as a policy that should be replicated in England. I note for the committee’s benefit that the UK Government has chosen to replicate it with a relief only for property improvements from 2023. Business growth accelerator relief in Scotland has been available not only for property improvements but for new builds since 2018.

I hope that members will support the regulations.

As you will be aware, a number of factors, one of which is the pandemic, are impacting on the availability of materials. Price is one implication of that, but issues with the availability and sourcing of materials due to supply chain and logistical challenges have inhibited the deployment of the money. We are committed to constructing 110,000 houses over the next 10 years as part of the Bute house agreement and consistent with our ambitions in “Housing to 2040”. We are absolutely committed to delivering the resource necessary to realise those ambitions but, as I think the committee will understand, our capacity to build houses—and, subsequently, to spend money on building houses—is constrained by the availability of materials. Of course, that challenge is not unique to Scotland or, indeed, the UK; it is global.

We will monitor the position very carefully. As I said last week in the chamber—echoing the First Minister’s comments in the local government finance order debate—we are ready and willing to play our part in Scotland. In the broader context of the crisis in Ukraine, we have been clear about what we would like the UK Government to do with regard to waiving visas and maximising the number of people coming to the UK. Should the UK Government make any funding available to support that effort, we will of course deploy it to maximum effect to support people coming to Scotland.

That is a fair and reasonable question. With this not-so-brief guide to the spring budget revision, we have tried to provide as much context and information as possible, and as you have correctly identified, we reflect the respective practices of the Treasury and the Scottish Government. As for the potential for a more unified approach, we are happy to reflect on that.

Scott, is there any technical commentary that you would want to make?

Yes, that is correct. To touch on that point, I am confident that we will be in a position not only to ensure that we are within budget but that we are able to take that carry forward into the reserve, which was part of the budget process. That resource will be found, as I mentioned, from a stronger than forecast performance of devolved taxes and emerging underspend in some demand-led areas. As it stands, we are confident that we will not only be able to spend within our budget limit but will have that carry forward in the reserve to meet next year’s budget requirements.

The broader point that I seek to make is that we need to spend, as you are aware, and we cannot exceed our expenditure limits as set by Treasury. We have a reserve totalling £700 million. Looking at the quantum of the Scottish budget as a whole, we have that very limited space in which to land. We cannot go over. We cannot overspend and we cannot underspend beyond what we can take forward in the reserve—and I am sure that members would rightly be criticising why resource had been lost. That is an extremely challenging set of circumstances. The way that I and others have articulated it is that it is like trying to land a 747 on a postage stamp.

As we move into the latter part of the year we, then have fiscal events including the autumn budget and potentially more in-year funding announced. We then have supplementary estimates. This year, we did not have confirmation of what the supps were going to be until about three weeks after we published the SBR. That creates an incredibly challenging set of circumstances in which to operate, and that compounds the existing challenges that we are all aware of, which meet any government or organisation managing its finances towards year end.

I take the point that you make about needing to provide as much clarity as possible, and I am happy to reflect on that. As I hope the way in which we have presented this information would indicate, I am committed to doing as much as possible to aid transparency and understanding, and I recognise the points that have been raised.

Do you wish to add anything, Scott?

This is an important point, and I will ask Scott Mackay to come in on it.

I would be happy to provide you with an up-to-date picture. As Niall Caldwell said, that is a conservative estimate. I would be happy to give you a rounded picture of the support that has been provided, if that would be helpful.

It expires at the end of next year.