Official Report 317KB pdf
Council Tax (Discount for Unoccupied Dwellings) (Scotland) Regulations 2005 (Draft)
I welcome back members of the committee after a relatively short break, particularly for those who had the stamina to stay until the end of yesterday's meeting, which produced the unique effect that David Mundell applied to join the National Union of Rail, Maritime and Transport Workers. Whether Bob Crow will accept his application remains to be seen.
Thank you for the invitation to come along and deal with this piece of business. Nikola Plunkett and Gillian Russell are with me to answer members' questions. I understand that the committee has another lengthy agenda on railways this morning, so I will keep my remarks to the point.
I welcome the measure, for which I have campaigned for more years than I can remember. However, I have a few technical questions for the minister. Is there any specific provision for crofts? Especially in the Western Isles, but also in other parts of the crofting counties, the children of many families that have a croft have to move away, usually for economic reasons. However, in most cases, they are reluctant to sever the connection. I have raised the issue of second homes over the years and have generally supported the measure, but occasions of such support have usually been followed by a wave of virulent opposition from crofters and others who do not wish to sever their connection and who feel that the imposition of the full council tax would be a burden. I have argued in the past for specific provision for crofts. Do the regulations make such provision?
The short answer is no; there is no provision for crofts. Forgive me, but I am not clear whether Mr Ewing is arguing for a special discount for crofters per se. If that is the precise point, the short answer is no.
I was not asking for specific provision, but rather for local authorities to be entitled to exercise discretion and introduce a specific provision, not just for purpose-built holiday homes, but for crofts.
Give the minister a chance to answer, Fergus. I suspect that we are touching on issues that relate to the reserved matters of income tax and potential income tax evasion. However, I will allow the minister to answer.
I appreciate the importance of the issue but, fundamentally, income declaration is a matter for the individual or business concerned and the Inland Revenue, which is the appropriate tax authority. Mr Ewing will know from his intimate knowledge of the Scotland Act 1998 that those powers reside at Westminster rather than with us. If there is a significant problem to which local authorities wish to bring our attention, we would be happy to pass on such representation to the Inland Revenue; I am sure that Mr Ewing would expect us to do that. The Inland Revenue is the appropriate authority to deal with matters relating to personal taxation and business taxation.
Purpose-built holiday homes are one of the classes of dwellings that are referred to in paragraphs (1) and (3) of regulation 5. Is it the case that if a purpose-built holiday home were to be granted exemption, its owner would automatically be liable to pay business rates?
Do you know the answer to that, Nikola?
That is the case if the home is rented out for 140 days or more.
A person is entitled to move over to the non-domestic rating system if their property is rented out for 140 days or more. I think that that is a matter for local authorities to establish. Someone would have to be able to prove to their local authority that they were letting out their property for that length of time—perhaps by demonstrating that it was advertised on a tourist board website, for example.
I thought that there was such a classification, but I could not remember the relevant number of days, so I am grateful to you for that information. However, my point was not about the precise definition; I wanted to check that owners of such dwellings would pay council tax or business rates and that they would not fall between two stools and end up being exempt and not having to pay either. I presume that the thoroughness of the regulations means that that could not possibly occur.
By working with local authorities and local assessors, we would ensure that that was not the case.
My final question is on the financial effects. My interpretation of the Executive's note and the minister's introductory remarks is that the extra income that would be yielded through any decision to remove the existing discount for second homes would accrue to local authorities as genuine additional revenue. There are no ifs or buts about that.
That is correct.
I am grateful for that. From reading the explanatory note and the associated documents, it seemed to me that there would be a delay in the process. Can you explain the mechanics of when—in what financial year—the local authority would have access to the extra yield, how the money would be spent and by whom? I understand that we have the common aim of using that extra income—which, if the removal of the discount were used to its maximum, would amount to about £3 million a year for Highland Council—to provide housing for young people so that they would have a better chance of being able to stay in their own area. Are there any practical impediments, procedural hurdles, difficulties or obstacles that could delay the achievement of that objective, which I believe is shared by my party and your party?
I agree with you on the broad policy, of which I imagine that the Parliament as a whole would be entirely supportive. Constituency members who represent the affected parts of Scotland have all made representations on freeing up cash by such means to help local authorities to make further provision on affordable housing.
The regulations will come into force on 1 April. Given the fact that local authorities will set their council tax levels prior to that date, will the regulations actually come into effect from the financial year 2006 onwards, or will they be applied for the forthcoming financial year?
I would have thought that they would be effective from this financial year. The regulations have been well trailed, and Andy Kerr announced them last summer. The committee will recall that it was felt strongly that, if the announcement was made in time—which was last summer—local authority finance chiefs would be able to make recommendations to their members to enable them to make decisions in time. I hope that the option of using the regulations will be available now, in time for the council tax setting process that local authorities are entering into.
That is useful to know.
Can the minister confirm that local authorities that think that they can have the additional capacity to raise a full council tax on second homes and then use the money in any way that they wish will be disappointed?
I am afraid that they will be disappointed. We have made that abundantly clear from day one, following representations from every political party in the Parliament about the availability of social rented, affordable housing. That is why we have followed that particular avenue.
My second question is about the electoral representation of second-home owners. There appears to be uncertainty about the ability of second-home owners to vote in two council elections when they are registered at two addresses. I am sure that you share my view that it is not appropriate to have full taxation without representation. Will a second-home owner be able to register and vote in both council areas in which they have a home?
No, they will not be able to register and vote in the area in which they have their second home. However, where they have their second home, they will receive the considerable benefits of being in that area in terms of the services that are provided by the local authority. The argument that your colleague Mr Monteith has made steadily since last summer does not hold any water.
At least you are making that clear. The matter has been unclear.
I welcome the proposal that is before us, but I have some questions about how the money will be used.
It will not preclude it. However, under the current legislation and the regime that is operated throughout Scotland, registered social landlords are the primary mechanism for the delivery of new housing stock. That is the route that we have gone down.
I understand that, but the terminology suggests that the money will be ring fenced to go through only registered social landlords. I want to ensure that the guidance makes it clear that, if councils cannot get registered social landlords on an adequate scale in their areas, especially in rural areas, they might use the money to build homes themselves. I would like that to be clear in the guidance.
I would be happy to consider any such examples, but I am not familiar with any area in rural Scotland in which there is not a registered social landlord who would meet the objectives that you and I share of building high-quality, affordable housing for local people. That is what we have sought to achieve across rural Scotland and we will follow that aim.
I might write to the minister with some examples.
Nikola Plunkett might be able to answer the specific question, but we have certainly put in place arrangements that will ensure that the systems that monitor the resulting additional spending are transparent to ministers and Parliament.
Paragraph 19 of the guidance stipulates that payments should be made to the affordable housing revenue account.
That is good, because it means that there will be no effect on council tax issues; the revenue will be contained within the housing account and no one will be able to claim that the council tax is being kept artificially low because of such activities.
The maximum additional income that could be raised if all Scottish local authorities chose to reduce the discount to 10 per cent is around £24 million. As Mr Ewing mentioned, Highland Council could make the greatest gain, if it wished to do so, at approximately £2.6 million.
The local authorities have told us that there will be cost implications with regard to the software and we have invited them to tell us exactly what those implications are. As yet, no one has got back to us so it is a case of watch this space. We should be able to update the committee at some future point.
I hope that COSLA will be encouraged to ensure that local authorities throughout the country come up with similar software rather than all of them trying to invent their own process for their own area.
You would expect me to adhere to the principles of efficient government and to expect that of local authorities.
Let us ensure that it is said and that it happens.
I hear you, Mr Crawford.
Will you clarify an issue regarding the additional council tax money or water charges that will accrue to Scottish Water? There seems to be a slight contradiction between paragraph 12 and paragraph 13, and I hope that you can confirm that paragraph 13 will take precedence. In many parts of Scotland, problems have arisen in relation to restrictions on development as a result of lack of sewerage infrastructure. Could money that is accrued from the additional revenues be used to deal with some of those issues? That seems to be implied by paragraph 13, but not by paragraph 12.
Paragraph 12 says that when discounts reduce, the water discount will also reduce. It means that extra money will go to Scottish Water as a result of the changes. Scottish Water has a revenue cap, therefore it will have to use that money to reduce charges to customers.
Scottish Water will not be able to use the additional revenue to support infrastructure schemes, but councils will be able to do so.
Scottish Water is required to use the money to reduce charges.
Right. That might be a question for the Minister for Environment and Rural Development.
You got an answer, but perhaps it was not the one you wanted.
The key point that I wanted to draw out was that it will be possible to use the money on the infrastructure.
In relation to the money that will be accrued, Nikola Plunkett used the phrase
It is for the local authority to decide whether new homes require new water and sewerage infrastructure.
If building takes place in an existing development, where there are already water and waste water facilities, there is no need to install any new facilities there. The expression "can be used" takes that into account.
So the phrase
That is correct.
I apologise for missing the minister's earlier remarks. I am afraid that ScotRail still has a job to do.
Our understanding is that an area-based system would be used.
We assume that the local authority would choose to use postcode areas or electoral wards. Such decisions will be at the discretion of the local authority. In any event, discretion will be at an area level.
If a local authority designates an area with respect to the removal of a current discount, would an appeal procedure be available for individuals in that area? I am thinking of parts of Scotland with traditional but-and-ben-type holiday homes, rather than the more affluent, nouveau riche type of holiday homes. I am a bit worried that everyone might get caught in the one situation.
I understand Tommy Sheridan's point. I ask Gillian Russell to comment on the legal aspect of that question.
There is no legal appeal but, within a local authority area, it would be for the voters to exercise a political sanction, ultimately.
If one area within a local authority area is designated for a loss of discount whereas another area in the same local authority area, where there are some second homes, is not designated, that would appear, prima facie, to present a legal basis for appeal against the authority's decision on the basis of discrimination. Has that been looked into?
In the short term, local authorities will have to consider the issues and decide what they want to do. It would be dangerous for me or any of my officials to second-guess what local authorities will do this year and to get drawn into complex areas of hypothetical legal judgment. Local authorities will make judgments on how they wish to apply the discount, if at all, using the powers that they will have if the order is agreed to. We will keep a close monitoring eye on what happens. The principle that is being applied is the devolution of the powers to local authorities. That is what we all sought to achieve, on a cross-party basis. It would be wrong to start second-guessing at this stage what local authorities will wish to do with their powers.
I appreciate what you are saying, and I recognise the cross-party support for the thrust and the principle of the proposals. I am merely trying to examine some of the possibilities that, it is to be hoped, will not occur, although they could occur.
I understand that.
On the potential generation of extra revenue, you mentioned £24 million as the top level of the estimate for Scotland as a whole. You then referred to Highland as, potentially, the top gainer. What is the situation for the more urban authorities, in particular Glasgow?
We do not have the relevant table with us, but we could provide it very quickly in a letter. Indeed, we could get it to the committee today, if that would be helpful.
That would be useful, minister. Thank you very much.
I thank the committee for its consideration of the issue. I do not have anything to add to what has been said. In my opening remarks, I made three points about why the measure has been taken forward, and there has obviously been quite a lot of discussion over the piece. As Mr Ewing fairly said, some of us have discussed the matter for a long time. I rest at that and leave the matter for the committee to consider.
I am delighted to speak in favour of the motion, which seeks the committee's approval of the draft Council Tax (Discount for Unoccupied Dwellings) (Scotland) Regulations 2005 because, as many members have said, many of us have looked for such a motion for a long time.
Recently, a young couple who attended a surgery of mine in Badenoch and Strathspey said that they could not afford to continue to live in the area because they could not find a house that they could afford. They were forced to leave the area despite the fact that both held important jobs that were useful to the community. They are exactly the kind of people whom we hope would be able to stay in the area.
At least I find myself agreeing with something that Fergus Ewing said. Indeed, it is important that he put his view of the situation on record, because the matter is not always portrayed in such a way. Many people who own second homes contribute enormously to the communities concerned and we must rebut the perception that second home ownership is a bad thing per se.
Given that the Tories have not controlled a single council since local government reorganisation, Mr Mundell's proposal is an innovative way of trying to create a Tory revival.
Thanks, convener. Members will recall that in 1996 the Tories' last attempt to gerrymander the councils backfired spectacularly when they lost through the reorganisation plan even the councils that they had formerly controlled. David Mundell will have to go back to the drawing board if he wants to secure local authority control by any Conservative administration.
I think that you are a bit wide of the mark, Tommy. Please return to the subject of the draft regulations.
Will the extra revenue generated by this measure come into the ambit of the discussion about the potential loss of revenue from an Executive-determined policy to abolish council tax? That abolition would be widely welcomed throughout Scotland.
That is a separate debate.
I welcome the draft regulations because, as everybody said, the way in which they are constructed means that the moneys generated will go into much-needed affordable housing. I agree with everything that Iain Smith said. He spoke about waiting lists in the north of Fife and we have exactly the same situation in my Stirling constituency. The regulations are needed all over Scotland.
Unlike in Fergus Ewing's constituency, holiday homes are not an issue in Glasgow Springburn, although we are working towards them.
I do not have a lot to add, but I am grateful for all members' points. Our overall and abiding interest is in the creation of more affordable housing in the rented sector for people in our communities who need it. I agree with those members who said that the draft regulations are only part of the solution. That is why we put so much more additional resource into affordable housing throughout Scotland in the spending review that has just concluded. The draft regulations are part of the solution, along with a number of other mechanisms and resources that we have been able to deploy because of the spending review.
The question is, that motion S2M-2198, in the name of Tavish Scott, be agreed to. Are members agreed?
No.
There will be a division.
For
The result of the division is: For 8, Against 0, Abstentions 1.
Motion agreed to.
That the Local Government and Transport Committee recommends that the draft Council Tax (Discount for Unoccupied Dwellings) (Scotland) Regulations 2005 be approved.
Agenda item 2 is a briefing on the evidence taken to date on the UK Railways Bill. Our adviser will give us his initial views on that evidence. We agreed previously to take the item in private.
Meeting continued in private.
Meeting continued in public.
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