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We have set out the three asks in the context of the fiscal framework review. Should there be opportunities for further devolution of tax beyond that, we would, of course, want to explore those. A topical example is a potential windfall tax, the possibility of which has been raised in exchanges in the chamber.

If opportunities for further devolution of tax were to arise, we would want those opportunities to be taken, as we believe that all tax powers should be in the control of this Parliament. However, our commitment, which we prioritised in the manifesto, was that our key focus in the fiscal framework review would be the three taxes that we mentioned. The precise nature of the operational arrangements will be contingent on the outcome of that.

You identify a tension that exists between administrative complexity and policy impact. The ability to take decisions on the taxes that I have referred to—especially national insurance and VAT—offers the potential for significant policy impact. I am not saying that that is not the case with other taxes. I appreciate that, with the cost of living crisis and the events that are unfolding in eastern Europe—which the framework predates—fuel duty has taken on an added dimension.

My key point is about the issues that we could address if we had powers over national insurance and VAT, examples of which I gave earlier: the marginal rate that exists between the higher Scottish rate and the upper earnings limit, and the implications of VAT for the deposit return scheme and for our work on decarbonising heat in buildings. You will be aware of some of the challenges that exist with regard to VAT in relation to the refurbishment and renovation of properties. There are areas where control of those taxes could be impactful.

There is also the question of going in with a clear set of asks and objectives with regard to further devolution of tax policy in the context of the fiscal framework review.

My final point, which relates to a point that Mr Johnson made, is to recognise that the taxes in question are significant revenue-raising taxes. If we had a broader suite—or basket—of taxes, we would be less reliant and exposed to volatility on income tax.

I am grateful for the opportunity, convener. Good morning and thank you for the opportunity to participate remotely.

The aim of the bill is to ensure fairness for all ratepayers. Members might recall that, when I gave evidence on 16 November 2021 on the Valuation and Rating (Coronavirus) (Scotland) Order 2021, I commented that subordinate legislation could apply only to the period beginning on or after 1 April 2021 and that to go back further would require primary legislation.

The bill builds on that order and extends similar provisions to matters arising on or after 2 April 2020 by ruling that the effect of coronavirus on or after that date cannot be considered when calculating a property’s rateable value or net annual value in the current valuation roll. The significance of that date is that it aligns with the date from which the definition of

“a material change of circumstances”

was clarified by the Non-Domestic Rates (Scotland) Act 2020.

The bill provides ratepayers with clarity and consistency on the policy.? Typically, the term “material change of circumstances” has been used to reflect either physical changes to a property, such as an extension or demolition, or certain major changes in a specific area, such as the tram works in Edinburgh. The intention of the change in definition was to reflect recent case law and the move to a three-year revaluation cycle by restricting the circumstances in which general economic factors can be regarded as being relevant to a change in valuation.

Since the start of the coronavirus pandemic, more than 40,000 non-domestic properties have been appealed on the basis of an MCC.? Given the timing, it is likely that those appeals were lodged as a result of the pandemic. The Scottish Government is of the view that economic changes to rateable values that have resulted from Covid-19 should be considered not under the MCC provisions but at revaluation, at which point the impact across all properties will be taken into account.? That view, which is shared by the United Kingdom and Welsh Governments and in Northern Ireland, ensures fairness to all ratepayers by ensuring that any effects of Covid-19 are considered for all properties at the next revaluation in 2023, rather than through the use of the MCC provisions.

The bill under discussion provides that, when net annual values or the rateable value of any property on the 2017 valuation roll are calculated, no account can be taken of any matter arising on or after 2 April 2020 that is directly or indirectly attributable to coronavirus. It does not apply to changes to the physical state of a property or whether a property should or should not be included on the valuation roll if, for instance, someone had started working from home as a result of the pandemic.

Although appeals were submitted for more than 40,000 properties in 2019-20, that is still less than a fifth of all non-domestic properties in Scotland and, as the Federation of Small Businesses has previously pointed out, there are not many small businesses among them. That situation might reflect our generous existing support package for small businesses, but the likelihood is that it also reflects the fact that well-resourced and professionally advised property owners and occupiers are more likely to know about the material change of circumstances provisions and to have appealed as a result.

Meanwhile, a number of large and multinational firms, which have been largely unaffected or have even been successful during the pandemic, have made appeals in relation to their properties. As was discovered in the evidence-taking sessions on the order, there is a disconnect between how Covid has felt to businesses and how it has impacted rents in the commercial property market. That issue is hugely complex and the outcome is uncertain, so it cannot be assumed that those appeals will be successful or their outcomes fair.

We believe that the right time for reflecting market-wide economic changes is at revaluation. Following the independent Barclay review of non-domestic rates, we have strengthened revaluations to ensure that they more closely reflect market circumstances. First, we have increased the frequency of revaluations from five to three years and reduced the time between the tone date and revaluation, and secondly, with the support of your predecessor committee, we delayed the next revaluation by one year to 2023 and also brought forward that commitment to a one-year tone date, which will be 1 April 2022. Both measures have been universally welcomed by the business community in Scotland.

Covid-19 has had a major impact on the economy, and we responded swiftly and on an unprecedented scale to support businesses throughout the pandemic. We introduced 100 per cent retail, hospitality, leisure and aviation relief in 2020-21 and were the first Government to confirm a full extension of that relief for 2021-22. In 2022-23, we responded to a key ask from the business community to prevent a cliff-edge return to full liability on 31 March 2022. For businesses in the retail, leisure and hospitality sectors, we are continuing relief at 50 per cent for the first three months of 2022-23, which will be capped at £27,500 per ratepayer. Since the start of the pandemic, businesses have benefited from £4.5 billion of support, including £1.6 billion of Covid-related reliefs. We acted quickly to support the business community when it needed it most, and we have continued to support businesses through the pandemic.

Before closing, I will highlight one parallel development. As I have stated, more than 40,000 appeals were lodged following the outbreak of the pandemic. When the committee considered the previous order, it raised with me the issue of workload around those appeals.

Appeals that were lodged between 1 January 2020 and 31 March 2021 currently have a disposal deadline of 31 December 2022, which is the date by which all appeals lodged between those dates require to be heard. Valuation appeal committees are required to provide appellants with a minimum 105-day notice period, which means that any request by one party to an appeal for referral to the Lands Tribunal for Scotland, as often happens in complex cases, would have to be made by the end of June.

Although the bill will provide clarity for ratepayers, I have been clear that it does not remove the right of appeal. It will be for appellants to decide whether they want to pursue or withdraw their Covid appeals, but as I am sure the committee will appreciate, appellants might not feel that they are in a sufficiently informed position to take such a decision until Parliament has finished its scrutiny of the bill. For that reason, we intend shortly to introduce legislation to extend the disposal deadline by a further year beyond 31 December 2022.

In closing, I return to my opening comment that the bill seeks to ensure fairness for all Scottish ratepayers while maintaining the integrity of the non-domestic rates system and the stability of Scottish public finances.

I look forward to any questions that the committee might have.

That consequential was contingent upon the passing of the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021, which has happened since I was most recently before the committee to talk about this matter. That funding is included and committed as part of the budget process for the forthcoming year.

We have undertaken not to wait but to provide support in advance, so we provided the £375 million of support in relation to omicron to which I referred. The key point that I come back to is that, overall, our spending on business support equates to £4.5 billion, which is over £400 million more than we have received in consequentials. Therefore, even including the money to which you referred, in supporting businesses, we have gone above and beyond what was allocated to us via UK consequentials. The most recent element of that was distributed through a tranche of £80 million to local authorities, which I touched on.

We have not hung about. We have been working to get the money to businesses as and where it is needed through a range of methods, whether by grants and support for specific sectors, such as wholesale or taxi drivers, or through discretionary funding for local authorities that they can use to support businesses in their areas in the way that they think is most appropriate.

To be clear on that, Mr Coffey, as I understand it, the consequential was contingent on the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill being passed. It has now been transferred and incorporated into our existing spending plans.

The point that I am making is that, overall, it is important to look at the money that is made available to us via the Barnett formula in a broader context. With Barnett, you have to look at what the net amount is. Sometimes, a particular budget line can be identified as increasing but the net amount is reducing because of reductions in other budget lines. It can create a complex set of circumstances in which to operate.

Although that money has been received as part of the budget process, the key message that I want to convey is that we went above and beyond what we received in business support consequentials.

As I have said, we have spent £4.5 billion. The money that we have delivered is for a range of measures, from tailored packages of support for particular sectors to the 100 per cent RHL relief that we have had in the previous financial year and this financial year. We are delivering 50 per cent RHL relief for the first three months of the next financial year to avoid the cliff edge, we have delivered support for local government, and we have delivered £80 million for discretionary support. We have delivered in a range of ways—rates relief, sector-specific grants and discretionary funding for local government—and gone above and beyond the resource that was allocated to us, including the MCC consequentials to which you referred.

We will all agree that, given the unpredictable nature of appeals, there is no guarantee that any outcomes would be fair. The Scottish Government’s approach to supporting businesses over the past two years of the pandemic has sought to focus on delivering support to where it is most needed. As I have stated, we have provided in the region of £4.5 billion of support to businesses in Scotland, which is more than £400 million more than we received in consequentials from the UK Government, and as recently as December, we announced a £375 million support package in the wake of the emergence of the omicron variant. That has been delivered in tranches, the last of which was £80 million in discretionary support, which will be available for local authorities to administer in their own areas. That allows for a much more bespoke, tailored and needs-based approach to business support. The issue with MCC appeals is not only their unpredictability but the timescales involved, and our focus is on getting support to businesses as quickly as possible.

What we are doing, ultimately, is clarifying an existing provision in the 2020 act. The previous order sought to clarify what that provision meant in practice; what we are doing with this legislation is, effectively, what we could not do through subordinate legislation alone, which is to put the date back a year. It is important to note that the date that the legislation refers to—2 April 2020—is the date when the power in the 2020 act came into force. Of course, there was also an opportunity during the passage of the 2020 act to consider its policy intentions. The order and the bill are designed to provide greater clarity and certainty, which I assume is something that would be welcomed.

The question of resource helped to inform the decision that I referred to in my opening statement on the extension of the disposal deadline through the legislation that will be introduced shortly. That will provide opportunity for appellants to consider the progress of this bill through Parliament and decide whether it should inform their future decisions. It also helps to address the issue of pressures faced by assessors.

We are taking that approach in the subordinate legislation that we will introduce to allow more time for appellants and users of the system to consider their position in the light of how Parliament progresses the bill. Obviously, that has the knock-on effect of helping to support assessors and free up resource.

I recognise that we have a tone date in two weeks’ time and that there is a revaluation process under way. I take your point regarding assessors’ resource and capacity, which is why I took the opportunity to inform the committee of the legislation that will be introduced. As I said, there are two aspects to the approach, one of which will be supporting assessors’ capacity management.

That is a fair question, Mr Griffin. Of course, we have to recognise the independence of assessors and valuation appeal committees and, ultimately, how they choose to manage their workload and proceed is a matter for independent assessors.

Where we have sought to help is by extending the deadline by one year so that there is no longer a statutory requirement for disposal by the end of this year. As I said in my opening statement, given that 105 days’ notice is required for citation, a deadline of 31 December 2022 would mean that a case would need to be referred to the Lands Tribunal for Scotland by the end of June. The deadline might be 31 December, but we are only three and a half months away from the end of June, which creates more immediate and proximate pressure.

By extending the deadline we have increased capacity and space, so to speak, for assessors. However, the way that they manage their workload and how valuation appeal committees operate are matters for them as independent bodies. As a minister, I do not think that it would be appropriate for me to say anything that could be misconstrued as commentary on how those bodies carry out their functions independently.

I know that that point was conveyed in written evidence to the committee. Although I recognise the concerns about that, the key point of setting the date to 2 April is to be consistent with what was in the 2020 act.

The point I have sought to make in my responses to all of the questions that I have answered this morning is that this legislation is about providing clarity and certainty. That is why it is very important that this bill aligns with the 2 April 2020 date that was in the 2020 act. Although I recognise that there are concerns, the reasoning and rationale behind setting the date at 2 April are very important, and that is why that date is in the bill that is before us today.