9th Report, 2012 (Session 4): Stage 1 Report on the Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill

SP Paper 174

LGR/S4/12/R9

9th Report, 2012 (Session 4)

Stage 1 Report on the Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill

CONTENTS

Remit and membership

Report
Provisions of the bill

Council tax
Housing Support Grant
Non-domestic rates

Committee scrutiny
Consideration of the evidence heard by the Committee

Council tax
Non-domestic rates
Housing Support Grant

Other matters

Subordinate Legislation Committee report
Finance Committee report
Policy Memorandum
Consultation
Equalities

Overall conclusions

Annexe A: Extracts From The Minutes

Annexe B: Record Of Divisions Taken In Private By The Local Government And Regeneration Committee

Annexe C: Oral Evidence And Associated Written Evidence

Annexe D: Other Written Evidence

Annexe E: Visit by a delegation of the Committee to Shetland

Annexe F: Report by the Subordinate Legislation Committee

Annexe G: Report by the Finance Committee

Remit and membership

Remit:

To consider and report on a) the financing and delivery of local government and local services, and b) planning, and c) matters relating to regeneration falling within the responsibility of the Cabinet Secretary for Infrastructure and Capital Investment.

Membership:

James Dornan
Joe Fitzpatrick (Convener)
Anne McTaggart
Margaret Mitchell
John Pentland
Kevin Stewart (Deputy Convener)
David Torrance

Committee Clerking Team:

Clerk to the Committee
Eugene Windsor

Senior Assistant Clerk
Euan Donald

Assistant Clerk
Seán Wixted

Stage 1 Report on the Local Government Finance
(Unoccupied Properties etc.) (Scotland) Bill

The Committee reports to the Parliament as follows—

1. The Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill1(“the Bill”) was introduced in the Parliament, by Derek MacKay, the Minister for Local Government and Planning, on 26 March 2012.

2. The Bill is accompanied by Explanatory Notes2 (SP Bill 12–EN), which include a Financial Memorandum, and a Policy Memorandum3 (SP Bill 12–PM), as required by the Parliament‘s Standing Orders.

3. On 28 March 2012, the Parliament agreed to refer the Bill to the Local Government and Regeneration Committee (“the Committee”) as lead committee for stage 1 consideration. Under Rule 9.6 of the Parliament‘s Standing Orders, it is for the lead committee to report to the Parliament on the general principles of the Bill.

PROVISIONS OF THE BILL

4. The Bill, if passed, would provide powers to the Scottish Government to amend, by regulations, the arrangements for charges in relation to non-domestic rates and council tax on unoccupied commercial properties and homes. The Bill would also abolish the Housing Support Grant.

Council tax

5. The Bill’s provisions, and proposed regulations, would give local authorities wider discretionary powers to vary council tax charges on unoccupied homes. At present, local authorities have powers to vary discounts in relation to unoccupied properties to give a minimum discount of 10%. Under the Bill, and proposed regulations, where a home was left long-term empty (LTE), the local authority would have powers to decide to charge a tax increase. According to the Policy Memorandum, the amount of increase in council tax that local authorities would be permitted to charge would be set out in regulations, but is expected to be up to 100% of the council tax that would have been liable (that is, up to double the applicable standard rate for the property) had the property been occupied. Where the owner was not eligible for an exemption from council tax or from the tax increase, the owner would be required to pay increased council tax to the local authority. The tax increase would only apply to long-term empty homes and not to those which were not a household’s sole or main residence, or were sometimes occupied as a second home.

6. Provisions in the Bill would also aim to facilitate the administration of any tax increase by local authorities by allowing them (once regulations had so provided) to require owners to provide information in relation to whether or not a home was occupied. Owners would be required to inform their local authority in certain circumstances that their home was empty, or of a change in its status, and local authorities would be permitted to charge a penalty in cases where the owner either did not provide information in line with the requirements or was found to have provided false information.

7. The Policy Memorandum argues that long-term empty homes are a wasted resource and are often an eyesore that can attract vandalism and fly-tipping. It further argues that neglect of homes can lead to the value of surrounding properties being reduced as a result of the neighbourhood not being perceived as a good place in which to live.

8. The proposals in the Bill are intended to encourage the bringing of empty homes back into use. According to the Policy Memorandum, this could play an important part in providing homes – affordable homes, such as social rented housing, or market housing, such as homes for private rent or sale – for people who need them.

Housing Support Grant

9. Housing Support Grant (HSG) has been available in its present form since the late 1970s under the Housing (Financial Provisions) (Scotland) Act 1978. The Policy Memorandum argues that “the continuing availability of Housing Support Grant leaves open the possibility, and indeed creates a theoretical incentive, for local authorities to increase their Housing Revenue Account debt levels to unsustainable levels and receive ongoing Scottish Government subsidy for doing so”4. It goes on to suggest that the local authority housing revenue subsidy system has been rendered obsolete by the introduction, in 2004, of the Prudential Borrowing Regime, the local authority council housing capital grant programme, in 2009, and the removal of the Right to Buy for new council housing, in 2010.

10. The Scottish Government would prefer to increase the supply of housing through the provision of capital grant for social housing rather than using “scarce resources” to service historic debt on an ongoing basis.

11. Under the Bill, therefore, from 1 April 2013, Housing Support Grant would be abolished by repeal of the legislation which provides for it. This would require all 26 local authorities in Scotland with a Housing Revenue Account to operate their HRA without assistance from the Scottish Government in the form of Housing Support Grant.

12. The Scottish Government consulted on these proposals as part of the consultation in relation to the proposals for council tax, mentioned above. The Policy Memorandum reports that 26 of the written responses provided views in relation to Housing Support Grant and that all of them (except Shetland Islands Council, the only council that currently receives Housing Support Grant) agreed to the idea that HSG should be abolished. A number of responses qualified this by saying that the Shetland Islands Council should be subject to some kind of transitional arrangement.

Non-domestic rates

13. According to the Policy Memorandum, empty properties are “an obstacle to the regeneration of town centres”5. The Policy Memorandum also notes that the Scottish Government’s 2011 Regeneration Strategy6 highlights the importance of strong and vibrant town centres and business districts as “vital to the economic and social fabric of Scotland”. It goes on to argue that reform of empty property relief would provide “incentives to bring vacant commercial premises back into use”7.

14. The Policy Memorandum notes that the Scottish Government announced, in its 2011 Spending Review document, and in its 2011 Regeneration Strategy, its intention to introduce incentives to bring vacant premises back into use, reduce the prevalence of empty properties in town centres and support urban regeneration by reforming empty property relief from April 2013. The Policy Memorandum goes on to say that “The broad policy proposals have been consulted on as part of the consultation on the Scottish Budget”8. In addition, the Policy Memorandum notes, “key stakeholders have been consulted throughout the process in the course of regular meetings, business events and meetings with business groups”. The specific proposals in relation to non-domestic rates relief contained in the Bill have not, however, been the subject of formal consultation.

15. Under the Bill and associated regulations, the Scottish Government would have powers to vary the percentage of non-domestic rate relief available for defined classes of unoccupied premises. Currently the amount of liability can only be set at 0% (which is applied as the default percentage for the first three months) and 50% (which is applied for prescribed classes of lands and heritages for an indefinite period thereafter). The Bill, if passed, would enable the Scottish Government, by regulation, to set out a different percentage of rate relief applicable on unoccupied properties and when and for how long this relief would apply.

16. The Scottish Government proposes that, for the classes of unoccupied premises currently subject to the 50% relief, the rate payable prescribed in regulations would be 90%, in other words giving a rate of relief of 10%. This rate would apply following the initial three-month zero-rated period, for an indefinite period.

COMMITTEE SCRUTINY

17. The Committee issued a call for evidence on the Bill. A total of 30 responses was received. The Committee thanks the organisations and individuals that submitted written evidence.

18. The Committee took oral evidence over the course of three meetings. At its meeting on 9 May 2012, the Committee received an informal briefing from the Scottish Government bill team.

19. On 16 May 2012, the Committee took evidence, primarily on the council tax and housing support grant aspects of the Bill, from the Association of Local Authority Chief Housing Officers (ALACHO), Empty Homes Network, Shelter Scotland, Shetland Islands Council, Shetland Tenants Forum, Scottish Property Federation and Scottish Land and Estates.

20. The Committee considered the non-domestic rates aspects of the Bill at its meeting on 23 May 2012, taking evidence from Scottish Chambers of Commerce (SCC) and the Scottish Council for Development and Industry (SCDI).

21. In its final oral evidence-taking session at its meeting on 30 May 2012, the Committee took evidence from Derek Mackay, the Minister for Local Government and Planning, and from Keith Brown, the Minister for Housing and Transport.

22. A cross-party delegation of Committee members visited Shetland on 28 and 29 May, to gain an understanding of wider issues surrounding Shetland Islands Council and the Housing Support Grant, which would be withdrawn if the Bill were to be passed.

CONSIDERATION OF THE EVIDENCE HEARD BY THE COMMITTEE

Council tax

General views

23. Most of those who gave oral evidence to the Committee were broadly supportive of the Bill’s proposals in relation to council tax on empty homes.

24. Shelter Scotland told the Committee9 that it worked with councils across Scotland to help them to develop processes to bring private sector empty homes back into use. In Shelter’s view, homes could be empty for many reasons, but usually this was not because of an issue with the property but because the owner has “got stuck somewhere”10. Owners might, for example, not be aware of how to make the best economic use of the property, have a fear of becoming a landlord, not have sufficient money to renovate the property, or need information about how to rent or sell the property in its current condition.11 Shelter argued that councils faced challenges in working with owners to address those issues, including staff resources and offering owners an incentive to bring properties back into use. Shelter reported that it worked with councils to help address these challenges by developing a process that started with advice and information and moved on to help councils develop incentives, loans and grants to encourage owners to bring property back into use for affordable housing.

25. Shelter Scotland’s evidence to the Committee concentrated mainly on the positive attempts that it made in supporting councils in their efforts to encourage owners to bring empty properties back into use, but its representative noted that, in the worst cases, enforcement was “an option”12. Shelter Scotland considered that the powers the Bill would give councils were “not a stand-alone measure”13, but “part of a wider approach to bringing empty homes back into use”14.

26. The Association of Local Authority Chief Housing Officers (ALACHO) was also broadly supportive of the Bill. Noting that the power that would be given to local authorities by the Bill was a discretionary one, ALACHO added that it was “a helpful tool in the toolbox for local authorities”15. This was not primarily because councils would “be able to raise extra income”16 but because it would give them “a lever to try to engage with owners”17 who might “be uncertain about what to do”18.

27. ALACHO argued that councils were getting better at giving advice and information to point owners in the right direction and to signpost them to possible solutions, which might include, for example, properties being managed by letting agents on behalf of owners who did not want to get into the bureaucracy and the minutiae of letting.19 ALACHO indicated that it welcomed the Bill for those reasons, but most of all “because of the huge and pressing problems of housing need”20. Noting that public and private resources were “in short supply for new affordable housing”, and that some estimates had put the number of empty properties in Scotland as high as 25,000,21 ALACHO concluded that anything that could be done to augment the supply by using the resource of empty properties and to “get people who need homes into decent homes”22 should be welcomed.

28. COSLA and Scottish Land and Estates also welcomed the Bill’s provisions in relation to council tax. The COSLA submission largely reflected views similar to those expressed by Shelter Scotland and ALACHO in oral evidence that, while council tax increases could not be the only answer to tackling empty homes, they were to be welcomed as “part of the toolkit”23 to address the number of long-term empty properties. Scottish Land and Estates reflected the views of other witnesses that the positive steps that local authorities were taking by offering advice and information and providing access to the loan fund would have “more impact”24. However, its written submission indicated that it remained in favour of a sliding scale, with a gradual increase in council tax to 100% over time.25

29. Individual local authorities which responded to the Committees’ call for evidence were also broadly supportive of the Bill’s provisions in respect of council tax. Glasgow City Council welcomed the “additional tools to incentivise owners to bring their properties back into use”26. Highland Council’s written submission indicated that the Council was “generally supportive”27 of the Bill, while West Dunbartonshire Council also welcomed the Bill’s proposals in relation to council tax.

30. Waverley Housing, in its written evidence, was also broadly supportive of the Bill’s council tax provisions. Arguing that it was essential that every possible and practicable step be taken to increase the supply of housing across all tenures and to ensure that use of existing stock was maximised, Waverley Housing concluded that inducements to owners not to leave property empty though the use of a financial penalty was “a sound general principle”28.

31. The Scottish Property Federation (SPF) noted in its oral evidence to the Committee that, even with the withdrawal of discounts, the number of empty properties had risen in the past few years. The SPF went on to argue that in many of those circumstances, the landlord would have a “powerful incentive to get the property let and to have the rent paid”29. Councils would, the SPF argued, “have to look at individual cases and use the provisions very carefully indeed”30.

32. The Committee also received a submission from Adie Hunter Solicitors, arguing that it was the “wrong time” to introduce the Bill and that the number of unoccupied properties at present was “simply because of the state of the market”31. The submission concluded that it was “unfair and uncommercial at this time to introduce additional penalties on individuals and businesses who are often hard pressed in the current climate”32. The Committee also received a confidential submission from an individual, providing examples of how properties can sometimes remain unoccupied for lengthy periods as a result of personal circumstances beyond the control of the owners.

33. The Committee welcomes the Bill’s provisions in respect of council tax. The committee endorses the consensus within the evidence it received that, while the council tax provisions contained in the Bill, will not, in themselves, solve the problem of long-term empty properties, they could be a useful, discretionary addition to the toolkit available to local authorities in addressing the issue. The Committee also recognises that although other measures taken by local authorities and their partners to support people in bringing their empty properties back into use are likely to play a more significant role, the provisions in the Bill are a necessary tool to have available in cases where all other attempts to support people to bring property back into use have failed. To this end, guidance to local authorities on best practice should be published when regulations are issued.

34. The remainder of this section concerns itself with specific issues relating to the council tax provisions in the Bill.

Discretionary powers

35. Currently, owners of empty properties which are liable for council tax are entitled to an exemption for the first six months during which the property is empty, and to a discount of 50% for the following six months. Since 2005, councils have had powers to vary the council tax discount, after the 12-month period, to any level between 10% and 50%. The Policy Memorandum explains that, under the Bill, the exemption would , as at present, apply for the first six months of the property being empty. The Scottish Government would introduce regulations that would permit councils to vary the level of discount on council tax for the next six months of the property being empty, to any level from 10% to 50% of the total council tax for which the property would normally be liable. The regulations would also provide that, after the end of the 12-month period of discount (six months exemption and six months at a rate of discount of between 10% and 50%) councils could charge increase on the council tax of up to 100%, that is, double the applicable rate for the property had it been occupied.

36. Councils will also have flexibility, under the Bill, to vary any rate of council tax increase on empty properties in different parts of their areas.

37. Most of the Committee’s witnesses welcomed the discretionary nature of the provisions contained in the Bill. ALACHO told the Committee—

“One of the things that we welcome about the proposals is their flexibility. They allow councils to make decisions about the problems that they face. Some problems will be more significant in some areas than in others, but the way in which the proposals are framed gives councils the discretion to decide whether the cost of implementing the legislation will merit the benefits that will come from it. That is to be welcomed.”33

38. COSLA welcomed the “discretionary nature”34 of the provision enabling councils to accommodate variations within their council areas. Similarly, Glasgow City Council welcomed the “flexibility in approach in regulations”35. Highland Council also welcomed the flexibility, but considered it “reasonable” for the Scottish Government to set out in regulations the framework for varying discount and applying charges, including the limits.36

39. West Dunbartonshire Council, however, argued in its written submission that “all areas within the council should be treated on an equal basis” and that the “scheme should apply evenly across Scotland so as to prevent disparity between neighbouring council areas” and that the “scale of charge should also apply evenly across Scotland”.37

40. The Committee welcomes the discretion that will be given to local authorities as regards the council tax proposals contained in the Bill. The Committee considers that it is reasonable to give local authorities powers to vary (within prescribed limits) any increase in council tax charge after the 12-month period and to vary the degree of increase in different parts of their areas as they consider appropriate.

Power to require information

41. The Policy Memorandum explains that the Bill and subsequent regulations would impose a specific requirement on owners to advise local authorities if their home was unoccupied and therefore potentially avoiding the payment that would have been due had the local authority been aware that the home was unoccupied. The regulations would enable local authorities to require owners or their agents to provide information on request regarding whether their home was unoccupied, how long it had been occupied or unoccupied and, where a property had been declared as a second home, how often it was occupied. This would be accompanied by a power for local authorities to impose a penalty charge for failure to provide the required information or for providing false information of up to £200 (currently local authorities can only charge a penalty of £50 for similar types of failure to provide information requested by the local authority, other than for repeated failure).

42. The Policy Memorandum explains that these proposals are intended to help local authorities to identify those homes that should be classed as LTE and to provide a deterrent to owners from withholding information or providing false information. It further notes that this provision is intended to improve the viability of imposing a penalty for local authorities, as feedback suggests it is not currently worth a local authority’s time to impose a penalty as the administrative costs of securing payment can exceed the existing £50 penalty charge.

43. The proposed penalty and its level were generally accepted as appropriate. ALACHO told the Committee that finance staff in local authorities had noted that the penalty of £50 that may currently be levied would frequently not cover the cost of trying to pursue enforcement.38 ALACHO hoped that the proposed £200 penalty under the Bill would be “a very last resort and rarely used, but at least it would make it more economically viable to pursue cases in which people are minded to try to circumvent the legislation”39.

44. Glasgow City Council, in its written submission, noted that, in a city with a high proportion of flats, it can be difficult to identify properties which are empty until a problem with house condition or environmental health arises. The Council therefore welcomed the proposed power for local authorities to require owners or agents to provide information on whether a property was empty and for how long it had been empty. However, the Council argued that the suggested level of fine (£200) seemed “very low in comparison to the potential impact to the owner of providing information”.40 Glasgow City Council also argued that past experience of civil penalties suggested that these are “difficult to administer, including collection issues, are time consuming, and are often ineffective in changing behaviours”.41 West Dunbartonshire Council reinforced this point, remarking in written evidence that “fixed penalty fees in practice are seldom used by councils, as they have a very poor collection rate”42.

45. COSLA also noted that in practice the power to impose a penalty of £200 for failure to notify “may be ineffective and may not be applied widely, particularly where there is a significant risk of non-payment”.43

46. The Committee considers that it is possible that owners may be tempted to fail to disclose an empty property in order to avoid paying potentially double the council tax that would have been liable had the property been occupied. The level of the proposed penalty for failure to disclose seems to the Committee to be fairly low in comparison to the amount that an owner could save by failing to declare a property as empty. The Committee also questions whether, even at the proposed level of £200, local authorities would possibly incur greater costs in collection than would be recouped through payment of the penalty. The Committee therefore calls on the Scottish Government to consider again whether the proposed £200 penalty for failure to disclose the relevant information is set at an appropriate level.

Exemptions

47. The Policy Memorandum explains that the Scottish Government proposes to bring forward regulations to provide for time-limited exemptions from any increase in council tax liability in certain circumstances where there may be legitimate reasons why homes need to be left empty. These exemptions would apply in addition to any time-limited exemptions to which the owner was already entitled (for example where the property had been empty and unfurnished, uninhabitable for a period due to renovations or exempt for six months as a new build property which had never been occupied). It is therefore proposed that owners who are “proactively” trying to sell their home at a reasonable price be exempted from the increase for up to 12 months. It is also proposed that discretionary exemptions be available to local authorities in respect of owners actively attempting to let a property and registered social landlords (RSLs) which have homes that are needed for use as temporary accommodation, but are sometimes left empty for long periods because their use is linked to a demolition and new build programme. Additionally, local authorities would have powers to grant an exemption, in circumstances where they are satisfied that owners have strong grounds for being unable to bring their property back into use.

48. The Bill, and regulations, would not specify the evidence that owners would need to produce in order to demonstrate that they were making serious efforts to market a property for sale or rent. This would be a matter for local authorities to determine.

49. Homes for Scotland, in its written evidence44, supported the proposed exemptions but suggested that the exempt period for new build properties that are currently being marketed for sale be extended from the proposed 12 months to 18 months, as a result of current market conditions which meant that new properties may wait for long periods before being sold, partly as a result of limited availability of mortgages.

50. Scottish Land and Estates also welcomed the proposed exemptions, but argued that “basic confirmation that the property is on the market and a comparison with the Home Report Valuation should be all that is required to avoid unnecessary costs or bureaucracy” adding that any exemption system should be “straightforward and not unnecessarily burdensome.”45 The organisation also argued that exemption from any increase should be applied in cases where a planning application involving change of use from, for example, residential to business use, had been made.

51. COSLA argued that it would be “extremely difficult” for Councils to track the properties that were being actively marketed, COSLA concluded that while this provision was “understandable”, it presented an “additional administrative burden on councils” and that further clarity on the practical application of this provision would need to be established through development of the regulations.46

52. Shelter Scotland argued that exemptions should be limited to those that could be judged by objective facts – for example that a person has died or a property is due for demolition – rather than where subjective judgements might be required. Its representative told the Committee—

“We warn against having too many exemptions that are subjective, because that makes the system more expensive to enforce. We would like the balance to be on the other side, where someone who is in genuine hardship and is doing everything that they can to bring the property back into use is given incentives and financial help from the council, using money that has been recycled from the levy. That would be preferable to providing exemptions for this and that, which would be quite difficult to keep a handle on.”47

53. Shelter Scotland also raised a question of clarity regarding whether the reference in paragraph 40 of the Policy Memorandum refers to the specified list of cases mentioned earlier in the Policy Memorandum or to a more general exemption for local authorities to exercise. 48

54. The Committee questioned the Minister for Transport and Housing on the issue of exemptions. The Minister told the Committee—

“The issues will take time to work through. If it was clear that a sincere effort had been made to sell or let a property, for example, we would not want to punish somebody for a genuine attempt to bring an empty home into productive use. Those matters should be considered further. They are not easy to resolve; we will deal with them in conjunction with our local authority partners. The judgment will be about what is prescribed in primary legislation or regulations and what is left to local authorities.

It will be possible for local authorities to work out whether something that has been left empty should be brought back into productive use and whether a property owner is genuinely trying to bring it back into productive use. The provisions would not apply if someone was selling their own home, because they would be occupying the property.”49

55. On the question of a possible exemption in respect of properties subject to a planning application for change of use, the Minister told the Committee that he would not be in favour of such an exception—

“It would be quite possible for an owner to lodge a planning application to try to circumvent their liability for additional council tax. When we look at tax issues—of course, we do not currently have many tax powers—we have to be careful to ensure that we do not make it easy for people to avoid the tax. We have seen evidence of that happening over many years in the context of the UK Exchequer, to the substantial loss of taxpayers in this country. It is fair to everyone if the rules are applied consistently and are not easily avoided.”50

56. The Committee notes the views of most of its witnesses that the proposed exemption regime is fair and reasonable. The Committee also recognises that the detailed operation of the exemption regime will not be able to be fully understood until the relevant regulations have been published in due course. The Committee would wish to be kept informed of the broad developing trends of exemption regime. The Committee therefore recommends that the Scottish Government take steps to monitor the situation as regards exemptions across the country and ensure that local authorities collect data that can be reported to the Committee in due course as required.

57. The Committee notes that there may be a lack of clarity in the Policy Memorandum on whether or not local authorities will have powers to grant exemptions on other grounds besides those specified in the Policy Memorandum and calls on the Minister to address this question, in the light of his ongoing discussions with local authorities, before the regulations are published.51

58. The Committee also accepts that, while it may be appropriate for local authorities to determine what evidence would be required in order to demonstrate, for example, that serious efforts are being made to market a property for sale or rent, such a process should not be excessively bureaucratic or burdensome. The Committee therefore calls on the Minister to address this in his ongoing discussions with local authorities regarding the practicalities of exemptions.

Ring-fencing of income raised for affordable housing purposes

59. The Scottish Government has decided not to ring-fence any sums raised as a result of the Bill’s council tax provisions for affordable housing or any other purpose. The Policy Memorandum explains that this decision was made after taking account of feedback from the consultation. It would, therefore, be at local authorities’ discretion to determine how they spend any additional revenue raised through the council tax increase or through any reduction in discount to below the current 10% minimum, based on their own local priorities. However, the Scottish Government proposes to keep existing arrangements for revenue raised from existing reduced discounts on long-term empty and second homes, which should continue to be used by local authorities to fund a range of affordable housing and empty homes projects in their area. These proposed arrangements will not be set out in legislation and will be agreed with COSLA.

60. COSLA argued, in its written evidence, that councils were best placed to determine if and how any income raised should be used and did not want to see “additional constraints, such as ring-fencing of this income” being imposed.52 COSLA, therefore, welcomed the Scottish Government’s proposal not to ring-fence any additional revenue raised through the council tax increase.

61. ALACHO told the Committee that its understanding had been, under the original proposals on which the Scottish Government had consulted, additional income available to local authorities as a result of the Bill’s provisions would be ring-fenced for affordable housing purposes. ALACHO “thought that that was a good idea”53. However, ALACHO went on to say that it understood “the corporate nature of local authorities”54 and COSLA’s position, which was that councils should be at liberty to spend resources as they see fit.

62. Shelter Scotland’s view was similar. It was “in favour of the money being ring-fenced for affordable housing initially”55, but understood COSLA’s position.

63. Highland Council also welcomed the proposal to give councils “discretion and flexibility to decide how best to spend the revenue generated”56. Glasgow City Council, however, indicated that it would prefer any additional revenue raised from council tax on long-term empty homes be used to support the provision of affordable housing.57 The Council’s submission also noted that “the potential revenue which may be raised might not cover the costs of administering the new procedures and the council “would have to consider this”58.

64. The Committee questioned the Minister for Housing and Transport on the decision not to ring fence any income raised. The Minister told the Committee—

“We considered whether the money should be ring fenced, but our view is that we should try to encourage councils and give them discretion, which is consistent with the concordat and the way in which we now work with councils. They will, of course, continue to ring fence the moneys that they get for current income from council tax in relation to discounts. They will continue to be obliged to use that towards providing more housing. However, in this context we thought that a collaborative approach was best, such that councils would have discretion and we would put in place other means that could support them to bring housing back into productive use.”59

65. The Committee considers, on balance, that it is appropriate for individual local authorities to decide how to spend any additional revenue generated under the proposed powers to charge an increase in council tax on long-term empty properties. While the Committee acknowledges the argument that any sums raised should be dedicated towards affordable housing it recommends that local authorities monitor how this additional revenue is used. The trend in recent years has been very much against ring fencing of specific funds and towards allowing councils as much flexibility as possible in making their own financial decisions, having regard to their local circumstances and priorities. The Committee therefore supports the proposals not to ring-fence any income generated, but would like to be advised, in high-level terms, on how any additional revenue generated under the Bill has been spent.

Second homes

66. Shelter Scotland raised the question of whether property owners might attempt to designate their empty property as a second home, given that the council tax payable on a long-term empty property could be significantly higher than that on a second home, which would lead to increased enforcement costs. Shelter Scotland believed that enforcement should be part of a wider approach—

“We believe that, … if staff resources—ideally, an empty homes officer—are allocated to keeping an empty homes database and updating it as owners are contacted and worked with to try to bring property back into use, the enforcement costs should be lower because councils will have a better idea of what is out there and of the status of the empty homes in their communities. That is slightly different from a council officer simply having a spreadsheet and seeing numbers moving. We think that that should help.”60

67. The Committee put the points about possible attempts to designate long-term empty properties as second homes to the Minster for Housing and Transport. The Minister told the Committee—

“We have looked at the matter but it will take more work to formulate a working definition of second homes that will allow us to distinguish between the two types of property. That said, we think that second homes often provide economic benefits to and improve the areas in which they are located, although I admit that the reverse can be the case if there are too many of them. However, that is not the case with empty homes, which is why we have focused on them. We intend to put together a proper definition to distinguish between the two types of property and that will come down to factors such as the length of time for which a property is occupied in the course of a year.”61

68. Pressed on whether councils should have powers to decide whether second homes had a negative economic impact in their council areas and to apply a similar increased rate of council tax on them if they did take that view, the Minister indicated that more work was needed on this question—

“Councils have different views on the issue of second homes and if we want to ensure that the measure is as workable as possible we must take a consistent approach across the country. We will look at the responses that we receive as the legislation proceeds and try to be flexible in the way that Derek Mackay suggested. However, our view at the moment is that a consistent approach to second homes, which we do not intend to capture in this legislation, and empty homes, which we do, is the best way to move forward.”62

69. The Committee notes the possibility of owners of long-term empty properties seeking to redesignate them as second homes in order to avoid an increased council tax liability. The Committee also recognises that there are differing views amongst local authorities as to the economic benefits or disbenefits of second homes within a council area.

Properties unsuitable for habitation

70. Scottish Land and Estates raised the issue with the Committee of long-term empty properties that were classified as dwelling houses but were not suitable for use as modern homes—

“I would also like local authorities to be far more realistic about removing properties from the council tax register. There are properties that will never be brought back into use. Because they cannot be removed from the council tax register, they are listed as empty homes, with the result that it would appear that they could be brought back into use, whereas, in fact, that is completely unrealistic. I am talking about bothies up hills and properties that are derelict but which are in the midst of a farming business and are used to store bales and other things. They are not lettable properties and should be removed from the council tax register.”63

71. The Committee put this point to the Minister and queried whether it would be possible for the Scottish Government to issue guidance to assessors about the removal of such properties from the register. The Minister for Housing and Transport explained that, currently, a derelict property can be removed from the list that is kept by the relevant assessor. If a property were removed, it would no longer be subject to tax. It was, the Minister explained, for the assessor to determine whether a property remained on the list and neither local authorities nor the Scottish Government had control over that. Additionally, under the Council Tax (Exempt Dwellings) (Scotland) Order 1997, certain dwellings on land used for agricultural purposes could be exempt.64

72. Questioned by the Committee on whether guidance was issued to local authorities and valuation boards, to encourage a uniform approach across the country to dealing with such properties, the Minister stated that he did not think that local authorities had a role – it was “strictly a matter for the assessors” and that he understood that neither local authorities nor the Scottish Government had direct control over what was a matter for assessors.65

73. The Minister subsequently wrote to the Committee providing further detail on this matter—

“The Committee queried whether the Scottish Government could provide guidance to the assessors given that some concerns had been raised by Scottish Land and Estates that the assessors were often unwilling to remove homes from the council tax valuation list, even where they were not suitable to be occupied. I can confirm that, as I mentioned to the Committee, the assessors operate independently of both the Scottish Government and local authorities. Their role is to provide an impartial interpretation of how local government taxation legislation applies in individual cases on matters such as the inclusion or removal of homes from the council tax valuation list. In order to ensure that they remain independent and impartial, it would not be appropriate for the Scottish Government to provide guidance to the assessors in relation to removing homes from the valuation list as it is entirely for the relevant assessor to decide whether or not a home should be removed.

Their decisions are based on whether or not the home still constitutes a ‘dwelling’ under sections 70 and 72 of the Local Government Finance Act 1992. Assessors are fully accountable for their decisions and if an owner does not feel the decision is in line with the legislation, they can appeal to the Valuation Appeal Committee and ultimately to the courts.”66

74. The Minister’s letter went on to say that the Scottish Government considered the council tax system as a whole to be unfair and that it would prefer to replace it in future with a “fairer local tax, based on ability to pay”67. Issues such as those raised by the Committee and Scottish Land and Estates would be considered as part of the Government’s plans to consult on replacing the council tax.

75. The Committee notes the point raised by Scottish Land and Estates about homes that remain on the valuation list that may be unlikely to be able to be used as dwelling houses in the future. The Committee also notes that decisions on whether or not to remove homes from the valuation list are a matter for the relevant assessor, but would welcome a review by assessors of properties designated as ‘unsuitable for habitation’.

Financial assumptions

76. This section of the report considers the financial assumptions that have been made in the development of the Bill and how they are explained in the Financial Memorandum (FM). In doing so, it draws on the Finance Committee’s report on the Bill’s FM.

77. The Financial Memorandum sets out estimates of the likely costs to local authorities and the Scottish Government brought about by the provisions of the Bill. According to the FM, the costs on the Scottish Government would be minimal.68 Although there would be staff time required in developing regulations and guidance following the passage of the Bill, this would be taken forward by existing staff so would not be an additional cost. The FM acknowledges that there could be additional costs to the Scottish Administration in relation to empty homes owned by the Scottish Government or its agencies, although the Scottish Government now only owns a very small number of residential properties, six of which are currently known to be empty and therefore potentially liable for a council tax increase from April 2013.

78. In terms of costs to local authorities, the FM states that in order to be able to apply an increased council tax charge, local authorities might incur set-up costs69 to ensure that their computer systems would be able to calculate the tax due (although in some cases no IT changes would be required). Based on information the Scottish Government received from two local authorities, it estimates the IT se-up costs for authorities that decide to set an increase to be in the range of £5,000 to £10,000 per authority. Some additional staffing resource might also be required70 in the set-up period in councils. The FM estimates this at between £7,125 for one member of staff and £21,375 for three.

79. The main costs to local authorities, however, would be in enforcing the increase. Some councils would also have to pay the increase in respect of their LTE council homes (although homes scheduled for demolition would not be liable for council tax). The FM, based on information received by the Scottish Government from one local authority estimates that, depending on the number of LTE homes in the area, between one and three additional members of staff would be required at approximately £28,500 per member of staff per year (including National Insurance and superannuation)71. The average additional staffing costs for a local authority are therefore estimated by the FM at approximately £28,500 to £85,500 per year or £912,000 to £2,736,000 per year for the whole of Scotland.

80. In relation to costs, the evidence received by the Committee appeared to broadly accept the assumptions in the FM. Fife Council considered the estimated £5-10,000 IT setup costs as “reasonable” and noted that the staffing cost estimates fitted with the Council’s staff grades for this work72. COSLA considered that it had “no reason to disagree with the costings provided in the Financial Memorandum”73, though it noted that councils would need to consider if it was worthwhile applying the council tax variation power and might choose to offset any increased administration costs against the revenue raised.

81. The Financial Memorandum also sets out the possible revenue implications of the Bill for local authorities. The FM notes that the Scottish Government has created a model to estimate the potential revenue that could be generated as a result of the council tax increase. The model uses actual numbers of long-term empty homes liable for council tax, actual council tax rates and takes into account the distribution of properties across council tax bands. In producing its calculations, the model assumes that all local authorities would apply the same level of discount or increase and that 10% of properties would be returned to use each year.

82. According to the FM, if all local authorities were to charge a maximum 100% increase for all LTE homes liable for council tax, a maximum of £33.9 million per year could be collected (assuming a 100% collection rate). The FM provides this figure as an average over four years because, it says, it is difficult to produce robust estimates of how many homes would be brought into use each year as a result of the increase (or other factors); it assumes no increase in council tax rates, no additional LTE homes and 10% of homes being brought back into use each year. This estimate also includes revenue which is already received through reduced council tax discounts (of less than 50%) on LTE homes (about £7 million per year).

83. The FM further notes that based on data on the number of homes empty for one year or more, a sample of four local authorities indicated that about 70% of current LTE homes had been empty for one year or more and around 30% empty for between 6 and 12 months. Assuming this rate to be constant across all local authority areas, and given that it is not proposed that the proposed increases would come into effect until the property had been empty for a year, this would, according to the FM, have the effect of reducing the £33.9 million maximum revenue level per year to £23.8 million per year.

84. In relation to the proposal for a mandatory exemption from the increase for up to one year after the initial six-month period of a home being classed as LTE for homes actively being marketed for sale, the FM reports that no accurate information on the number of LTE homes advertised for sale, and thus able to qualify for the proposed exemption is available. However, the Scottish Government estimates, based on data on the number of homes marketed for sale each year, that in the region of 3-6% of LTE homes could potentially qualify for the time-limited exemption. On this projection, the potential revenue to local authorities would reduce to approximately £22.3-23 million per year. When the revenue that is already received through reduced council tax discounts (around £7m) is removed, the maximum additional revenue that could be achieved from the proposals is estimated to be £16.05m a year.

85. The FM also notes that regulations may provide that, effectively, local authorities would be able to set the level of discount or increase themselves although the Scottish Ministers would be able to set a maximum discount or maximum increase that could not be exceeded by local authorities. As the Bill itself does not set those maxima, they could be set to produce a wide range (e.g. 100% discount to 100% increase). As the FM acknowledges, this could introduce “significant margins of uncertainty”74 in projected revenue. Although, according to the FM, the Scottish Government does not intend to use this flexibility to reduce the current discounts further or to change the level of discount in relation to other classes of unoccupied homes that are not LTE,75 if it did increase the maximum discount to 100% for LTE homes and this was applied across all local authorities, a total cost to local authorities of approximately £8.7 million per year would result (through reduced council tax revenue). As the Scottish Government estimates a maximum additional revenue of £16.05 million per year, the potential range of impacts varies between a cost of £8.7 million per year for local authorities and an additional revenue income of up to £16.05 million per year.

86. COSLA’s written submission urges caution in interpreting these figures, “as they may be overly optimistic”76. The Finance Committee report also notes that the Parliament’s Financial Scrutiny Unit had suggested that assuming that all local authorities would charge the maximum 100% increase in council tax risked “overstating the potential revenue gains to local authorities”77.

87. The Finance Committee report on the FM notes a number of potential issues with regard to the modelling of the revenue, including the assumptions that councils would use 100% council tax as the basis for charging on LTE properties, that the whole amount due would be able to be collected and the extent to which revenue might be reduced by councils deciding to offset the administration costs of collection and enforcement. Given the flexibility that councils would have in deciding what level, if any, of council tax increase to apply, the Finance Committee found it “surprising that this figure was used as the basis for its modelling in the FM”78.

88. The Finance Committee report also noted evidence it received from local authorities that questioned the assumption of 10% of unoccupied properties being brought back into use each year, highlighted the possibility of evasion and noted the potential for revenue being impacted because of local authorities’ liability for the extra charge on their own unoccupied properties.

89. The Committee questioned the Minister for Housing and Transport on the assumptions and variabilities in the FM, and in particular on the assumption that councils would apply a charge of 100%. The Minister told the Committee—

“I am not sure how else a workable estimate would be arrived at. The figure is the potential amount that could be realised.

We have made it clear from the start that the discretion will lie with councils. The bill will allow councils to vary the level if they want to, so the only meaningful figure that we can advance is the potential maximum figure.”79

90. Pressed further on this point, the Minister added—

“We have said that the power will be an option for councils to use. Given that, there could be innumerable permutations of some councils using or not using the power and some councils providing different discounts. We could not have arrived at any other meaningful figure. We have specified the maximum that could be achieved. That makes sense to me, at least.”80

91. The Committee notes the report of the Finance Committee on this aspect of the Bill. The Committee acknowledges the potential variations and unknown quantities that make it difficult to estimate accurately the likely impact of the Bill on revenue.81

92. The Committee notes that the FM acknowledges the significant margin of uncertainty inherent in the assumptions that have been used to calculate revenue. The Committee concludes that it is impossible to estimate accurately, at this stage, what the impact on revenue for local authorities is likely to be. However, the Committee considers that what is most important is the Bill’s impact on reducing the number of long-term empty properties and bringing them back into use. Should there be a positive impact on council tax income in local authorities, this is likely to be helpful in giving councils other options in helping to bring properties back into use through other initiatives, although the Committee acknowledges that it will be for councils to determine how to use any additional income that accrues as a result of the proposed measures.

Council tax – overall conclusions

93. The Committee supports the policy intention of the Bill to bring as many long-term empty homes as possible back into use.

94. The Committee recognises that the measures proposed in the Bill, while they are likely to contribute towards a reduction in the number of long-term empty homes, are not a panacea, although they will add to the “toolkit” of options available to local authorities in addressing the housing need within their areas. In that respect, the Committee welcomes the flexibility and discretion that the Bill allows local authorities in determining the level of council tax increase, if any, that they consider appropriate to levy on the owners of long-term empty homes, having had regard to their local circumstances.

95. Although the Committee might have preferred that the Bill had provided that any revenue increases gained by local authorities as a result of its provisions would be channelled into the provision of affordable housing, and that the use of additional income should be monitored by local authorities, the Committee acknowledges that local authorities are best placed to make decisions about how such additional income should be used, taking local circumstances and priorities into account.

96. Given the local discretion that has been built into the Bill’s proposals, it is perhaps not surprising that the revenue projections set out in the Bill’s Financial Memorandum contain significant “margins of uncertainty”. It is also arguable that the Financial Memorandum is perhaps optimistic in the assumptions that it makes about the likely revenue flow to local authorities as a result of the Bill’s provisions.

97. The Committee acknowledges, however, that the Bill is not intended as a revenue-raising exercise for local authorities. What is most important is that as many as possible of Scotland’s estimated 25,000 long-term empty homes are brought back into use as dwellings. The Committee, therefore, is more interested in ensuring that councils use these powers creatively and proportionately alongside other measures, and with partners like registered social landlords, in order to support and encourage owners to bring empty property back into use, either for sale or rental, in order to help meet the continuing need for social housing. The Committee calls on the Scottish Government to continue to provide support to local authorities and others to ensure that this process continues and, indeed, accelerates.

98. The Committee therefore endorses the general principles of the Bill as regards the changes to council tax.

Non-domestic rates

99. As mentioned in the introductory section of the report, the Scottish Government announced, in its 2011 Spending Review document, and in its 2011 Regeneration Strategy, its intention to introduce incentives to bring vacant premises back into use, reduce the prevalence of empty properties in town centres and support urban regeneration by reforming empty property relief from April 2013. The Policy Memorandum says that the proposals have been widely consulted on as part of the consultation on the Scottish Budget and as part of wider consultation on the Regeneration Strategy. The specific proposals in relation to non-domestic rates relief contained in the Bill have not, however, been the subject of formal consultation.82

100. Under the Bill and associated regulations, the Scottish Government would have powers to vary the percentage of non-domestic rate relief available for defined classes of unoccupied premises. Currently the amount of liability can only be set at 0% (applied for the first three months) and 50% (applied for an indefinite period thereafter). The Bill would enable the Scottish Government, by regulation, to set out a different percentage of rate relief applicable on unoccupied properties and when and for how long this relief would apply.

101. The Scottish Government proposes that, for the classes of unoccupied premises currently subject to the 50% relief, the rate payable prescribed in regulations would be 90%, in other words giving a rate of relief of 10%. This rate would apply following the initial 3-month zero-rated period.

General comments

102. This aspect of the Bill proved to be considerably more controversial than the proposals in relation to council tax. Some of the written evidence received by the Committee was supportive of the principles of this aspect of the Bill. The Association of Town Centre Managers Scotland, for example, indicated that it supported the legislation “in principle”83, although it did go on to note a number of areas of concern.

103. The submission from the Federation of Small Businesses (FSB) notes that FSB, had, in 2010, welcomed the Scottish Government’s announcement of a forthcoming review of the rates system. It also argues that “small businesses often report that stubbornly high rent levels make town centre units an unsustainable option, particularly in the current economic climate” 84, and goes on to say that it is sometimes suggested that “empty property relief may contribute to this”85. Additionally, the FSB reported that only 2% of its members had benefitted from empty property relief and only 19% believed it had a positive effect on small businesses.86 The FSB also notes that in previous evidence to the Economy, Energy and Tourism Committee (on the Spending Review 2011 and draft budget 2012-13) it had “cautiously” welcomed moves to amend empty property relief. However, the FSB submission goes on to set out a number of concerns, and states that it would have preferred to see a “thorough review of how the current empty property relief system operates in Scotland before any specific proposals were introduced”87.

104. Highland Council stated that it was “generally supportive” of this aspect of the Bill, although it raised a number of issues on which it considered that “further work” may be required.88

105. Other evidence received by the Committee on this aspect of the Bill was critical of its proposals. CBI Scotland noted that it had “repeatedly called on the Scottish Government to reconsider the proposals outlined in this Bill”.89 It added that it remained “unconvinced of the non-domestic rates measures”90 in the Bill and argued that the Bill’s proposals represented a “tax on distress”91 under which property owners faced the prospect of having to pay increased charges for buildings that were “not earning them any money in the first instance”92.

106. Falkirk Council Development Services said it had “concerns” over aspects of the Bill’s provisions on non-domestic rates. Although it acknowledged that the Bill’s provisions “might prove beneficial in certain locations and circumstances”93, its view was that they would “further constrain redevelopment and regeneration”94.

107. Scottish Chambers of Commerce (SCC) did not believe that the policy of reducing empty property relief to business would be effective either in providing incentives to bring vacant commercial premises back into use or in raising additional revenue for the Scottish Government.95 The submission went on to say that SCC’s members were “deeply concerned” that moves to tax property owners in Scotland by an additional estimated £18million per year were “misguided and counterproductive”96.

108. The Scottish Council for Development and Industry (SCDI), although it “strongly supports” a strategy to regenerate and revitalise town centres, argued that “this should be evidence-based in data, modelling and comparators, and joined-up”, going on to add that there was a “lack of information from the Scottish Government about the profile of and trends in vacant properties with which to judge the impact of reform”.97

109. The Scottish Retail Consortium was also critical of the Bill, arguing that it would add “further costs to struggling high streets already impacted by significant business rates costs, including the retail specific public health supplement”98.

110. Finally, the Scottish Property Federation, in its written submission, stated that it remained “deeply concerned” at the proposals in the Bill to reduce rate relief for empty properties, arguing that this was a “serious mistake” and would “undermine competitiveness and incentives for investment in Scotland” and have consequences that would go “far beyond the stated intention of seeking to reduce the numbers of empty shops in the High Street”99.

111. The Committee put many of the points that had been raised by the business sector to the Minister for Local Government and Planning. The Minister defended the Bill’s provisions on non-domestic rates—

“I make the point once more that the purpose of the bill is to give ministers the power to vary the reliefs. We will do that in the context of all our other policies. When we set the reliefs and arrive at that policy we will return to this committee. I am sure that we will evidence how we have taken on board the views of the Finance Committee and this committee and the views of stakeholders and we will show that we are indeed a listening Government.

We are not dismissing the arguments that are being put forward, but we have to bear in mind that some people are making a case for not paying more tax. That is understandable but, as a Government, we have to balance the books and show that we are stimulating the local economy and continuing to invest in the public services that these properties and these landowners depend on.”100

112. The Committee acknowledges the concerns over this aspect of the Bill of many organisations representing business. The Committee also acknowledges the Minister’s statement that there is a need to “balance the books” and continue to invest in public services while seeking to regenerate the economy.101

113. The remainder of this section of the report examines specific issues that arose in evidence on the Bill’s proposal for non-domestic rates.

Consultation

114. As noted earlier, although the Scottish Government had announced its intention to bring forward legislation to reform empty property relief on business rates during consultation on the spending review 2011 document and on the regeneration strategy, the proposals had not been subject to the same degree of formal consultation as the other main aspect of the Bill (proposed changes to council tax on long-term empty domestic properties), which had been subject to a full 12-week consultation on the specific proposals.

115. The absence of a formal consultation exercise on the empty property relief proposals was raised by several respondents in their submissions to the Finance Committee, including the Scottish Property Federation and Glasgow City Council, although Angus Council indicated to the Finance Committee that it had no significant concerns over the absence of a formal consultation, noting that the proposals had been signposted.

116. The Finance Committee report notes that, in respect of this Bill, the spending review 2011 included only a brief statement regarding the Scottish Government’s intentions and that financial estimates on the empty property relief proposals were not published in the draft budget document.

117. The Finance Committee concluded that a separate formal consultation exercise on the empty property relief proposals should have been undertaken, similar to that conducted on the council tax proposals, as this would have been helpful to its scrutiny and evidence gathering.

118. The Committee questioned the Minister for Local Government and Planning on the absence of a formal consultation. The Minister responded—

“it was felt that it would not be proportionate to carry out a consultation at that stage because of the number of properties involved and the scale of the issue. It affects £18 million of income generation in the context of £2.3 billion income from non-domestic rates. … I point out that there is on-going consultation on how the policy intent of the bill is being progressed. At this stage we seek only the enabling power to vary the reliefs. The regulations that will specify what the reliefs will be will come to the committee at some point in the future.”102

119. The Committee notes the Minister’s view that it would not have been proportionate to carry out a consultation because of the number of properties and the scale of the issue. The Committee also recognises the Minister’s assurance that there is ongoing consultation around the progression of the policy intent of the Bill. However, the Committee questions why it was considered appropriate to hold a formal consultation on the council tax provisions of the Bill, which are estimated to create a lower level of income than are those in respect of non-domestic rates, but not on the other principal aspect of the Bill. The Committee considers that the consultation process is essential in allowing the government to consider a full range of views, and generally results in more carefully considered and thought through legislation.103

120. The Committee concluded that the Scottish Government could have carried out further consultation before bringing the measures forward in a Bill.104

Business and regulatory impact assessment

121. The Committee also notes that the proposals in the Bill on non-domestic rates had not been the subject of a business and regulatory impact assessment (“BRIA”).

122. The Scottish Government Bill team had explained to the Finance Committee that the view had been taken that it would have been disproportionate to carry out a BRIA because of the level of savings involved, which was about £18 million. The Bill team explained that business rates were paid by about 200,000 properties. There was a tax base of £6.7 billion and business rates generated about £2.3 billion a year, so savings of £18 million were relatively small.105

123. The Finance Committee examined this issue in some detail. It noted that the Scottish Government had published guidance on business and regulatory impact assessments106 which stated that the “BRIA process encourages policy makers to identify the problem and then use available evidence to find proposals that best achieve the policy objectives while minimising costs and burdens.” It continues that the BRIA allows those with an interest in the policy to understand why the Government is proposing to intervene; options the Government is considering, and which one is preferred; how and to what extent new policies may impact on them, on business and on Scotland’s competitiveness; and the estimated costs and benefits of the proposed measures.

124. The Finance Committee also noted that the guidance states that if a “yes” answer is given to (amongst others) the questions, “does the proposal impose additional cost or reduce existing costs on businesses or the third sector, and have you tested the proposal on relevant businesses?”, a BRIA is required. The Finance Committee also notes that while the BRIA guidance refers to the application of the proportionality principle, this is with reference to the length and detail of the BRIA and not to whether a BRIA is required.107

125. The Finance Committee noted the explanation of the Bill team on the reasons why a BRIA was not undertaken. However, it went on to note that the Scottish Government’s guidance on BRIAs did not apparently distinguish between the level of costs and impact on business in deciding whether a BRIA was required. The Finance Committee further noted that the potential impact of the Bill’s proposals were not limited to those businesses currently in receipt of empty property rates relief but could extend to any business, individual or other body that owned commercial property that might become empty at some point in the future or which was considering the development of commercial premises.108

126. The Finance Committee concluded that it was “unfortunate” that no BRIA of a proportionate level of length and detail had been prepared and suggested that the Local Government and Regeneration Committee pursue this matter in its evidence session with the Scottish Government. 109

127. The Committee put the point about the absence of a BRIA to the Minister for Local Government and Planning during its evidence session. The Minister told the Committee—

“The decision to undertake a business and regulatory impact assessment is at ministers’ discretion. On this occasion, it was decided not to undertake one. In the same way, it was felt that such a process was not required for the decision to implement the public health supplement.”110

128. Later in the same meeting, the Committee pressed the Minister further on this question. He elaborated—

“given that the policy will generate £18 million out of a total tax take of £2.3 billion, it would not be proportionate to carry out such an assessment. We are talking about a unitary national system of reliefs, unlike the council tax benefit system, on which there might be 32 different policies. There is a difference between the two systems. It was not felt that it would be proportionate to carry out a BRIA on a national system at that level.

I am asking the committee to consider the principle of the enabling power rather than the exact levels of rates relief. The committee will consider the extent to which rates relief will be varied at some point in the future. In many ways, an assessment of the impact is on-going, as we explore and refine the policy and listen to the committee and stakeholders. It is not as if the decision has been taken in the budget and that is the end of the matter. As the cabinet secretary has said, there is some flexibility. I have outlined why we think that the policy direction is important, but we will be flexible. The process of assessing the impact, the consultation and the engagement is very much on-going.”111

129. The Committee notes the view of the Finance Committee that it is unfortunate that a business and regulatory impact assessment (“BRIA”) was not conducted before the Bill was introduced. The Committee also recognises it is for minsters to determine if a BRIA is proportionate.112

130. The Committee welcomes the Minister’s commitment stated above to explore and refine the policy and to listen to the Committee and to stakeholders, together with his remark that although the Scottish Government considers the policy direction to be important, it is prepared to be flexible. The Committee therefore urges the Scottish Government to continue the dialogue with business organisations and other stakeholders as the policy develops.113

Reasons for commercial property being empty

131. According to the Policy Memorandum, the provisions of the Bill are intended to provide incentives to bring vacant commercial property back into use, as well as to raise revenue for the Scottish Government.114 The Federation of Small Businesses, in its written evidence, mentioned that, anecdotally, small businesses often report that “stubbornly high rent levels” make town centre units an unsustainable option. It also took the view that the current empty property relief system had “some role to play as a disincentive to filling vacant units”115. However, most of the other submissions to the Committee and, indeed, most of its oral evidence on this subject, suggested that the main factor in the amount of commercial property currently being vacant was low demand. The Association of Town Centre Managers Scotland, for example, commented—

“The key driver behind the acceleration of empty commercial property in our town centres is depressed consumer confidence and a decline in demand. Increasing the liability of property owners, in many cases, will not improve market conditions and re-letting will not be any easier.”116

132. The Business Centre Association, in its written evidence, argued that buildings were empty “because of a lack of demand” adding that during a downturn, both rents and capital values fall, so there was “no reason for a landlord to keep a building empty notwithstanding what Governments have said about this”117.

133. CBI Scotland, noting that the proposals included in the Bill had come about as a result of a belief that the current empty property rates relief regime acts as a disincentive to bringing empty properties back into use, argued that this was “simply untrue” and that commercial premises were “rarely left empty on purpose as they do not generate an income for their owners”118.

134. Enterprise North East Trust (ENET) argued that although the empty relief scheme was “helpful;” for property owners or landlords, it in no way detracted from a property owner’s ultimate desire to relet.119

135. Similarly, Falkirk Council Development Services argued that there were “few situations where shops are deliberately being held off the market because of the current discount” adding that few landlords choose to leave properties empty in the hope of securing higher rentals or by not wishing to prejudice rent review negotiations elsewhere in a locality.120

136. The Scottish Property Federation (SPF) noted that the reduction of rate relief had been argued by some to be a necessary measure to force landlords to let properties at a lower rent. However, the SPF argued that properties were vacant because of a lack of demand, driven by the recession and changing consumer behaviour in relation to the retail and the growth of online shopping.121

137. The oral evidence received on this issue by the Committee represented views very similar to those in the written evidence. Scottish Chambers of Commerce told the Committee—

“The view of our members has been that the problem of vacant properties is largely down to lack of demand. There are various reasons for that, many of which are well publicised, such as the lack of access to finance for businesses that are looking to move into larger properties, which has been an issue.

Rentals have been an issue during the past few years but currently are probably less of an issue; it is the lack of demand that is leaving vacant property in the marketplace. That is the clear message that our members are putting forward, which I think is reflected in a few of the submissions to the committee.”122

138. Colliers International gave the Committee a similar view—

“From my background as a surveyor, I know that the basic driving force in any market in property is supply and demand. We are experiencing an economic downturn that is probably unprecedented in our lifetimes, and the supply and demand argument has been thrown out of the window. There is plenty of supply, but there is no demand.”123

139. In response to questions from members about the possibility of large landlords deliberately keeping property vacant, Scottish Chambers of Commerce told the Committee—

“It might well be the case that, in certain circumstances, landlords are not letting. However, in a large shopping centre up north a unit has lain empty for six or seven years. Currently, the rating is calculated at £60 per square foot—that goes back to 2008, which was the tone date—but a new unit in the same centre has just been let at £30, that is, at half the value. The landlord is a big landlord, who has been trying to let units in the centre. That example spells out the situation for you. Landlords are trying to let, although there might be times when they sit back and say no. Those that have taken a loan through one of the big banks expect a return on that loan and need to repay it, so they will not sit back and wait until the market returns. At present, they are taking anything that they can get.”124

140. The Scottish Property Federation, in its written evidence, also disagreed with the public perception that landlords were happy to allow empty premises to remain empty in order to ‘hold out’ for higher rents. Its evidence reported that its members were aware of “considerable incentives being offered to tenants in order to secure their custom”125.

141. The Committee also heard views that changing shopping patterns were a significant factor in some property being empty. Questioned about major properties lying empty for many years in some town centres, Colliers International told the Committee—

“There are towns throughout Scotland … that could be referred to as terminal towns. Around 10 or 15 years ago, they were vibrant and had their own levels of value. In some cases, properties had 25-year leases in place, with the usual five-year rent reviews. However, the market has changed in such a way that those towns now have large established shopping centres that have sucked out the tenants from the traditional high street, leaving it very much secondary.

Landlords are trying to let those high street properties, but the problem is finding someone who wishes to go in there: nobody is willing to take on a lease. There may be other occupiers in the high street who continue to pay the same rent, but they are probably tied into institutional leases with upward-only rent reviews in which there is no provision to set a lower rent. That may be why rental levels are staying the same. The fact that there has been no take-up of other empty units tells me that there is no demand but plenty of supply.”126

142. The Committee notes the comments of witnesses about the current lack of demand – whether created by the current downturn or by changes in shopping patterns – being a significant factor in the number of empty commercial properties across Scotland.

Impact of the Bill’s proposals on business

143. Some of the evidence received by the Committee argued that the Bill’s proposals would not have the intended outcome of bringing significant numbers of empty properties back into use. CBI Scotland, for example, noted that policies of a similar nature that had been introduced in other parts of the UK have had little effect on reducing numbers of unused non-domestic properties. Citing a survey undertaken by Lambert Smith Hampton in 2008, in which 600 respondees claimed that the loss of empty property relief in England had not increased occupancy levels, it claimed that if Ministers were “determined to reduce the number of empty properties, this was not the way to go about it”127.

144. SCDI’s written submission also argued that evidence from England since 2008 did not suggest that the abolition of long-term property relief had increased occupancy rates, and in fact, retail vacancies in England had “increased sharply” as a result of the economic downturn.128

145. Scottish Chambers of Commerce (SCC) argued that the main effects of adding costs to property owners would be to “restrict their ability to invest in upgrading their portfolio”, adding that and it might even encourage owners to “seek demolition” of their property129. SCC also argued that added non-domestic rates liability in the absence of new rental income could “affect the viability of existing finance agreements and even result in foreclosure in some cases”130.

146. The Scottish Property Federation took the view that the Bill’s proposals would have a wide impact on business—

“In summary we feel that the proposal to reduce empty property rates relief is based on a misconception of the market and will be a significant cost to businesses, the public sector and investors including in particular pension funds. The measure will be a significant and perverse incentive for lenders to place businesses into administration and will also undermine the attractiveness of Scotland as a place to invest in and build speculative commercial developments.”131

147. Other stakeholders also commented on speculative development in the context of the Empty Property Relief reform proposals. For example, the Scottish Retail Consortium, in its written evidence, stated that the lack of finance and tenants will discourage speculative developments with the potential burden of empty rates further reducing investment”.132

148. The Scottish Chambers of Commerce echoed these concerns—

“In the absence of safeguards, the reduction of Empty Property Relief could also stifle speculative development, where owners are unwilling to take the risk of being left with untenanted property and a sizeable rates bill. This could adversely affect the available supply of quality and suitable business premises in Scotland.”133

149. Similar concerns were expressed by the Business Centre Association and the Scottish Council for Development and Industry.

150. In evidence to the Committee the Minister for Local Government and Planning reflected on these concerns raised with regards to speculative development—

“…the Scottish Government sympathises with the point about the liability costs of any new development. However, the advice that we have received is that the exemption of new properties would not comply with European Union state aid principles and therefore we cannot exempt them, although we sympathise with the point about the viability of developments. To suggest that there has to be complete rates relief for new properties would be wrong. The current policy is 50 per cent rates relief, so it is not the case that some unoccupied properties and landlords should pay nothing—that case has not been argued, even by stakeholders. The level at which relief is set is what we have to consider closely in the mix of all the other policy tools that we have at our disposal.”134

151. The Committee notes the concerns raised by many of those who gave evidence of the perceived possible negative effects the proposals to remove, or radically reduce, empty property relief may have on speculative development, and asks the Minister to consider whether other measures can be taken to mitigate any potential negative impact on speculative development.

152. There were particular concerns expressed in evidence about the potential impact of the Bill’s provisions on the retail sector in general and on town centres in particular. The Scottish Retail Consortium, for stated in its written evidence, that retail was the largest private sector employer in Scotland, employing around 240,000 people, many of them under 25. It highlighted the specific case of Glasgow city centre, which it said supported 11% of retail employment and was the second most important retail destination in the UK, acting as “showcase for the Scottish economy as a whole” and generating over £2.5 billion annually in sales. Despite this, it said, Glasgow had the highest shop vacancy rate amongst Scotland’s cities, at 21.2%.135

153. The SRC concluded that adding further property costs would “damage Scotland as a retail investment location resulting in more vacant units and less employment”136.

154. As regards town centres, the Scottish Chambers of Commerce written submission set out what it saw as the current situation—

“Scotland’s town centres are facing challenges from many different sources such as out of town competition, online retailing, falling consumer demand, high parking charges, access issues and the lack of a co-ordinated offering. At the moment, there are significant numbers of vacant properties in Scotland’s town centres – with around 14% of retail units lying vacant. This number is likely to grow further over the next two years as a host of leases come up for renewal. With major High Street stalwarts such as the Arcadia Group hinting at downscaling their operations, estimates have suggested that vacancy rates could rise to as high as 40% in Scotland.”137

155. COSLA’s written submission argued that further consideration needed to be given to the implications of non-domestic rates empty property relief on the wider policy context, particularly in light of the Scottish Government’s Regeneration Strategy. This Strategy commits to a national review of town centres in 2012 in order to scope potential solutions to issues faced by Scotland’s town centres. COSLA was “keen to explore with the Scottish Government how the non-domestic rates empty property relief will relate to other forthcoming policies and legislation including the Community Empowerment Bill, Better Regulation Bill and current consultations on the planning system”.138

156. Responding to some of the points that had been raised by witnesses on the likely impact of the Bill’s provisions, the Minister for Local Government and Planning defended the policy and the Scottish Government’s record of support for business, and indicated that the Scottish Government continued to have dialogue with the business sector on the details of the proposals—

“The Scottish Government has protected the poundage, and the small business bonus scheme, taken in context, has been incredibly helpful. Under our current proposals, we would still give relief of 10 per cent where none is given in England. Industrial properties, which were affected in England, are protected in Scotland, and we have ensured that we are applying some of the lessons that have been learned.”139

157. The Minister also set out the Scottish Government’s views on the policy position in Scotland compared to the rest of the UK—

“There are specific differences between what is proposed for Scotland and what has happened in England. The important point about the power is that it is very helpful to Scotland and to our economy to always have a competitive edge over other parts of the United Kingdom, specifically on business rates relief. That will come through in the consultation later this year. As with the small business bonus scheme, it is better to have the power—subject of course to parliamentary scrutiny—to vary those rates so that we will always have a competitive edge over what other parts of the United Kingdom are doing.”140

158. Finally, the Minister remarked that the Scottish Government was “listening to stakeholders to ensure that we get it right when we bring the regulations forward”141.

159. The Committee notes the concerns business organisations have expressed over the possible impact on Scottish business of an additional non-domestic rates liability. The Committee accepts that there may be a negative impact in certain situations, but also recognises that the Scottish Government needs to balance the need to bring empty properties back into use with the need to support business and to deliver value to the public for the significant sums that are and will continue to be provided by way of non-domestic rates relief. The Committee also recognises the significant support provided to business by the Scottish Government, which includes a commitment to maintaining the most generous rates relief package of anywhere in the UK and continuation of the small business bonus.142

Impact on the public sector

160. The Committee noted that the Bill would impact on the public sector in a number of ways. The main impact would be in respect of increased liability for non-domestic rates that public sector organisations themselves would face, although local government would also feel an impact in relation to its role in collecting non-domestic rates and as a commercial landlord.

161. COSLA’s written evidence noted that there would be a cost implication for local authorities where they were in ownership of properties that were unoccupied. The submission added that there were often “good reasons” for these properties remaining empty and that councils were active in letting out such properties as part of their asset management plans.143

162. COSLA also noted that some councils had raised concerns that the provision to vary the non-domestic rates empty property relief may have significant implications for local economies, adding that a council may have “strategic reasons” for “holding onto” an empty property for a certain length of time to ensure that the most appropriate and sustainable lets are made. A similar point was made in the submission by Glasgow City Council.144

163. COSLA indicated that it anticipated working with the Scottish Government during the development of the regulations to better understand the impact and to mitigate against any negative outcomes.

164. Highland Council’s submission argued that, in addition to the costs that local authorities would face arising from the reductions in empty property relief in respect of properties that they owned, administrative costs would be likely to increase in terms of identifying, verifying and monitoring empty properties in their areas. There would also be likely to be increased IT costs.

165. The Scottish Property Federation reported on wider analysis of the proposals that it had carried out—

“We have found some considerable costs from even this small sample for the public sector and a considerable impact for investors, including many pension funds (including public sector pension funds). It should be remembered also that liabilities may well follow businesses, including smaller businesses, seeking to downsize or upsize if they cannot dispose of their former lease. From this perspective the policy is something of an own goal as liabilities will also increase significantly for a number of public authorities including Scottish Enterprise, Dundee and Glasgow City Councils. It must be a concern for these authorities that this cost will need to be balanced by cuts elsewhere in their budgets.”145

166. The Finance Committee devoted a lot of its attention in its scrutiny of the Bill to the question of costs on the public sector. In respect of local authorities, it noted that there might be an increase in recovery costs arising from the requirement to collect increased rates from businesses. If more debt were to passed to the sheriff officer, this would increase councils’ agency fee for rates recovered.146

167. The Finance Committee also looked in detail at the question of commercial property owned by local authorities. The Finance Committee noted that the Financial Memorandum did not provide any figures for the number of local authority-owned properties that might be affected by the empty property relief proposals or information on the estimated costs to local authorities.

168. However, Glasgow City Council estimated in evidence to the Finance Committee that the changes would result in additional costs in the region of £0.5 million to £1 million per annum, which largely related to units in historically very hard-to-let areas.147 Angus Council also told the Finance Committee about the financial implications in respect of council property which remained empty longer than three months. It estimated that, based on the current position, additional rates charges of £20,000 would be incurred.148

169. Shetland Islands Council advised the Finance Committee that it had nine empty commercial premises, eight of which were in receipt of empty property relief and therefore would be affected by the Bill’s proposals149 while North Lanarkshire Council indicated that it owned 216 empty properties, 123 of which were granted 100% empty property relief.150

170. Following further investigation by the Finance Committee, the Bill team confirmed that it estimated that approximately 2,000 council properties were vacant and in receipt of empty property relief at any given point in time. Of this total, it estimated that between 630 and 870 properties would be affected by the proposed reforms, with a reduction in relief awarded between £1.4 million and £1.7 million. The remaining properties were likely to be industrial or listed or in the initial 3 month 100% period and would see no change to the amount of relief awarded.151

171. The Finance Committee concluded that greater effort should have been made to establish the number of local authority-owned empty properties that might be affected by the Bill’s proposals and the associated costs. The Committee also found it “surprising” that having established that it was unable to determine with clarity whether empty commercial properties were local authority-owned that the Bill team did not then seek this information directly from local authorities.

172. In respect of the overall impact of liability for increased rates in local authorities, NHS Scotland and Scottish Enterprise, the Finance Committee estimated that the projected net savings to the Scottish budget of £18 million could be reduced by up to £2.4 million.

173. The Committee questioned the Minister for Local Government and Planning on public sector liability for increased non-domestic rates as a result of the Bill’s provisions. The Minister said—

“the impact on the NHS is £0.3 million; the figure for Scottish Enterprise is £0.4 million; and the figure for councils is £1.7 million. Members should bear in mind that non-domestic rates income is £2.3 billion per year. Those figures are calculated on the basis that none of the properties concerned is brought back into use. They represent the cost of the policy to those organisations.”152

174. The Committee considers that the Financial Memorandum could have been more helpful in fully explaining the implications of the Bill’s proposals for the public sector. The Committee commends the Finance Committee for its efforts in getting more accurate and detailed information from Scottish Government officials.153

175. The Committee considers that the costs to the public sector, while not massive, are certainly potentially significant and notes that they could impact on the projected savings to the Scottish budget. The Committee therefore recommends that the Scottish Government monitors carefully the impact on the public sector in general and on local authorities in particular, once the Bill has been enacted, in order to ensure that the projections remain on track. The Committee also notes that the package of rates relief provided by the Scottish Government will help to mitigate costs.154

Financial assumptions

176. The Finance Committee looked in detail at the financial assumptions underpinning the Bill during its scrutiny of the Financial Memorandum. Full details of the Finance Committee’s investigations are contained in its report on the Bill, but the Committee noted that the figure of £18 million savings to the Scottish Government and cost to businesses appeared to have been based on a range of assumptions and therefore subject to a margin of uncertainty. It noted that whereas the FM had provided useful detail regarding the modelling and margins of uncertainty in connection with the council tax proposals, the same detail had not been provided in respect of the empty property relief proposals.

177. The Finance Committee concluded that the FM should have set out the margins of uncertainty on the figure of £18 million, how assumptions had impacted on its calculations and provided a range of financial estimates based on those assumptions, particularly given the volatility of the costs of empty property rates relief to date.

178. The Committee notes the Finance Committee’s findings on the projected £18 million savings, and draws their attention to the Scottish Government. The Committee considers it unfortunate that the margins of uncertainty as regards the non-domestic rates aspects of the Bill were not set out as clearly and helpfully in the Financial Memorandum as they were in respect of the council tax provisions, and notes that there might have been more time in which to research this information and make it available had this aspect of the Bill been subject to a full consultation.155

Exemptions for industrial property

179. Under the Bill, industrial property would be exempt from the reduction in rates relief.

180. The Scottish Retail Consortium’s submission to the Committee noted that the retail sector pays 28% of all business rates in Scotland, and was the largest private sector employer. The SRC was “unsure” why industrial units would continue to qualify for the more generous empty property relief “at the continued expense of other non-domestic ratepayers”.156

181. The Committee questioned the Minister on this point. The Minister told the Committee—

“There was evidence from the English experience that, because industrial premises are so specific by nature, it is hard to adapt them to new use. Therefore, it would be disproportionate and unfair if the empty property rates relief policy was applied in such a bland way to industrial premises. Learning the lessons from England, we felt that it made sense to exempt industrial properties. Some of the more glitzy stories in the press suggested that some industrial properties in England were demolished. There is not a huge amount of evidence on that, but if the policy was not implemented in a sophisticated way, it could have that impact on industrial properties. For that reason, industrial properties are not covered.”157

182. The Committee notes the Minister’s explanation for the exclusion of industrial properties from the changes to empty property relief.

Overall conclusions

183. The Committee notes the proposals contained in the Bill for reform of the system for relief on non-domestic rates on commercial and retail property.

184. The Committee recognises that the Scottish Government has attempted to develop a policy framework that is intended to save the public purse a significant sum of money and bring some of the currently empty commercial property back into use. In taking forward the proposals, the Scottish Government must ensure it maintains the correct balance between regeneration, revenue raising and the impact on business and economic recovery. It remains to be seen whether the Scottish Government has been successful in striking the correct balance, although the Committee accepts that the proposals are being taken forward in good faith.158

185. While the Committee acknowledges that the proposals have, in the main, been criticised in the business sector, it is also the case that the amount of public money that will continue to be devoted to rates relief on empty property – an estimated £137m in 2013-14 – is a significant sum, and will continue to support a non-domestic rates relief system that is more generous than those available in other parts of the UK. The Committee understands the current pressures on the business sector and accepts that businesses are unlikely to welcome proposals that will increase their costs during a time of recession. Nevertheless, the overall liability of £18 million that would be transferred from the taxpayer to a combination of the business and public sectors, does not seem to the Committee to be disproportionate given the overall contribution of the taxpayer to non-domestic rates relief.159

186. The Committee also recognises that the policy embodied in the Bill is only one tool in the box, and needs to be considered alongside measures emerging from other current policy developments such as the regeneration strategy and the forthcoming community empowerment bill.160

187. The Committee notes that the financial information supporting this aspect of the bill could have been presented in a more helpful and transparent way, rather than having to be probed by the Finance Committee as part of its scrutiny of the Financial Memorandum.161

Housing Support Grant

188. Section 4 of the Bill provides for the repeal of certain sections of the Housing (Scotland) Act 1987, the Housing (Scotland) Act 1988 and the Housing (Scotland) Act 2001. The effect of these repeals is to remove the Housing Support Grant. The Policy Memorandum explains that Housing Support Grant is a largely historic revenue subsidy system dating from the late 1970s, based on the notion that local authorities who build up excessive levels of Housing Revenue Account (HRA) debt should receive central government subsidy for as long as that debt remains disproportionate in relation to the level of rental income coming into the HRA.

189. The Bill, if passed, would abolish, from 1 April 2013, Housing Support Grant. This would require all 26 local authorities in Scotland with a Housing Revenue Account to operate their HRA without assistance from the Scottish Government in the form of Housing Support Grant.

190. The Policy Memorandum further explains that the Scottish Government would prefer to use its limited resources to support the construction of additional affordable homes and therefore the Bill proposes the abolition of Housing Support Grant by 1 April 2013. According to the Policy Memorandum, the Scottish Government “does not believe it is wise to continue to preserve legislation that offers an open-ended revenue subsidy to Scottish council housing when it already provides capital subsidy to support new build social housing”.162 The Scottish Government also believes that “under a local authority borrowing regime where HRA debt levels are required to be prudent and sustainable, HRAs should not require, by definition, to be serviced by central government subsidy”163. However, the Scottish Government considers that “the continuing availability of Housing Support Grant leaves open the possibility, and indeed creates a theoretical incentive, for local authorities to increase their Housing Revenue Account debt levels to unsustainable levels and receive ongoing Scottish Government subsidy for doing so”164.

191. It is further argued by the Policy Memorandum that the need for a local authority housing revenue subsidy system has been substantially altered by the introduction of the Prudential Borrowing Regime (April 2004), in which local authorities self-regulate their borrowing levels; the availability of local authority capital subsidy for new build housing from Scottish Government (from 2009); and the removal of the Right to Buy for new council housing (2010) making the possibility of new build council housing a more viable prospect (with capital subsidy from Scottish Government) for local authorities.

192. The Scottish Government would, therefore, prefer to increase the supply of housing through the provision of capital grant for social housing rather than using scarce resources to service historic debt on an ongoing basis.

193. The Policy Memorandum reports that, over time, the number of recipients and the overall level of grant provision at national and local level have changed markedly leaving the grant with virtually no national (although some local) significance.

194. The Financial Memorandum explains that Housing Support Grant is currently payable to one local authority in Scotland (Shetland Islands Council), largely for historical reasons (which the report will explore later). According to the Financial Memorandum, the need for HSG has fallen away in the rest of Scotland over time for various reasons including central government debt reduction measures imposed between 1996-97 and 2003-04, stock transfers between 2002-03 and 2006-07 and prudential borrowing by local government since 2004-05.

195. The HSG payment to Shetland Islands Council (SIC) is currently £0.761 million for 2012-13. The FM states that “the level and importance of HSG paid to the Council has been decreasing over the long term however and specifically in each of the last seven years”. This means that the Council “has been required to adjust its Housing Revenue Account (HRA) financial position over time to bring it more closely into line with the other 25 authorities with council stock who do not receive HSG”.

196. Discussions have been, according to the FM, “ongoing with the Council for approximately two years as to how their HRA can adjust further to the removal of the subsidy, whilst minimising the impact on rent levels”. Latterly, these discussions “have included the possibility of the transitional assistance the Council requested in its consultation response”.

Impact of the Bill on Shetland

197. Clearly, the main impact of the withdrawal of HSG would be on Shetland Islands Council and its council house tenants. The Committee agreed to take evidence from the Council and from its tenants’ organisations.

198. The Committee learned that the main reason for Shetland Islands Council’s housing debt was to support the provision of a large number of council houses at the time of the construction of the Sullom Voe oil terminal in the nineteen seventies. Anita Jamieson, Shetland Islands Council’s Executive Director for Housing, told the Committee—

“The difference between the Shetland Islands Council’s position and that of other local authorities is that the debt in Shetland is historical, and is a result of the oil industry’s arrival in the 1970s. … there was a national drive to get the oil revenues, and to get the Sullom Voe terminal built and up and running in Shetland. The population increased by about 40 per cent in a very short space of time, and, over two decades, the council had to build 200 to 300 houses, incurring a debt of around £50 million.

Over the years there have been various promises that the debt would be commuted, but that has not happened. We went through an initial stock transfer process, which was based on writing off the debt, but we did not get past the valuation stage. At that time, some of the other local authorities that had very high per-unit debt were successful in going through the stock transfer process. That left us where we are today.”165

199. During the evidence session with Shetland Islands Council, the Committee also learned that there had been an unsuccessful attempt at a whole-stock transfer a number of years ago. The attraction of such a transfer, had it been successful, was that the debt on the Council’s Housing Revenue Account would have been expunged. However, the stock transfer had to be abandoned. The Council explained—

“The difficulty was that our investment profile was inverse in comparison with a fundable investment profile. The condition of the stock meant that the front-end investment was much lower. The rents were already high, and the debt was there. It just did not work—it was unfundable.”166

Committee delegation visit to Shetland

200. The Committee felt that it needed to understand better the historical situation with regard to Shetland Islands Council, how the current situation had come about, what the Council was doing to address the historical debt, what role oil and other reserves might be able to play, if any, and how the withdrawal of Housing Support Grant, were it to happen, would impact on rents and on other aspects of housing in Shetland, in order to be fully informed in advance of the Committee’s Stage 1 report on the Bill being drafted. The Committee therefore agreed to send a cross-party delegation from the Committee167 to undertake a fact-finding visit to Shetland on 27–29 May.

201. During the visit, the delegation met and held discussions with the leader, members and senior officials of Shetland Islands Council and representatives of tenants groups and organisations. The delegation also met representatives of Hjaltland Housing Association and the Lerwick district heating scheme and met a number of the Council’s community planning partners, in connection with strand one of its Public Services Reform inquiry. The Committee expresses its sincere thanks to Shetland Islands Council for organising the content of the programme at short notice and for the excellent hospitality extended by its members and officials during the delegation’s visit.

202. The delegation was advised during its visit that there had been an urgent need to construct a large number of homes during the mid to late seventies, in order to accommodate workers and their families who were moving to Shetland for employment in connection with the development of the Sullom Voe oil terminal. Shetland Islands Council members present at the meeting took the view that although the debt from the construction of these houses accrued to the council, it was held on behalf of the government. They suggested that there had been an understanding with previous UK governments that the debt would be settled by the UK government, although it appeared that there had been no such indications by any UK or Scottish government since the UK general election of 1997.

203. Council officials also explained to the delegation the structure and management arrangements of its various reserves, including the Reserve Fund, the Harbour Account and the Housing Repairs and Renewal Fund, and the contingent liabilities on the Council, which constrain the ways in which some of these funds are capable of being used.

204. The attempt at whole-stock transfer (which would have wiped out the debt) that had taken place about ten years ago had not progressed as far as the ballot stage, because the stock transfer failed as the Council could not reach agreement with the government of the time to the valuation. At that time, the guidance was such that an agreed valuation was a pre-condition of proceeding to ballot.

205. The delegation also gained an understanding of some of the housing challenges faced by Shetland. Some of the stock is unlikely to be able to meet the Scottish Quality Housing Standard, as a result of a combination of the construction method, the Shetland climate and the absence of mains gas, which, taken together, make it impossible to achieve the required energy efficiency standards.

206. Housing need and demand continued to be high, but the Council’s ability to provide new social housing remained constrained by the requirement to service high levels of debt. Currently, the only new social housing on Shetland is being provided by the Hjaltland Housing Association, which works in partnership with the Council.

207. Rent levels in Shetland were reported by the SIC officials to have historically been in the upper quartile of comparable Scottish local authorities, although increases had been able to be held to inflation plus half a per cent.

208. Council officials also explained to the delegation that the discussions of options for the HRA were taking place in a context of a need to reduce the Council’s revenue spending, which had, for some years, been running ahead of income, meaning that it had been necessary to draw on reserves. A new council had been elected at the local government election on 3 May, and it was expected that reducing spending would be likely to be a priority for the new council.

Impact of the possible withdrawal of HSG on rents.

209. The Committee noted that there were different views on what the impact of a withdrawal of HSG would have on rent levels for council housing in Shetland. The Policy Memorandum suggests—

“Should the Council aim to recover all of this reduced revenue from council tenants this would lead to estimated rental increase of £3.04 per week on average over the three year period which represents an average annual rental increase of 4.7% above inflation.”168

210. Shetland Islands Council estimated the rent rise in the same scenario to be £8.13 per week169, while the Shetland Tenants Forum estimated the likely rise to be “in the region of £10 per week”170.

211. The Committee understands that the discrepancy in the different figures is due to different financial years being used for comparison. The Shetland Tenants Forum figure was based on the HSG levels in the 2011-12 financial year. The SIC figure was based on 2012-13, while the figure used in the Policy Memorandum is based on the 2013-14 financial year, which would be the first financial year in which, should the Bill be passed, HSG would be withdrawn.

212. The Committee was also aware of different views about rent levels in Shetland. SIC told the Committee that “in the 2011-12 figures for local authorities, Shetland had the second highest figure in Scotland, topped only by Edinburgh, and it was well above £4 a week greater than the Scottish average”171.

213. The Committee commissioned the Scottish Parliament Information Centre (SPICe) to carry out research into rent levels across Scotland in local authorities and registered social landlords in order to determine accurately where Shetland lay in the overall picture. The research found that Shetland had the fourth highest rent levels in Scotland, after City of Edinburgh Council, Renfrewshire Council and Highland Council, all local authorities with relatively high debt levels and in which proposed stock transfers had failed.172

214. Since 2004-05, rent increases in Shetland had been below the Scottish average, with the exception of 2010-11 to 2011-12, when rents had increased by 3% compared with 2.8% nationally.

215. Figures supplied to SPICe by the Scottish Government, showing weekly rent levels in 2011-12 across 22 comparator social landlords (17 RSLs and 5 councils) showed that Shetland Islands Council was ranked 19th out of 22 landlords in rent levels. The figures also showed that SIC tenants paid £3.84 or 6% less than the median figure for rural social landlords of £64.88 per week. Hjaltland Housing Association tenants in Shetland paid £6.03, or approximately 10%, more than SIC tenants,173 although SIC had remarked in evidence to the Committee—

“I think that our housing association rents are roughly equivalent for smaller properties and slightly more for others, but they have additional charges for factoring built in. When we strip those out, the figures are broadly similar.”174

Options open to Shetland Islands Council

216. According to the Bill’s Financial Memorandum, the Scottish Government has “for some considerable time”175 been discussing with Shetland Islands Council how the impact of losing HSG over time could be managed by a combination of a number of measures relating to the costs of running the HRA. The measures mentioned in the Financial Memorandum are “alternatives to rent increases aimed at minimising the impact of the declining grant on tenants”. The measures might include

  • bringing down the rate of income lost through void properties to (or below) Scottish median levels
  • reductions in the costs of the repair and maintenance service per unit to (or below) Scottish median levels
  • close examination of the housing capital expenditure programme to ensure it is tightly focused on specific elements of the Scottish Housing Quality Standard as laid out in Scottish Government Guidance dated March 2011

217. The Financial Memorandum goes on to note “that the Council has already been using some management cost reduction measures as the grant has declined over the last seven years so Scottish Government would simply expect that process to continue and to broaden as necessary as indeed it should under the prudential regime”176.

218. Finally, the Financial Memorandum suggests that the financial impact of the loss of HSG could “be further moderated by Shetland Islands Council reviewing the terms of its loan arrangements or the use of its wider portfolio of reserves”. The FM notes that, however, it is “not the role of the Scottish Government to impose any of these potential measures on the Council, but for the Council to manage the transition with declining grant as it has been doing successfully in recent years”177.

219. The report will return to some of these options in the concluding section.

Scottish Government views on Shetland

220. The Committee put many of the points that had been raised during the delegation’s visit to Shetland to the Minister for Housing and Transport, starting with the SIC’s understanding of commitments that had been made by previous UK governments to write off the debt. The Minister told the Committee—

“You are exactly right about Shetland’s point of view. We have found no evidence of a commitment apparently given by a previous Government, many years before the Scottish Parliament came into existence. We have seen no evidence that a commitment was given by a UK Government wanting to write off housing debt. There was a link in that the UK Government had an interest in ensuring adequate housing supply for people coming to work in the oil industry, but we have seen no evidence that the UK Government—not the Scottish Government—made a commitment to write off the debt. Shetland Islands Council has written to the UK Government on the issue, so it will be interesting to see the response.”178

221. The Committee also questioned the Minister on the reasons for SIC’s failed stock transfer and whether the fact that some of the debt had been internal – effectively owed to the Council’s reserve fund – had been a factor. A Scottish Government official said—

“I cannot speak for the Treasury, but my understanding is that the Treasury’s position has always been that it would write off only debt that was owed, in essence, to itself. Therefore, it would not have written off Shetland’s debt, which as you say was an internal loan from one part of the council to another. The Treasury would have written off the debt only if the stock had been transferred. My understanding is that Shetland Islands Council argued to receive grant to write off its debt, but not to transfer the stock. The Treasury would not have considered that.”179

222. In regard to the stock transfer, the Minister also remarked—

“…the main reason that stock transfer did not go ahead was a valuation disagreement.

It is also true to say that, when the UK Government has written off debt in the past, it has been Public Works Loan Board money. The UK Government took on loans that were taken out by councils to finance previous council house stock. According to recent information, what is different in this case is that the council owes the money to itself in one guise or another. That may well have been a sticking point but, as I understand it, the main sticking point was a difference in the valuation. We will find out more information on that and provide it to the committee if that is helpful.”180

223. The Minister subsequently wrote to the Committee providing further details on the stock transfer and the reasons for its failure. The Minister’s letter indicated that this was—

“due to a significant difference in the valuation placed on the stock by an independent valuer and that determined by the purchasing landlord, Shetland Homes. The independent valuer had valued the stock, using the widely accepted 30-year cash flow model approach for valuing social housing in existing use, at a considerably higher figure than Shetland Homes’ valuation. The then Scottish Executive policy was that the purchaser must meet the independent valuation placed on the stock before any progress could be made on the stock transfer proposal. This did not happen and so the proposal did not progress.”181

224. The Annexe to the Minister’s letter also clarified questions about whether there had been a realistic possibility of the Council’s debt being written off as a result of a stock transfer—

“Given the differences between the source of the Shetland Islands Council debt (i.e. internally funded) and the position of most other councils (mainly PWLB debt), the then Scottish Executive offered to fund the Shetland stock transfer proposal from its existing resources – just as it funded other, subsequent stock transfers with Scottish Government resources (in addition to the PWLB debt write-off granted by HM Treasury). This could only be done by means of a grant to Shetland Islands Council to extinguish the debt as the Scottish Executive was not the lender of any of the Council’s housing debt – thus making it impossible for it to write any debt off. Only the Council, as the lender, was (and is) in a position to write off the debt.”182

225. The Committee delegation to Shetland had heard that a budget line had existed within the former Scottish Executive during the 1999-2007 parliamentary sessions to fund debt write-offs resulting from stock transfers. The Committee asked the Minister for more information on this. The Annexe to his letter provided this clarification—

“The then Scottish Executive did make internal provision for the stock transfer from within its existing budgets and Ministers made public commitments to that effect even before the HM Treasury announcement … However, as the stock transfer in Shetland did not progress due to the differences in opinion on the valuation, the budget provision that was made was never called upon and was therefore reprogrammed within the Scottish Budget. It was not reprogrammed within the social housing budget as it had originated from elsewhere in the Scottish Budget. The principal reason for making the provision available was strictly related to the then Scottish Executive’s policy objective of maximising the number of houses to be transferred out of council ownership. 183

218A - The Minister’s letter also noted that although government funding to support debt write-off or grant to cover debt costs is no longer available, Shetland Islands Council had received considerable central government support—

“I would highlight that Shetland Islands Council has received £22 million in Housing Support Grant in the intervening period (2001-02 to 2012-13) and in excess of £75 million since 1979-80 and so has already had significant government grant support for its Housing Revenue Account.”184

226. The Minister also claimed, during the Committee’s evidence session, that there had “been virtually no rent rise in real terms in Shetland for a number of years” while “other councils have had that rent rise in many cases”. He added that “we have to try to treat people on a level playing field”.185

227. A question was also raised by the Minister about the repairs and maintenance service offered by the council, which he said was “very expensive compared to other councils”. He said that this might be because it was a gold standard service and that was what people “wanted and should have in Shetland”, or there could be “other reasons”. He concluded that it was “only right that we try to get to the bottom of that”.186

228. The Minister advised the Committee that he had written to Shetland Islands Council seeking a meeting with its leader, in order to discuss these matters further. This news was welcomed by the Committee. However, the Committee noted the Minister’s general comments in relation to Shetland’s situation—

“There are a number of points of difference between us. If the debt write-off was to happen, it would be the only one of this nature. It is not easy for me to see a basis for doing that, because the rents that are currently paid are comparable with rents in councils that are similar to Shetland. There are other issues. The council has substantial reserves, which, it argues, are committed elsewhere. It is true that some of those reserves could not be used for this purpose, but many of them could be. That is a choice that Shetland has made.

I would be keen to ensure that we did not treat one council differently from other councils. If we were to commit £40 million to writing off the debt of one council, that would equate to about £1 billion of debt write-off if we treated all councils the same way. We have to be very careful about that.

If Shetland has, as it says it has, a unique justification for asking for debt write-off, it is right that we should examine that. In the process of doing so, I am happy to pass the information back to the committee.”187

229. The Minister added—

“Shetland Islands Council also received its grant for 34 years, which is longer than any other council, so it has had the longest period of any council in Scotland to adjust its HRA’s financial position. If there are particular reasons why that adjustment has not happened, beyond those that we already know about from our discussions, we should discuss those reasons, and we are happy to do that.”188

230. The Committee notes the Minister’s comments on Shetland Islands Council, its HRA and the consequences of the possible withdrawal of the HSG. The Committee welcomes the prospect of further discussions taking place between the Minister and the leader of Shetland Islands Council in an attempt to resolve issues of disagreement.

Housing Support Grant – Committee conclusions

231. In principle, the Committee supports the proposal to end the Housing Support Grant. The Committee fully accepts the Scottish Government view, set out in the Policy Memorandum, that there are more appropriate ways in which central government can and should support the provision of new and affordable social housing in Scotland, other than by continuing to use scarce resources to service historic debt in perpetuity. The Committee also acknowledges that, since 2004, a prudential borrowing regime has existed, and all councils should have been moving to a situation in which their debt was manageable and sustainable under that regime.

232. However, the Committee also recognises the unique situation that has given rise to the housing debt levels in Shetland that have required the support of HSG. It fell to the local authority in Shetland to provide a large number of homes within a very short period of time in order to ensure the speedy construction of the Sullom Voe oil terminal, a facility that was essential to the development and continuing prosperity of the UK oil industry. Regardless of the benefits that Shetland has derived from the terminal, they have also undoubtedly been enjoyed much more widely beyond Shetland, and there seems to be an argument that at least some of that cost should be met from outwith local resources.

233. On the other hand, it is true that the resources available to the Shetland Islands Council and, more widely, to the inhabitants of Shetland, are significantly greater than those available to any other local authority in Scotland, and by some considerable way. While it is the case that the islands are on the extreme periphery of the UK and are disadvantaged by that position, poor transport links, a relatively extreme climate, a high cost of living and, ironically, high fuel prices, many of these factors are, arguably, outweighed by the significant wealth that the oil industry has brought to the islands. While the cost of living is high, so are wages and salaries. Unemployment is virtually non-existent, and public and council services are generously funded and of a noticeably high standard, virtually unheard of elsewhere in Scotland. Even during the Committee delegation’s brief visit, it was impossible for members not to be aware of the high standards of roads and the quality of their maintenance and the excellent education, sports, leisure and community facilities that appeared to exist even in very small communities. Not only does the Council have reserve funds that would be the envy of every other local authority in the UK, its members are trustees of the Shetland Charitable Fund, which is understood to sit at around £250million and to disburse, in most years, around £11m to charitable causes in the island.

234. The Committee understands Shetland Islands Council’s argument that the debt is “historical” and not of its making, but, in the apparent absence of any documentation to the effect that the debt that originated at the time of the construction of Sullom Voe would be commuted or met in some other way by central government, the Committee considers that Shetland Islands Council has some responsibility for developing a plan to ensure that its debt is put on a sustainable footing. This is particularly the case given the levels of resource available to the Council, some of which could be used to help reduce the existing debt levels further.

235. It is not for the Committee to tell Shetland how this could or should be done, but, as the Bill’s Financial Memorandum has pointed out, there are a number of options that the Council could explore, including raising rent levels, improving efficiency in the management of voids and reducing the cost of repairs and improvements. The Council could also explore corporately the extent to which its portfolio of reserves could be used creatively as part of a suite of measures to help put the debt on a sustainable footing, while ensuring that rents do not rise excessively or too rapidly.

236. It seems clear to the Committee, however, that there is an urgent need for such measures to be considered as soon as possible. The Committee delegation was surprised to learn during its visit that the modelling that had been done on the HRA so far by SIC required a further £15m of central government funding to go to Shetland over the next five years. This does not seem realistic to the Committee, given the direction of travel set out in the Bill and the tone of the Minister’s remarks when he gave evidence to the Committee on 30 May.

237. The Committee does take the view that it is likely that some kind of transitional funding will be needed in order to assist the Council restructure its debt to sustainable levels while avoiding unaffordable and sudden rent increases. It is not for the Committee to second-guess the content of negotiations between the Council and the Scottish Government on this matter, but the Committee would certainly be disappointed if it did not prove possible to reach agreement of a transitional scheme that saw central government support to the HRA to taper off to zero by the end of the current session of the Parliament.

238. The Committee notes that a new council was recently elected in Shetland, and the council has elected a new leader, who has committed himself to bringing the Council’s finances under control as a top priority. This is a welcome development. The Committee also welcomes the Minister’s statement that he has asked for a meeting with the new leader of the Council in order to discuss matters related to the withdrawal of HSG. The Committee urges both sides to strive to negotiate a solution that is fair and acceptable to the people of Shetland, but also to the rest of Scotland.

OTHER MATTERS

239. Standing Orders Rule 9.6 require the lead committee at stage 1 of bills to consider reports received from any other committee and, in the case of a Scottish Government bill, to report on the Policy Memorandum.

Subordinate Legislation Committee report

240. The Committee received a report from the Subordinate Legislation Committee.

241. The Subordinate Legislation Committee noted that the maximum increase in council tax payable on empty properties was not specified on the face of the Bill, but would be determined by regulations. It considered that there was a “fundamental question of principle as to whether the Parliament should confer an unlimited power to increase liability to council tax for certain properties”. The Committee observed—

“the ability to permit discounts within the council tax regime operates within certain limits at present. Discounts are also by their nature inherently limited in their effect on the individual, so far as they reduce tax amounts from those otherwise prescribed. The same is not true of an unlimited power to increase the liability to tax.”189

242. The Subordinate Legislation Committee considered that the Parliament should itself legislate for the maximum amount of liability that can be imposed rather than delegate this matter to Ministers. The Committee’s report went on to say that “in so far as the proposed enabling power to increase tax amounts in relation to unoccupied properties, is unlimited in amount, (or the possible percentage increase), the Committee considers this is not acceptable in principle, nor is it transparent”. 190

243. The Subordinate Legislation Committee concluded that the Bill “should state a suitable maximum level of permitted council tax increase in relation to unoccupied dwellings, beyond which any levels specified in the regulations could not go”.191

244. The Local Government and Regeneration Committee notes the point raised by the Subordinate Legislation Committee, and draws it to the attention of the Parliament and the Scottish Government.

245. The Committee thanks the Subordinate Legislation Committee for its report.

Finance Committee report

246. The Committee received a comprehensive report from the Finance Committee, following its scrutiny of the Financial Memorandum associated with the Bill. The Committee found the Finance Committee’s report very helpful in clarifying many of the financial assumptions that had informed the policy development that has been embodied in the Bill.

247. Many of the points raised by the Finance Committee in its report have been incorporated into the main text of this report, where appropriate.

248. The Committee thanks the Finance Committee for its report and draws it to the attention of the Parliament and the Scottish Government.

Policy Memorandum

249. The Committee considers that the Policy Memorandum that accompanied the Bill satisfactorily set out the policy objectives of the Bill, whether alternative ways of meeting those objectives were considered and, if so, why the approach taken in the Bill was adopted, as required by Standing Orders.

Consultation

250. Elsewhere in the report, the Committee has drawn attention to the absence of a formal consultation on the provisions of the Bill on non-domestic rates. Aside from these comments, the Committee considers that the consultation carried out by the Scottish Government on the Bill’s proposals was appropriate.

Equalities

251. The Scottish Government carried out an Equalities Impact Assessment192 on the council tax aspects of the Bill. The Policy Memorandum reports that the Scottish Government consulted equalities groups as part of the consultation on the increase, but none of them provided any specific comments in relation to the proposals or the information provided in the draft Equalities Impact Assessment.

252. The Policy Memorandum raises no specific matters in respect of the impact of the non-domestic rates and Housing Support Grant provisions on particular equalities groups.

253. The Committee is content with the Scottish Government’s analysis of equalities issues as set out in the Policy Memorandum.

OVERALL CONCLUSIONS

254. The Committee has considered the Bill’s provisions in detail, and has been assisted in this task by the reports received from the Finance Committee and the Subordinate Legislation Committee. The Committee’s conclusions on each of the three main areas that the Bill covers are provided in the relevant section of the body of the report, so need not be repeated here.

255. The Committee acknowledges that some aspects of the Bill are more controversial than others. The provisions in relation to council tax were generally welcomed and the Committee found little opposition to this aspect. The non-domestic rates provisions were more contested, and did attract significant opposition from the business sector, which has been covered in detail in the relevant section of the report.

256. Margaret Mitchell MSP took the view that this was the wrong piece of legislation at the wrong time, which fundamentally failed to acknowledge that the overriding reason for empty properties was due to a fundamental lack of demand and the current economic climate. For these reasons, the member could not support the provisions of the Bill relating to council tax and non-domestic rates. The member was not convinced that rates relief reform would be an incentive to bring empty properties back into use, or to tackle the underlying causes of empty properties.

257. The Committee unanimously supports the provisions in relation to the proposed withdrawal of the Housing Support Grant. This provision of the Bill attracted little comment, other than in Shetland, where the local Islands Council is the only remaining local authority in receipt of the grant. The Committee devoted a considerable portion of its scrutiny to this aspect of the Bill, sending a cross-party delegation to Shetland to fully inform itself of the issues surrounding the Bill’s proposals. Again, the Committee’s analysis of these issues and its conclusions are contained in the relevant section of the report.

258. The Committee acknowledges that there are likely to be improvements to be made to the Bill as it continues its progress through its parliamentary stages, and the Committee looks forward to debate on possible amendments in due course.193

259. In the meantime, the Committee recommends to the Parliament that the general principles of the Bill be approved.

ANNEXE A: EXTRACTS FROM THE MINUTES

12th Meeting, 2012 (Session 4)

Wednesday 16 May 2012

Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill: The Committee took evidence on the Bill at Stage 1 from—

Jim Hayton, Policy Officer, Association of Local Authority Chief Housing Officers;

Kristen Hubert, Coordinator of the Empty Homes Network, Shelter

Scotland;

Anita Jamieson, Executive Manager - Housing, Shetland Islands Council;

Joann Johnson, Chair, Shetland Tenants' Forum;

David Melhuish, Director, Scottish Property Federation;

Sarah Jane Laing, Head of Policy, Scottish Land and Estates.

Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill (in private): The Committee considered the evidence received.

13th Meeting, 2012 (Session 4)

Wednesday 23 May 2012

Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill: The Committee took evidence on the Bill at Stage 1 from—

Garry Clark, Head of Policy and Public Affairs, Scottish Chambers of

Commerce;

Peter Muir, Director of Rating, Colliers International;

Gareth Williams, Policy Manager, Scottish Council for Development and

Industry;

Mark Rodgers, Director of Housing and Property Services, Waverley Housing.

Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill (in private): The Committee agreed to undertake a fact-finding visit to Shetland as part of its evidence gathering on the Bill at Stage 1.

Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill (in private): The Committee considered the evidence received.

14th Meeting, 2012 (Session 4)

Wednesday 30 May 2012

Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill: The Committee took evidence on the Bill at Stage 1 from—

Derek Mackay, Minister for Local Government and Planning, Keith Brown, Minister for Housing and Transport, and Sam Baker, Head of the Tax and Markets Unit, Housing Supply Division, and Marianne Cook, Policy Manager, Local Government Finance Unit, Scottish Government.

Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill (in private): The Committee considered the evidence received.

17th Meeting, 2012 (Session 4)

Wednesday 20 June 2012

Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill (in private): The Committee considered a draft Stage 1 report. Various changes were agreed to, and the Committee agreed to consider a revised draft report, in private, at its next meeting.

18th Meeting, 2012 (Session 4)

Tuesday 26 June 2012

Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill (in private): The Committee considered a draft Stage 1 report. Various changes were agreed to, by division, and the Committee agreed the report for publication.

ANNEXE B: RECORD OF DIVISIONS TAKEN IN PRIVATE BY THE LOCAL GOVERNMENT AND REGENERATION COMMITTEE

1. On Tuesday 26 June 2012, the Local Government and Regeneration Committee considered its draft Stage 1 report to the Parliament on the Local Government Finance (Unoccupied Properties etc.)(Scotland) Bill. This consideration took place in private session.

2. During consideration of the draft report, 34 amendments to the report were proposed by members of the Committee. Nine of these amendments were unanimously agreed to by the Committee, and form part of the text of the report.

3. The remaining 25 amendments were moved, and following a debate by the Committee were either agreed to, or disagreed to, by way of a division (vote). In each case the Convener put a question to the Committee that the respective amendments be agreed to.

4. This annexe sets out the name of the member(s) proposing those amendments, the proposed text of each amendment, and the results of the division on each amendment.

5. John Pentland and Margaret Mitchell proposed the following alternative wording for paragraph 57—

The Committee notes that there is a lack of clarity in the Policy Memorandum on whether or not local authorities will have powers to grant exemptions on other grounds besides those specified in the Policy Memorandum and calls on the Minister to clarify this before the regulations are published.

6. The proposal was disagreed to, by division: For 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Against 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Abstentions 0.

7. John Pentland proposed the following alternative wording for paragraph 91—

The Committee notes the report of the Finance Committee on this aspect of the Bill. The Committee acknowledges the potential variations, speculative assumptions and unknown quantities that make it difficult to estimate accurately the likely impact of the Bill on revenue. The Committee notes that the FM acknowledges the significant margin of uncertainty inherent in the assumptions that have been used to calculate revenue. The Committee concludes that it is impossible to estimate accurately, at this stage, what the impact on revenue for local authorities is likely to be. However, the Committee considers that what is most important is the Bill’s impact on reducing the number of long-term empty properties and bringing them back into use. Should there be a positive impact on council tax income in local authorities, as seems likely on the balance of probability, this is likely to be helpful in giving councils other options in helping to bring properties back into use through other initiatives, although the Committee acknowledges that it will be for councils to determine how to use any additional income that accrues as a result of the proposed measures.

8. The proposal was disagreed to, by division: For 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Against 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Abstentions 0.

9. John Pentland proposed the following alternative wording for paragraph 99—

As mentioned in the introductory section of the report, The Scottish Government announced, in its 2011 Spending Review document, and in its 2011 Regeneration Strategy, its intention to introduce incentives to bring vacant premises back into use, reduce the prevalence of empty properties in town centres and support urban regeneration by reforming empty property relief from April 2013. The Policy Memorandum says that the proposals have been widely consulted on as part of the consultation on the Scottish Budget and as part of wider consultation on the Regeneration Strategy. The specific proposals in relation to non-domestic rates relief contained in the Bill, whose growth the Scottish Government wishes to restrict, have not, however, been the subject of formal consultation.

10. The proposal was disagreed to, by division: For 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Against 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Abstentions 0.

11. John Pentland proposed the following alternative wording for paragraph 112—

The Committee acknowledges the concerns over the Bill of many organisations representing business. The Committee also acknowledges the Minister’s statement that there is a need to “balance the books” and continue to invest in public services while seeking to regenerate the economy, but that several witnesses commented that there is a major question over whether the Bill will generate the resources claimed by ministers.

12. The proposal was disagreed to, by division: For 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Against 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Abstentions 0.

13. John Pentland proposed the following alternative wording for paragraph 119—

The Committee notes the Minister’s view that it would not have been proportionate to carry out a consultation because of the number of properties and the scale of the issue. However, the Committee questions why it was considered appropriate to hold a formal consultation on the council tax provisions of the Bill, which are estimated to create a lower level of income than are those in respect of non-domestic rates, but not on the other principal aspect of the Bill. The Committee also notes that it has been normal practice for many years for all legislative proposals to be the subject of full consultation before they are finalised and introduced in the Parliament in the form of a bill. The Committee considers that the consultation process is essential in allowing the government to consider a full range of views, and would result in more carefully considered and thought through legislation.

14. The proposal was disagreed to, by division: For 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Against 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Abstentions 0.

15. Kevin Stewart proposed the following alternative wording for paragraph 119—

The Committee notes the Minister’s view that it would not have been proportionate to carry out a consultation because of the number of properties and the scale of the issue. The Committee also recognises the Minister’s assurance that there is on-going consultation around the progression of the policy intent of the Bill. However, the Committee questions why it was considered appropriate to hold a formal consultation on the council tax provisions of the Bill, which are estimated to create a lower level of income than are those in respect of non-domestic rates, but not on the other principal aspect of the Bill. The Committee considers that the consultation process is an important aspect in allowing the government to consider a full range of views, and generally results in more carefully considered and thought-through legislation.

16. The proposal was agreed to, by division: For 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Against 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Abstentions 0.

17. John Pentland proposed the following alternative wording for paragraph 120—

The Committee also notes that consultees have major concerns over the proposals in relation to business rates and the potential negative impact of the removal of rates relief, and is therefore disappointed that the Scottish Government decided to bring these measures forward in a bill without the normally expected degree of consultation having taken place.

18. The proposal was disagreed to, by division: For 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Against 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Abstentions 0.

19. Kevin Stewart proposed the following alternative wording for paragraph 120—

The Committee concluded that the Scottish Government could have carried out further consultation before bringing the measures forward in a Bill.

20. The proposal was agreed to, by division: For 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Against 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Abstentions 0.

21. Margaret Mitchell proposed the following new wording be added [as a new paragraph] after paragraph 128—

The Committee notes, however, that under the Scottish Government’s own published BRIA Guidance, the principle of proportionality is only mentioned in relation to the content of any BRIA, and is not listed as a relevant factor with regards to the decision to actually undertake a BRIA. [Insert as a footnote: The Guidance states: The content of a BRIA should be proportionate to the problem involved and the size of the proposal. If it is likely to affect only a few firms or organisations, or many firms or organisations but only to a negligible degree, and/or the costs and benefits are likely to be negligible, then the BRIA can be quite short. Where the impact will be substantial, more data and analysis will be required.] Therefore, from the Government’s own guidance it appears that whilst the proportionality principle can be applied with regards to the content and detail of the BRIA, it is not cited by the Government as a pertinent factor in the actual need to conduct one in the first place.

22. The proposal was disagreed to, by division: For 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Against 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Abstentions 0.

23. Margaret Mitchell proposed the following alternative wording for paragraph 129—

The Committee, therefore, notes that the decision not to undertake a BRIA is at odds with the Government’s own published guidance, and the Committee agrees with the Finance Committee in its conclusion that it was unfortunate that a BRIA was not conducted before the Bill was introduced.

24. The proposal was disagreed to, by division: For 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Against 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Abstentions 0.

25. Kevin Stewart proposed the following alternative wording for paragraph 129—

The Committee notes the view of the Finance Committee that it is unfortunate that a BRIA was not conducted before the Bill was introduced. The Committee also recognises it is for ministers to determine if a BRIA is proportionate.

26. The proposal was agreed to, by division: For 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Against 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Abstentions 0.

27. John Pentland proposed the following alternative wording for paragraph 130—

The Committee notes the Minister’s commitment stated above to explore and refine the policy and to listen to the Committee and to stakeholders, together with his remark that although the Scottish Government considers the policy direction to be important, it is prepared to be flexible. The Committee therefore urges the Scottish Government to continue the dialogue with business organisations and other stakeholders as the policy develops, and to reconsider conducting a BRIA.

28. The proposal was disagreed to, by division: For 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Against 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Abstentions 0.

29. John Pentland proposed the following alternative wording for paragraph 159—

The Committee notes the concerns of the business organisations have expressed over the possible impact on Scottish business of an additional non-domestic rates liability. The Committee accepts that there may be a negative impact in certain situations, but would prefer greater clarity through the undertaking of a BRIA. It also recognises that the Scottish Government wants to balance the need to bring empty properties back into use with the need to support business and to deliver value to the public for the significant sums that are and will continue to be provided by way of non-domestic rates relief.

30. The proposal was disagreed to, by division: For 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Against 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Abstentions 0.

31. Kevin Stewart proposed the following alternative wording for paragraph 159—

The Committee notes the concerns of the business organisations have expressed over the possible impact on Scottish business of an additional non-domestic rates liability. The Committee accepts that there may be a negative impact in certain situations, but also recognises that the Scottish Government needs to balance the need to bring empty properties back into use with the need to support business and to deliver value to the public for the significant sums that are and will continue to be provided by way of non-domestic rates relief. The Committee also recognises the significant support provided to business by the Scottish Government, which includes a commitment to maintaining the most generous rates relief package of anywhere in the UK and continuation of the small business bonus.

32. The proposal was agreed to, by division, For 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Against 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Abstentions 0.

33. John Pentland proposed the following alternative wording for paragraph 174—

The Committee considers that the Financial Memorandum should have been more helpful in fully explaining the implications of the Bill’s proposals for the public sector. The Committee commends the Finance Committee for its attempts to get more accurate and detailed information from Scottish Government officials, and is disappointed that it was not more promptly given to the Local Government and Regeneration Committee.

34. The proposal was disagreed to, by division: For 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Against 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Abstentions 0.

35. John Pentland and Margaret Mitchell proposed the following alternative wording for paragraph 175—

The Committee considers that the costs to the public sector are certainly potentially significant and notes that they could impact on the projected savings to the Scottish budget. The Committee therefore recommends that the Scottish Government monitors carefully the impact on the public sector in general and on local authorities in particular, once the Bill has been enacted, in order to ensure that the projections remain on track.

36. The proposal was disagreed to, by division: For 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Against 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Abstentions 0.

37. Kevin Stewart proposed the following alternative wording for paragraph 175—

The Committee considers that the costs to the public sector, while not massive, are certainly potentially significant and notes that they could impact on the projected savings to the Scottish budget. The Committee therefore recommends that the Scottish Government monitors carefully the impact on the public sector in general and on local authorities in particular, once the Bill has been enacted, in order to ensure that the projections remain on track. The Committee also notes that the package of rates relief provided by the Scottish Government will help to mitigate the costs.

38. The proposal was agreed to, by division, For 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Against 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Abstentions 0.

39. John Pentland and Margaret Mitchell proposed the following alternative wording for paragraph 178—

The Committee accepts the Finance Committee’s findings on the projected £18 million savings, and draws their attention to the Scottish Government. The Committee considers it unsatisfactory that the margins of uncertainty as regards the non-domestic rates aspects of the Bill were not set out as clearly and helpfully in the Financial Memorandum as they were in respect of the council tax provisions, and believes that there should have been more time in which to research this information and make it available had this aspect of the Bill been subject to a full consultation.

40. The proposal was disagreed to, by division: For 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Against 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Abstentions 0.

41. John Pentland and Margaret Mitchell proposed the following alternative wording for paragraph 184—

The Committee notes that the Scottish Government has attempted to develop a policy framework that is intended to save it a significant sum of money and bring some of the currently empty commercial property back into use, without having too severe an impact on business or on economic recovery. It remains to be seen whether the Scottish Government has been successful in striking the correct balance.

42. The proposal was disagreed to, by division: For 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Against 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Abstentions 0.

43. Kevin Stewart proposed the following alternative wording for paragraph 184—

The Committee recognises that the Scottish Government has attempted to develop a policy framework that is intended to save the public purse a significant sum of money and bring some of the currently empty commercial property back into use. In taking forward the proposals, the Scottish Government must ensure it maintains the correct balance between regeneration, revenue raising and the impact on business and economic recovery. It remains to be seen whether the Scottish Government has been successful in striking the correct balance, although the Committee accepts that the proposals are being taken forward in good faith.

44. The proposal was agreed to, by division, For 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Against 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Abstentions 0.

45. John Pentland proposed the following alternative wording for paragraph 185—

The Committee acknowledges that the proposals have, in the main, been widely criticised in the business sector. The Committee understands the current pressures on the business sector and accepts that businesses are unlikely to welcome proposals that will increase their costs during a time of recession. Nevertheless, the overall maximum figure of £18 million (if it turns out to be accurate) that will be transferred from the taxpayer to a combination of the business and public sectors, does not seem to the Committee to be a disproportionate measure given the overall contribution of the taxpayer to non-domestic rates relief.

46. The proposal was disagreed to, by division: For 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Against 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Abstentions 0.

47. Margaret Mitchell proposed the following alternative wording for paragraph 185—

While the Committee acknowledges that the proposals have, in the main, been widely criticised in the business sector, it is also the case that the amount of public money that will continue to be devoted to rates relief on empty property –£721 million annually – is a very significant sum, and will continue to support the most generous non-domestic rates relief system within the UK. The Committee understands the current pressures on the business sector and accepts that businesses are unlikely to welcome proposals that will increase their costs during a time of recession.

48. The proposal was disagreed to, by division: For 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Against 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Abstentions 0.

49. Margaret Mitchell proposed the following alternative wording for paragraph 186—

The Committee also recognises that the policy embodied in the Bill is only one tool in the box, and needs to be considered alongside measures emerging from other current policy developments such as the regeneration strategy and the forthcoming community empowerment bill. However, given the Government’s upcoming national review of town centres as part of its Regeneration Strategy – which was noted by some of those who gave evidence – the Committee questions the timing of these proposals given the impact they will have on town centre regeneration and finds it odd that they are being considered in isolation from the “national review of town centres” that the Government is to undertake.

50. The proposal was disagreed to, by division: For 1: (Margaret Mitchell); Against 6: (James Dornan; Joe FitzPatrick; Anne McTaggart; John Pentland; Kevin Stewart; David Torrance); Abstentions 0.

51. John Pentland proposed the following alternative wording for paragraph 187—

The Committee notes that the financial information supporting this aspect of the bill could have been presented in a more helpful and transparent way, rather than having to be probed by the Finance Committee as part of its scrutiny of the Financial Memorandum. The Committee considers that this is probably a product of this aspect of the Bill’s provisions not having been as fully consulted upon as other aspects and calls on the Scottish Government to reconsider conducting a BRIA.

52. The proposal was disagreed to, by division: For 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Against 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Abstentions 0.

53. Margaret Mitchell proposed the following alternative wording for paragraph 258—

The Committee acknowledges that there are no doubt improvements to be made to the Bill as it continues its progress through its parliamentary stages, and the Committee looks forward to debate on possible amendments in due course.

The proposal was disagreed to, by division: For 3: (Anne McTaggart; Margaret Mitchell; John Pentland); Against 4: (James Dornan; Joe FitzPatrick; Kevin Stewart; David Torrance); Abstentions 0.

ANNEXE C: ORAL EVIDENCE AND ASSOCIATED WRITTEN EVIDENCE

12th Meeting 2012 (Session 4), 16 May 2012

Written Evidence

Association of Local Authority Chief Housing Officers

Scottish Empty Homes Network/Shelter Scotland

Shetland Islands Council (Annexe)

Shetland Tenants' Forum

Scottish Property Federation

Scottish Land and Estates

Oral Evidence

Association of Local Authority Chief Housing Officers

Scottish Empty Homes Network/Shelter Scotland

Shetland Islands Council

Shetland Tenants' Forum

Scottish Property Federation

Scottish Land and Estates

Supplementary Written Evidence

Shetland Island Council

13th Meeting 2012 (Session 4), 23 May 2012

Written Evidence

Scottish Chambers of Commerce

Waverley Housing

Scottish Council for Development and Industry

Oral Evidence

Scottish Chambers of Commerce

Colliers International

Waverley Housing

Scottish Council for Development and Industry

14th Meeting 2012 (Session 4), 30 May 2012

Oral Evidence

Minister for Housing and Transport

Minister for Local Government and Planning

Supplementary Written Evidence

Scottish Government

Minister for Housing and Transport

ANNEXE D: OTHER WRITTEN EVIDENCE

Aide Hunter Solicitors

Association of Town Centre Managers

Business Centre Association (BCA)

CBI Scotland

COSLA

Enterprise North East Trust

Falkirk Council

Federation of Small Businesses Scotland

Fife Council

Glasgow City Council

Highland Council

Homes for Scotland

NHS Ayrshire & Arran

NHS National Services Scotland

Reform Scotland

RTPI Scotland

West Dunbartonshire Council

ANNEXE E: VISIT BY A DELEGATION OF THE COMMITTEE TO SHETLAND

ANNEXE F: REPORT BY THE FINANCE COMMITTEE

ANNEXE G: REPORT BY THE SUBORDINATE LEGISLATION COMMITTEE


Footnotes:

1 Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill (SP Bill 12, Session 4 (2012)). Available at: http://www.scottish.parliament.uk/S4_Bills/Local%20Government%20Finance%20Unoccupied%20Properties/b12s4-introd.pdf [Accessed 16 May 2012].

2 Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill. Explanatory Notes (and other accompanying documents) (SP Bill 12-EN, Session 4 (2012). Available at: http://www.scottish.parliament.uk/S4_Bills/Local%20Government%20Finance%20Unoccupied%20Properties/b12s4-introd-en.pdf [Accessed 16 May 2012].

3 Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill. Policy Memorandum (SP Bill 12-PM, Session 4 (2012)). Available at: http://www.scottish.parliament.uk/S4_Bills/Local%20Government%20Finance%20Unoccupied%20Properties/b12s4-introd-pm.pdf [Accessed 16 May 2012].

4 Policy Memorandum. Paragraph 9.

5 Policy Memorandum. Paragraph 4.

6 Scottish Government, (2011) Achieving a Sustainable Future: Regeneration Strategy. Available at: http://www.scotland.gov.uk/Publications/2011/12/09110320/0 [Accessed 19 June 2012].

7 Policy Memorandum. Paragraph 4.

8 Policy Memorandum. Paragraph 17.

9 Local Government and Regeneration Committee. Official Report, 16 May 2012, Col 962.

10 Local Government and Regeneration Committee. Official Report, 16 May 2012, Col 962.

11 Local Government and Regeneration Committee. Official Report, 16 May 2012, Col 962.

12 Local Government and Regeneration Committee. Official Report, 16 May 2012, Col 962.

13 Local Government and Regeneration Committee. Official Report, 16 May 2012, Col 962.

14 Local Government and Regeneration Committee. Official Report, 16 May 2012, Col 962.

15 Local Government and Regeneration Committee. Official Report, 16 May 2012, Col 963.

16 Local Government and Regeneration Committee. Official Report, 16 May 2012, Col 963.

17 Local Government and Regeneration Committee. Official Report, 16 May 2012, Col 963.

18 Local Government and Regeneration Committee. Official Report, 16 May 2012, Col 963.

19 Local Government and Regeneration Committee. Official Report, 16 May 2012, Col 963.

20 Local Government and Regeneration Committee. Official Report, 16 May 2012, Col 963.

21 Local Government and Regeneration Committee. Official Report, 16 May 2012, Col 963.

22 Local Government and Regeneration Committee. Official Report, 16 May 2012, Col 963.

23 COSLA. Written submission. Paragraph 17.

24 Local Government and Regeneration Committee. Official Report, 23 May 2012, Col 982.

25 Scottish Land and Estates. Written submission.

26 Glasgow City Council. Written submission.

27 Highland Council. Written submission. Paragraph 4.

28 Waverley Housing. Written submission. Paragraph 3.

29 Local Government and Regeneration Committee. Official Report, 16 May 2012, Col 982.

30 Local Government and Regeneration Committee. Official Report, 16 May 2012, Col 982.

31 Adie Solicitors. Written submission.

32 Adie Solicitors. Written submission.

33 Local Government and Regeneration Committee. Official Report, 16 May 2012, Col 966.

34 COSLA. Written submission. Paragraph 19.

35 Glasgow City Council. Written submission.

36 Highland Council. Written submission. Paragraph 4.

37 West Dunbartonshire Council. Written submission.

38 Local Government and Regeneration Committee. Official Report, 16 May 2012. Col 965.

39 Local Government and Regeneration Committee. Official Report, 16 May 2012. Col 965.

40 Glasgow City Council. Written submission.

41 Glasgow City Council. Written submission.

42 West Dunbartonshire Council. Written submission.

43 COSLA. Written submission. Paragraph 12.

44 Homes for Scotland. Written submission.

45 Scottish Land and Estates. Written submission.

46 COSLA. Written submission. Paragraph 12.

47 Local Government and Regeneration Committee. Official Report, 16 May 2012. Col 969.

48 Policy Memorandum. Paragraph 40: “However, scope for additional exemptions needs to be balanced with avoiding potentially making the system overly complex for local authorities to administer and creating scope for some owners to exploit this by claiming exemptions they may not genuinely be eligible for. Therefore, in some cases, the Scottish Government intends that it should be up to the local authority to decide whether or not they wish to offer an exemption, depending on whether or not they feel owners have strong grounds for being unable to bring their home back into use. Even when an exemption is proposed in the regulations to be available in all local authority areas where the tax increase is applied, it will be at the local authority’s discretion to determine whether or not they are satisfied that an owner meets the requirements of the exemption (this is already the case in relation to determining whether or not an owner is eligible for any of the existing exemptions under Schedule 1 to the Council Tax (Exempt Dwellings) (Scotland) Order 1997).”

49 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1077.

50 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1078.

51 Paragraph 57 agreed to, by division (see Annexe B: Record of Divisions in Private).

52 COSLA. Written submission. Paragraph 20.

53 Local Government and Regeneration Committee. Official Report, 16 May 2012. Col 967.

54 Local Government and Regeneration Committee. Official Report, 16 May 2012. Col 967.

55 Local Government and Regeneration Committee. Official Report, 16 May 2012. Col 968.

56 Highland Council. Written submission. Paragraph 7.

57 Glasgow City Council. Written submission.

58 Glasgow City Council. Written submission.

59 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1074.

60 Local Government and Regeneration Committee. Official Report, 16 May 2012. Col 965.

61 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1074.

62 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1074.

63 Local Government and Regeneration Committee. Official Report, 16 May 2012. Col 983.

64 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1078.

65 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1078.

66 Minister for Housing and Transport. Written submission.

67 Minister for Housing and Transport. Written submission.

68 Financial Memorandum. Paragraph 37.

69 Financial Memorandum. Paragraph 38.

70 Financial Memorandum. Paragraph 42.

71 Financial Memorandum. Paragraph 46.

72 Fife Council. Written submission.

73 COSLA. Written submission. Paragraph 13.

74 Financial Memorandum. Paragraph 35.

75 Financial Memorandum. Paragraph 35.

76 COSLA. Written submission. Paragraph 7.

77 Scottish Parliament Finance Committee. Report on the Financial Memorandum of the Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill. Paragraph 147.

78 Scottish Parliament Finance Committee. Report on the Financial Memorandum of the Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill. Paragraph 163.

79 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1076.

80 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1076.

81 Paragraph 91 agreed to, by division (see 82 Paragraph 99 agreed to, by division (see Annexe B: Record of Divisions in Private).

83 Association of Town Centre Managers Scotland. Written submission.

84 Federation of Small Businesses. Written submission.

85 Federation of Small Businesses. Written submission.

86 Federation of Small Businesses. Written submission.

87 Federation of Small Businesses. Written submission.

88 Highland Council. Written submission. Paragraphs 9 and 10.

89 CBI Scotland. Written submission.

90 CBI Scotland. Written submission.

91 CBI Scotland. Written submission.

92 CBI Scotland. Written submission.

93 Falkirk Council Development Services. Written submission.

94 Falkirk Council Development Services. Written submission.

95 Scottish Chambers of Commerce. Written submission. Paragraph 4.

96 Scottish Chambers of Commerce. Written submission. Paragraph 5.

97 SCDI. Written submission. Paragraph 4.

98 Scottish Retail Consortium. Written submission.

99 Scottish Property Federation. Written submission. Paragraph 3.

100 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1068.

101 Paragraph 112 agreed to, by division (see Annexe B: Record of Divisions in Private).

102 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1058.

103 Paragraph 119 agreed to, by division (see Annexe B: Record of Divisions in Private).

104 Paragraph 120 agreed to, by division (see Annexe B: Record of Divisions in Private).

105 Scottish Parliament Finance Committee. Official Report, 2 May 2012, Col.1057.

106 http://www.scotland.gov.uk/Topics/Business-Industry/support/better-regulation/partial-assessments/BRIAGuidance/BRIAGuidance. [Accessed on 26 June 2012].

107 Scottish Parliament Finance Committee. Report on the Financial Memorandum of the Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill. Paragraph 32.

108 Scottish Parliament Finance Committee. Report on the Financial Memorandum of the Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill. Paragraph 34.

109 Scottish Parliament Finance Committee. Report on the Financial Memorandum of the Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill. Paragraph 101.

110 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1058.

111 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1072.

112 Paragraph 129 agreed to, by division (see Annexe B: Record of Divisions in Private).

113 Paragraph 130 agreed to, by division (see Annexe B: Record of Divisions in Private).

114 Policy Memorandum. Paragraph 3.

115 Federation of Small Businesses. Written submission.

116 Association of Town Centre Managers Scotland. Written submission.

117 Business Centre Association. Written submission.

118 CBI Scotland. Written submission.

119 Enterprise North East Trust. Written submission.

120 Falkirk Council Development Services. Written submission.

121 Scottish Property Federation. Written submission.

122 Local Government and Regeneration Committee. Official Report, 23 May 2012. Col 1003.

123 Local Government and Regeneration Committee. Official Report, 23 May 2012. Col 1003.

124 Local Government and Regeneration Committee. Official Report, 23 May 2012. Col 1004.

125 Scottish Property Federation. Written submission. Paragraph 13.

126 Local Government and Regeneration Committee. Official Report, 23 May 2012. Col 1006.

127 CBI Scotland. Written submission. Page 2.

128 SCDI. Written submission. Paragraph 6.

129 Scottish Chambers of Commerce. Written submission. Paragraph 8.

130 Scottish Chambers of Commerce. Written submission. Paragraph 11.

131 Scottish Property Federation. Written submission. Paragraph 18.

132 Scottish Retail Consortium. Written submission.

133 Scottish Chamber of Commerce. Written submission. Paragraph 10.

134 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1068.

135 Scottish Retail Consortium. Written submission.

136 Scottish Retail Consortium. Written submission.

137 Scottish Chambers of Commerce. Written submission. Paragraph 7.

138 COSLA. Written submission. Paragraphs 15 and 16.

139 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1061.

140 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1061.

141 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1062.

142 Paragraph 159 agreed to, by division (see Annexe B: Record of Divisions in Private).

143 COSLA. Written submission. Paragraph 11.

144 Glasgow City Council. Written submission.

145 Scottish Property Federation. Written submission. Paragraph 17.

146 Finance Committee. Report on the Financial Memorandum of the Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill. Paragraph 43.

147 Glasgow City Council. Written submission to Finance Committee.

148 Angus Council. Written submission to Finance Committee.

149 Shetland Islands Council. Additional written submission to Finance Committee.

150 North Lanarkshire Council. Written submission to the Finance Committee.

151 Scottish Government. Supplementary written evidence to the Finance Committee.

152 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1065.

153 Paragraph 174 agreed to, by division (see Annexe B: Record of Divisions in Private).

154 Paragraph 175 agreed to, by division (see Annexe B: Record of Divisions in Private).

155 Paragraph 178 agreed to, by division (see Annexe B: Record of Divisions in Private).

156 Scottish Retail Consortium. Written submission.

157 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col1066.

158 Paragraph 184 agreed to, by division (see Annexe B: Record of Divisions in Private).

159 Paragraph 185 agreed to, by division (see Annexe B: Record of Divisions in Private).

160 Paragraph 186 agreed to, by division (see Annexe B: Record of Divisions in Private).

161 Paragraph 187 agreed to, by division (see Annexe B: Record of Divisions in Private).

162 Policy Memorandum. Paragraph 62.

163 Policy Memorandum. Paragraph 63.

164 Policy Memorandum. Paragraph 63.

165 Local Government and Regeneration Committee. Official Report, 16 May 2012. Col 975.

166 Local Government and Regeneration Committee. Official Report, 16 May 2012. Col 980.

167 The delegation was: Joe FitzPatrick, (Convener); Kevin Stewart, (Deputy Convener); Anne McTaggart and Margaret Mitchell. The Committee Clerk and Senior Researcher also took part.

168 Policy Memorandum. Paragraph 74.

169 Shetland Islands Council. Written submission.

170 Shetland Tenants Forum. Written submission.

171 Local Government and Regeneration Committee. Official Report, 16 May 2012. Col 977.

172 The source of the data is the Scottish Government Local Authority Housing and Income and Expenditure Dataset: http://www.scotland.gov.uk/Publications/2011/09/27083556/0. [Accessed 26 June 2012]. This table shows Average Rent received per dwelling (£ per house per week). Average rents do not reflect the amount charged to tenants, but rather the amount earned by the council in respect of each property owned. This is the dataset used for figures provided in the Financial Memorandum.

173 Financial Memorandum. Paragraph 67.

174 Local Government and Regeneration Committee. Official Report, 16 May 2012. Col 977.

175 Financial Memorandum. Paragraph 62.

176 Financial Memorandum. Paragraph 64.

177 Financial Memorandum. Paragraph 63.

178 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1082.

179 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1082.

180 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1083.

181 Minister for Housing and Transport. Supplementary submission.

182 Minister for Housing and Transport. Supplementary submission.

183 Minister for Housing and Transport. Supplementary submission.

184 Minister for Housing and Transport. Supplementary submission.

185 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1084.

186 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1084.

187 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1084.

188 Local Government and Regeneration Committee. Official Report, 30 May 2012. Col 1085.

189 Scottish Parliament Subordinate Legislation Committee. 28th Report, 2012 (Session 4) Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill. Paragraph 19.

190 Scottish Parliament Subordinate Legislation Committee. 28th Report, 2012 (Session 4) Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill. Paragraph 20.

191 Scottish Parliament Subordinate Legislation Committee. 28th Report, 2012 (Session 4) Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill. Paragraph 21.

192 Scottish Government (2012) Equality Impact Assessment- Council Tax on Long-Term Empty Properties. Available at http://www.scotland.gov.uk/Publications/2012/04/7872/2 [Accessed 21 June 2012].

193 Paragraph 258 agreed to, by division (see Annexe B: Record of Divisions in Private).

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