Meeting of the Parliament 23 February 2016
I will sum up for the Labour group.
It has been a very short debate, but we have heard the key points. During evidence sessions, the Finance Committee heard about the stated aim of the policy, which is to minimise market distortion in Scotland due to inward investment from the rest of the UK, given the Tories’ introduction of a similar initiative there. The Scottish Government considers that such inward investment could crowd out first-time buyers.
We support the principles underpinning the tax, which are to reduce rent-seeking behaviour—whether to crowded-out first-time buyers from buy-to-let landlords or others, or to second-time home owners.
The draft budget estimates that the additional dwelling supplement would raise about £23 million in the first year. That sum is equal to the shortfall at Dundee City Council. If Mr Swinney wanted to earmark it for Dundee City Council, I would be very happy about that. Seriously, though, the Chartered Institute of Housing suggested earmarking that revenue for housing, and I suggest that the Scottish Government ought to consider that. I read in the cabinet secretary’s response to the committee about how the Scottish Government is trying to promote home ownership and about how it has initiatives. If it puts the money raised—the £23 million—into that, it would help more people to get into housing.
I have some concerns about the bill. As everybody said, there is a lack of credible data. The data used is largely anecdotal. I have mentioned that, in 2009, colleagues and I were involved in the Scottish Government report that produced a baseline of the private rented sector. One of the recommendations in that report was about improving the data, and I see that there have been very small improvements. However, to understand how the market works, we need to understand the motivations for people owning more than one home and renting it out—whether that is accidental landlords or people who have inherited property. We just need to understand how the private rented sector is evolving.
The proportion of households in the private rented sector has increased, from 5 per cent in 1999 to 14 per cent now. That expansion has been encouraged by the Scottish Government. Rent increases in Scotland over the last year were 1.6 per cent in the private rented sector. If we are concerned about market distortion, a rental increase of 1.6 per cent might not be as competitive as down south.
Registers of Scotland noted that, between 2005 and 2015, approximately one in five purchases with a mortgage in Scotland was made by first-time buyers. However, it is important to be mindful of the context. Annual house price inflation was 5.6 per cent in England, 0.8 per cent in Wales, 2.9 per cent in Northern Ireland and -0.9 per cent in Scotland. That is the latest data from the Office for National Statistics. The price of properties for first-time buyers is also increasing but at a decreasing rate, which suggests a slowdown in the housing market. I am a bit concerned that there might be unintended consequences.
There is a question of whether the lack of first-time buyers is a supply-side issue. It might also be a demand-side issue because of the general state of the economy and employment. Revenue Scotland is currently preparing guidance to help taxpayers and their agents to understand the additional dwelling supplement.
Like Gavin Brown, I have concerns about accidental second home owners. I urge the cabinet secretary to think about the grace period. A family who buys a house that takes a couple of months to renovate would be affected by the additional dwelling supplement. Other people might be affected by the supplement if they have accidentally ended up owning a house because something has happened down the chain. A family who are relocating to Scotland from England and have bought a home in Scotland while trying to sell their home in England might be affected.
I know that the cabinet secretary said that he is going to take evidence over the first six months, but there should be a longer grace period, especially given how quickly the LBTT has been implemented. I welcome his comments about the provision in relation to 28 January, but I really hope that he extends the grace period further.
There are some questions that the cabinet secretary ought to address. What will happen if the Conservative Government at Westminster decides to delay the implementation of the tax? How confident is the cabinet secretary that the 3 per cent supplement will change behaviour, prevent second home ownership, and prevent the crowding-out of first-time buyers? I look forward to hearing the cabinet secretary’s comments on those questions.
18:33