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Finance and Constitution Committee 16 January 2019

16 Jan 2019 · S5 · Finance and Constitution Committee

Item of business

Subordinate Legislation

Land and Buildings Transaction Tax (Tax Rates and Tax Bands etc) (Scotland) Amendment Order 2018 (SSI 2018/372)

Forbes, Kate SNP Skye, Lochaber and Badenoch Watch on SPTV

There were three questions there, and I will take each in turn. The first was on investments, the second was on rents and the third was on the evidence for the increase of 1 per cent. On ADS, it is worth bearing in mind that there is another policy objective as well as the ability to raise revenue, which is to support first-time buyers. The SFC’s evidence on that is important. Its analysis shows that the majority of the decline in ADS transactions has been made up of first-time buyers and home movers. In other words, where there is a loss of ADS-related transactions, the majority is absorbed by the market when it comes to first-time buyers and home movers. That is part of the policy objective of the change. On investment, we recognise the role that the private rented sector plays. In the evidence that has been provided, tax is seen as just one of a range of financial, regulatory and other considerations. The Scottish Property Federation is clear in its evidence to the committee that other changes have more significance than the changes to ADS. The sector remains at a steady 15 per cent in Scotland. Although an increase in ADS might mean that some people in the property sector will take other decisions, other people will see new opportunities. When it comes to investment, we recognise the role that the private rented sector plays, and when it comes to the creation of affordable housing, people often choose the private rented sector as a form of affordable housing. That is why we have the exemption from ADS for six or more properties, in order to get that balance right. I move on to rents. It is perhaps obvious, but I think that it is worth saying that the changes have no bearing on landlords with existing properties. They apply only to new purchases. I cannot comment on decisions that individual landlords might take in specific circumstances but, as I said, tax is only one of a range of concerns. The Office for National Statistics has shown a 0.5 per cent annual increase in rents to November 2018 across all private tenants in Scotland. That compares with annual increases of 1 per cent in England and 0.9 per cent in Wales, which suggests that, while ADS has been in place—albeit at 3 per cent—it has not resulted in a significant increase in rents. On the reason for the increase from 3 per cent to 4 per cent, we were keen to strike the right balance, as highlighted in the question, between supporting the private rented sector and achieving the policy objective of supporting first-time buyers. The SFC evidence makes it clear that we have got the balance just about right because the majority of ADS transactions that are lost will be made up of first-time buyers and home movers. There is an important point about fairness. In the budget process, we looked at different rates, and a judgment was made that a 1 per cent increase would strike the right balance between supporting the sector and supporting first-time buyers.