Hansard

I bring to the chamber our deep concern with a part of the Local Government Finance (Unoccupied Properties) (Scotland) Bill. Our particular concern involves the changes to empty property relief under the non-domestic rates regime. Although the changes will protect industrial property and listed buildings, they will almost extinguish the discount for empty commercial property, taking it from the—broadly accepted, to be fair—50 per cent down to 10 per cent.

We have three main concerns about the policy. First, it will not make any positive difference, it will not achieve the policy objective and it will not get empty properties back into use. Everyone in the chamber and most people across Scotland wish empty properties to be brought back into use. However, the prescription from the Scottish Government simply will not work and will not have any impact.

Secondly, not only will the policy not make a positive impact, but it is fairly clear that it will damage our economy and make it more difficult for it to grow when the upturn begins.

Thirdly, the policy has a cost to the public sector—something that was missed by the Scottish Government when it introduced the proposal. The bill suggested that the cost to the Scottish Government would be minimal because it has only 12 properties to be concerned about. That idea was knocked on the head the first time that the Finance Committee considered the bill, when it was gently pointed out that Scottish Enterprise has several hundred empty properties, and the cost to that agency alone could be pushing £500,000.

Underpinning all that—it is the reason for a lot of the negativity and the bad ideas—is the fact that the Government undertook no formal consultation on the measure. It consulted formally on all other parts of the bill, including a part that will cost only £750,000 a year and affect only one council. That part of the bill was deemed worthy of consultation, but a proposal that will affect thousands of properties, will affect every public sector agency in Scotland and will cost the business community millions of pounds a year was not deemed worthy of consultation by the Scottish Government. The Scottish Government has to explain to us clearly why the proposal was specifically excluded from the consultation on the bill. This has all happened when sales of commercial property in Scotland have slumped by 40 per cent in the first quarter of 2012.

My first substantive point is why I do not think the measure will achieve the policy objective. Paragraph 4 of the policy memorandum states that

“Reform of empty property relief will provide incentives to bring vacant commercial premises back into use and raise additional revenue for the Scottish Government.”

That is a fairly loose definition of the word “incentive”. Clobbering them with a tax does not sound to me like an incentive to bring properties back into use.

The policy has two objectives: to bring vacant properties back into use and to raise additional revenue. Most people—even people who are not sceptical—feel that most of the Scottish Government’s emphasis is on the latter; it is about the money.

However, helpfully, Derek Mackay, the minister in charge of bringing forward this part of the bill, gave evidence to the Local Government and Regeneration Committee a short while ago. When I read the Official Report of the meeting, I was interested to see that Derek Mackay had stated:

“If it were just about income generation at the expense of the business community, we would not be progressing it.” —[Official Report, Local Government and Regeneration Committee, 30 May 2012; c 1070.]

The Scottish Government and the minister in charge of the bill therefore accept that, if all that the measure does is raise additional revenue, it should not be taken forward. To win the argument today, and in the coming weeks and months, the Scottish Government therefore has to demonstrate clearly how the measure will bring vacant commercial property back into use, because, by its own admission, the measure should not be only about additional revenue; indeed, the Government would not introduce the measure if that was all that it was about.

We have asked repeatedly how many properties would be brought back into the fold. It turns out that the Government has made no attempt to model that. The bill team stated:

“we cannot say that we have seen any evidence in Scotland on whether the incentive works”.—[Official Report, Finance Committee, 2 May 2012; c 1070.]

In addition, having observed four years of evidence in England and Wales, the bill team was unable to present any evidence that the measure might have had any impact south of the border.

To correct the record, when the First Minister answered my question on the matter at First Minister’s question time, he said that 5,500 properties would be brought back into use as a consequence of the bill. I put the question to him very specifically. However, the 5,500 properties are the number of commercial premises that would immediately be hit by the tax. That does not mean that a single property will be brought back into use. The figure of 5,500 properties is the number that would be clobbered by the tax.

There is a basic misunderstanding on the part of the Scottish Government about why the properties are empty. They are empty because of market conditions and lack of demand. I accept that there will be exceptions, and during the evidence sessions individual members pointed to examples in their constituencies, but the vast majority of landlords want to let their properties. That is the meat and drink of what they do. If they are not letting out a property, they are not generating an income. Landlords want tenants, but the market is weak. The measure punishes landlords who have been unlucky and who have been hit by the downturn and the recession, without doing anything positive to bring the properties back into use.

The direction of travel in Wales seems to be the opposite to that in Scotland. The Welsh Government, which has had such a measure in place since 2008, has had a business rates review undertaken by an independent group. The independent report, which was published last week by the Wales business minister, said:

“We have not come across any examples in Wales where property owners have intentionally left property vacant; indeed pressure from insurers and the risk of holding vacant property are ample enough incentive to re-let.”

There we have it. The measure will not bring empty properties back into use. There is no evidence whatsoever that that will be the case, and there is a fundamental misunderstanding by the Scottish Government about why those properties are empty.

That is bad enough, but on top of that, the measure is quite likely to cause damage to the economy. Various properties have been demolished in other parts of the United Kingdom. In some cases, it was cheaper to demolish the property—no rates were paid at all as a result of that—than to pay the additional tax. A report by Lambert Smith Hampton on behalf of the Royal Institution of Chartered Surveyors said:

“there has been an increase in the demolition of perfectly sound properties ... largely as a result of their liability to Empty Property Rates”.

Therefore, there could be demolitions.

A reduction in speculative activity is also likely. If we want more premises, including commercial properties, to be built, there must be speculative activity, but the Scottish Government’s measure will choke off the development of new business space because substantially more will have to be paid for vacant rates. That is a big deterrent for speculative commercial development. It has an impact on the viability appraisals and is an extra contingency to be built in at a time when the sector is finding things extremely difficult. Our view and the view of industry is that the industry does not need extra punishment, and certainly not at this time.

The measure sends out a signal to the world and the business community at large that the Scottish Government will impose new taxes on a whim without consultation. I think that I am correct in saying that empty property relief was not mentioned in the Scottish National Party’s manifesto, which was published not that long ago and on which, admittedly, it won a fairly healthy majority. I stand to be corrected on that, but I had a good look through the manifesto. Why was the measure not mentioned in that manifesto if the SNP intended to introduce it? I am pretty sure that the First Minister will not mention it to the business community in the United States as something that the Government is proud of bringing forward. I am sure that that will be deeply hidden from everyone everywhere.

The measure will damage the economy and will not do anything to bring empty properties back into use. That is the key for the Scottish Government. Can the Government demonstrate at all that the measure will put properties back on to the market? There will also be costs to the public sector; we can return to that later.

I am very happy to move,

That the Parliament is concerned by the Scottish Government’s plans to substantially reduce empty property relief for non-domestic rates through the proposals in the Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill; is deeply concerned that the Scottish Government has introduced this proposal with no formal consultation and without making a business and regulatory impact assessment; notes the Finance Committee’s report on the Bill’s financial memorandum, which concluded that, “the Committee finds it surprising that the [Financial Memorandum] makes no attempt to estimate the number of commercial properties that will be brought back into use as a result of the Bill’s empty property relief proposals”; believes that reducing the tax relief for empty properties will have a detrimental effect on business and the economy; notes that there will be significant costs to the public sector, and therefore calls on the Scottish Government to abandon its proposed changes to empty property relief for non-domestic rates.

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