Good morning, colleagues. First, I thank the committee for the opportunity to give evidence and to make this statement. I hope that our written evidence provided helpful context. I was also grateful for the opportunity to discuss the Scottish Government’s position with several members of the committee in recent weeks.
I highlight once again that we are not considering a party-political issue but a judgment about balancing risk for the benefit of businesses and public finances. Indeed, for context, I note that the Scottish Government’s proposal to delay the revaluation date to 2023 has also been called for by the Conservative Government in Westminster and by the Labour Government in Wales. What is more, I remind members that Ruth Davidson requested the delay in the chamber on 1 September—the day on which we announced our proposal to do exactly that in the programme for government.
The decision that is before the committee today is ultimately a simple binary choice. If the committee supports the instrument in question, the next revaluation will take place in 2023 with a one-year tone date of 1 April 2022. If the committee rejects the instrument, the next revaluation is scheduled in law to take place in 2022 with, I am concerned to say, a two-year tone date of 1 April 2020.
Despite the binary choice, I anticipate that the committee will wish to explore the Government’s view on a third option of a 2022 revaluation with a 2021 tone date. However, I must emphasise that the Government has no intention to consider that option if the instrument is rejected.
The option of a 2022 revaluation with a 2021 tone date is, of course, one that we in Government carefully considered, but ultimately rejected. Our decision was based on risk. With respect, those arguing for a 2021 tone date appear to be doing so based primarily on following the word of the Barclay review while overlooking the spirit of the review.
I submit that their arguments do not adequately take into account the impact of the situation that we face as a result of the pandemic. I highlight that I have not seen evidence to justify a 2021 tone date. Furthermore, from an operational delivery perspective, I must point out that a 2021 tone date would require assessors, with only around 15 months’ notice, essentially to deliver a six-month revaluation in order to inform the Scottish budget process. Therefore, although some may use the word “challenging” to describe a potential 2022 revaluation with a 2021 tone date, I argue that such a proposal runs the risk of compromising the entire revaluation exercise.
First, there are the operational impacts of the pandemic. It is a little more than four months until 1 April 2021, and, unfortunately, the number of Covid cases continues to increase. We know that the rating profession has appropriately taken up the Chancellor of the Exchequer’s coronavirus job retention scheme and that the profession was subject to national lockdown for much of the summer. We also know that the private sector rating agents are typically city-based but often provide a national service. Conversely, assessors have local offices but often cover multiple local authorities.
We need to consider that, under the strategic framework, one third of local authorities are entering level 4 and are subject to travel restrictions. In addition, it is not inconceivable that some areas might be significantly restricted again between now and next April. Moreover, where businesses are open, we know that some have refused to allow strangers—including rating surveyors and assessors—on site to reduce the risks of Covid transmission.
Put simply, given all that disruption, there are temporarily fewer professionals to do the job of revaluation, and, where they are available, there are legal and structural impediments preventing them from doing their jobs.
Secondly, we also need to consider the risk of a lack of evidence on which to base a potential 2022 revaluation with a 2021 tone date.
Since Covid, about 50,000 appeals have been lodged claiming a material change of circumstances. Some of those are believed to be duplicates, but every valid appeal is entitled to request an expedited hearing. However, despite the financial and economic challenges that are facing businesses, there has not been, to my knowledge, a single request for an expedited hearing. I think that that is a clear and compelling indication that appellants do not yet hold the evidence to support their case.
Furthermore, last Thursday, the Federation of Small Businesses published a poll that found that
“seven in 10 ... Scottish rent-paying businesses have been forced pay rent as normal throughout this crisis”.
Colleagues, we may disagree on various things, but I am sure that we agree that 2020 has been far from normal, as the FSB has evidenced for almost 70 per cent of small businesses.
More fundamentally, I am not aware of any credible evidence having been provided to assessors to support a change in rateable value.
Those points are undoubtedly correlated. They point to a lack of robust evidence on which to base a revaluation without significant risk of unintended but utterly predictable consequences.
Revaluations are revenue neutral by design, in order to maintain the income stream that supports public services that we all rely on delivered through local government. Therefore, they inevitably create a situation in which those who see their rates liabilities increase are offset by those who see their liabilities fall.
The winners and losers—I use those phrases advisedly—are not a matter of political influence, but are determined on the basis of regional and sectoral rental evidence. I am not suggesting that that evidence cannot come forward in time for 1 April 2021, but, on the basis of the verifiable evidence available to ministers, we have no confidence that it will—and certainly not in a way that fully reflects the impact of Covid-19 or Brexit, nor in a way that reflects the volumes or sectoral and geographic coverage that is necessary to enable a stable revaluation.
I believe that it is important that we give the market time to stabilise, to allow the evidence to catch up with reality and identify the correct winners and losers, rather than risk using structurally deficient evidence.
Indeed, when it comes to considering the winners and losers of an upcoming revaluation, it is undeniably clear from the written evidence provided ahead of today’s meeting that the overwhelming priority for the Scottish business community is certainty over the future of reliefs. That is where our focus should be after today’s decision has been taken.
However, I must also reiterate that, as the Cabinet Secretary for Finance has previously emphasised, given the constraints of the fiscal framework, decisions on the future of Covid-19 reliefs can be taken only in the context of United Kingdom Government spending decisions. We therefore hope that the chancellor will provide that certainty in his statement next week, to allow us to reflect those decisions in the Scottish budget rather than awaiting his March budget, which is only weeks before the current relief is scheduled to expire.
There is no political or even financial benefit to the Scottish Government from delaying revaluation. However, there are significant unintended consequences if we do not and the values at revaluation are not accurate and robust.
Although nothing about 2020 has been ideal, delaying the revaluation is a prudent, pragmatic and practical measure that we can collectively take to respond appropriately to the consequences of the global pandemic. Delaying the revaluation is the majority view of business organisations in Scotland. I hope that the committee will appreciate our risk-based approach to the next revaluation. If the instrument does not proceed there will not, as I emphasised earlier, be a delay to the revaluation or a change of tone date. Therefore, I hope that members will support our proposal, which seeks to ensure fairness for Scottish ratepayers in aggregate, while maintaining the stability of public finances.
I look forward to any questions the committee may have.