Seòmar agus comataidhean

I am pleased to join the committee today to assist members’ scrutiny of the Non-Domestic Rates (Miscellaneous Amendment) (Scotland) Regulations 2026.

The regulations provide for an additional 25 per cent relief for eligible licensed premises and music venues—including pubs, restaurants, hotels, nightclubs and licensed clubs—that are liable for the basic or intermediate property rate, that is, those with a rateable value of up to £100,000. That additional relief was announced by the Cabinet Secretary for Finance and Local Government on 12 February during stage 1 of the budget bill.

Together with the 15 per cent retail, hospitality and leisure relief that was announced in the budget for properties that are liable for the basic or intermediate property rate, the instrument will take the total relief for eligible licensed hospitality premises and music venues to 40 per cent for the next three years, capped at £110,000 per business per year.

The instrument also provides for a specific revaluation transitional relief for self-catering and holiday accommodation that has the requisite licence to operate, capping annual increases in gross liabilities for those seeing the highest increases in rateable values at revaluation at 15 per cent year on year until the next revaluation.

I met the non-domestic rates consultative group immediately after the chancellor announced additional support for pubs in England in order to hear businesses’ views and suggestions in that regard. We took on board what they told us and reacted to support their suggestions.

I am happy to answer any questions that the committee might have.

You have to look at the issue in context. Some years ago, the Barclay review made a number of proposals that have been largely taken forward, such as moving to a three-year revaluation and adopting a one-year tone date, which were supported by business organisations, as were many of the other measures that were introduced at that time.

If you look at the issue in the context of the past few cycles, you can see that, at the moment we are in a position in which the total rates bill levied on businesses is 6 per cent less, in real terms, than it was before Covid, despite there being more businesses eligible to pay rates. That shows that, far from being ramped up, the tax is taking a lower toll on businesses across the piece.

Of course, businesses always want not to pay rates, so we will always have these conversations, no matter what the system is or the extent of the reliefs in place. The Government has been clear about listening to what businesses have to say and coming forward with proposals for relief and reductions where they make sense. The total amount of relief for next year is £830 million—it is not an insignificant amount of money that we are putting into the system. Whatever way you work through it, if there is going to be a rates system that levies property-based charges on businesses to support public services, there will always be people who think that they should be paying less. That would be the case under any tax system.

It is important to recognise that the way that the total rates package is assessed works on the basis that it is revenue neutral over the revaluation period. It is not the case that the rates bill has been hiked up on average over the period. Although some will be paying more, quite a lot will be paying less.

As I said, the total amount that has been gathered through that process is revenue neutral over that revaluation period. There are people who are paying more and people who are paying less. Compared to the historical position, the total revenue raised through rates is 6 per cent less in real terms than it was before Covid, which is not that long ago. If anything, in reality, the rates bill on business has been reduced over that period.

We recognise that businesses face a range of challenges in relation to VAT, the employer national insurance contributions, energy bills and so on. However, if we are to have a system that raises money through a property-based tax on business to support and pay for public services, we will always be in a position in which there are people who say that they should be paying less than they are being asked to pay. Assessors go through a rigorous process of evaluating what the rateable value of a business should be, based on a range of factors, all of which are well documented. There is an extensive process of appeals that businesses can engage with if they feel that their rates are too high—either individually or, as you have already heard this morning, as a sector—and that there needs to be a reassessment. Assessors are very responsive to those discussions.

As I said earlier, the Barclay review looked at the NDR system a number of years ago and we implemented most of the recommendations from that.

The specific reason for the Gill review on licensed hospitality is that the sector told us that it felt that a different valuation methodology could be used for businesses in that sector. Other sectors have not come forward with the same challenges with regard to methodology. The self-catering sector has seen a change in the methodology as a result of the valuation, which is a more recent issue, and we have had engagement with the sector on that. The licensed hospitality sector has, for some time, been making the point that valuation methodology needed to be looked at. We have responded to that by setting up the Gill review.

At the end of the day, if we run a rates system that is revenue neutral over the cycle, although we can absolutely look at the methodology, on average, it is going to mean that because some pay less, potentially some are going to pay more.

If you are talking about the licensed hospitality sector, we have taken a broad definition there. It is broader than the approach that has been taken down south in terms of how many businesses are covered by the 40 per cent reduction. The difference is quite significant—I do not think that anyone else is getting a 40 per cent reduction in their rates bill. It is quite a significant undertaking from the Government that is going to cost £320 million over the cycle.

That is a fair response to the concerns that have been raised by the sector; we are supporting the sector because we recognise those costs. However, is also important to recognise that all sectors, by and large, are paying rates, and that other sectors are also impacted by cost of living challenges.

There are a few points there.

First, the system is clear; I do not think that there is anything unclear in relation to how it is calculated—you just walked through it yourself. However, that is different from it being complicated. I will come on to talk about that in a minute.

There are two parts to it. There is how the assessment of the rateable value of an individual property is done, which is clear. The methodology that the assessors use is published. They work through that for several hundred thousand businesses in order to arrive at numbers for each business, based on a range of factors, depending on the sector. The information and methodology that they use is clearly communicated. There is therefore nothing that is not available for individual businesses and organisations to see.

When it comes to the reliefs, I think that you have answered your own question: if those reliefs were not there, clearly, businesses would be unhappy, because they would have to pay significantly higher rates bills. We have had a number of questions this morning about individual sectors that are more challenged than others by economic factors and, indeed, rates increases. As a consequence of that, we have put in place targeted reliefs, such as those in relation to island businesses, remote and rural businesses, different sectors, or businesses that are feeling the shock of moving from small business bonus eligibility to not being in that position.

The package of reliefs that we have put in place is important. However, it will, by its nature, be complicated. I do not think that there is any getting away from that, given the need to target relief where we—and, indeed, business organisations—think that it needs to be targeted. It is also about dealing with businesses that are in transition, either as a consequence of an increase in their rateable value or their moving out of the small business bonus scheme.

If there are proposals as to how to continue to have a targeted system that supports businesses in transition, but in a less complicated way, then I am all ears. I, and the officials who need to do the calculations, would certainly be delighted to make it simpler.

Absolutely. It will be updated so that it reflects the latest situation. A representative of the Convention of Scottish Local Authorities sits on the NDR consultative group, alongside the assessors, as well as all the different business sectors. In that forum, which is held every two or three months, there will be an opportunity for those conversations to be had directly between business organisations, local authorities and the assessors. There are plenty of opportunities for people to raise those issues on an on-going basis.

Thank you very much. I do not think that we will see you again during the session. At least, I hope not, given that there is only one day left of the session. [Laughter.]

: No, of course the Government does not take them for granted.That is exactly why we put caps in place on rates increases for self-catering premises. It is also why we have engaged extensively with the tourism sector on the changes that we have made, which will be finalised today, if Parliament passes the Visitor Levy (Amendment) (Scotland) Bill.

The sector has indicated publicly that it is very happy with the level of engagement and support that it has had from the Government on the measures. We have carried out extensive engagement with the sector to respond to the issues that it has raised with us.

We meet regularly with the NDR consultative group, which has representatives of different sectors. We met with it before and after the United Kingdom budget and the Scottish budget, and when it became apparent that there was potential movement—it was not clear at that point—from the UK Government in relation to additional support for businesses south of the border. I asked the group how it thought that we should spend any money that might come to us as a result of any decisions in that regard by the UK chancellor, as we were committed to making use of any consequentials that came in that way. The group was clear that there was a need to support licensed hospitality. There was also a recognition that the self-catering properties were suffering a significant increase on average, so we took steps to put caps in place to support that sector.