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Finance and Public Administration Committee

Meeting date: Tuesday, September 12, 2023


Contents


Subordinate Legislation


Land and Buildings Transaction Tax (Green Freeports Relief) (Scotland) Order 2023 [Draft]

The Convener (Kenneth Gibson)

Good morning, and welcome to the 22nd meeting in 2023 of the Finance and Public Administration Committee. Before we start, I congratulate all members of the committee who contributed to ensuring that we won the powering change award at last week’s Holyrood awards. It is a committee award, not an individual one for me, as convener, so I thank everyone. I doubly thank Michelle Thomson, who won the political hero award on Thursday night. [Interruption.] I named everyone on the committee to ensure that you were all recognised, including new members such as you, Jamie—you also got the nod.

Let us get on with the meeting and the matter at hand. The first item on our agenda is an evidence session with the Minister for Community Wealth and Public Finance on a draft Scottish statutory instrument—the Land and Buildings Transaction Tax (Green Freeports Relief) (Scotland) Order 2023. The minister is joined by Scottish Government officials Laura Parker, who is the land and buildings transaction tax policy lead, and Laura Duffy, who is head of the green freeports policy and delivery unit.

I welcome our witnesses and invite the minister to make a short opening statement.

The Minister for Community Wealth and Public Finance (Tom Arthur)

Thank you, convener. Good morning. I congratulate the committee on its award, and I congratulate Michelle Thomson on her award. However, having been in front of the committee several times, I know that praise and flattery will not get me off the hook, so I will get on with the matter at hand.

The Land and Buildings Transaction Tax (Green Freeports Relief) (Scotland) Order 2023 provides for relief from LBTT, in part or in full, for qualifying transactions in a designated green freeport tax site. Green freeports are designed to support businesses to create high-quality and well-paid new jobs. The successful bidding consortia are currently developing business cases that will set out plans to establish hubs for trade, investment and innovation, to promote regeneration and to make a significant contribution to achieving our net zero ambitions.

The Scottish and United Kingdom Governments have made a commitment to deliver a green freeport model that meets the needs of the Scottish economy and offers all the benefits that are available to those who are situated in freeports in other parts of the UK. LBTT relief is offered on that basis. It is part of a package of incentives for green freeports and is designed to be equivalent to the stamp duty land tax relief that is offered to other UK freeports, which will ensure that the overall objective of parity of treatment between freeports and green freeports is met.

The LBTT relief supports the wider programme by encouraging investment in specific tax sites on land that is underdeveloped or undeveloped. The legislation enables businesses to start to benefit immediately from the relief when the tax sites are designated, and the relief will be available for up to five years.

I welcome the evidence that has been submitted by a range of organisations in response to the Government’s call for evidence and the Scottish Government’s consultation on the draft instrument, and I look forward to members’ questions.

The Convener

As you will probably know from reading last week’s Official Report, there was quite a lot of discussion and deliberation regarding all aspects of the green freeport proposals. One issue is the importance of attracting green jobs into green ports. I felt that there was an element of frustration from our witnesses last week that there does not appear to be a definition of what a green job is. For example, on two occasions, Derek Thomson from Unite the union asked whether someone making deliveries on an electric bike counts as a green job. Does the Scottish Government have a definition of what a green job is? We do not want to be comparing apples and oranges in our discussion, with everyone around the table having a different view of what a green job might be.

Tom Arthur

That is a very important point and I recognise that various Administrations—at devolved level, at local government level, at UK level and at international level—will be engaging with the issue. In the private sector, various organisations will be assessing their commitments on sustainability and attempting to find a stable definition of green jobs. Clearly, as tackling the climate emergency has, in recent years, moved to the top of the political agenda domestically and internationally, there has been an evolution in some of the language that is used.

For example, in work that was published in March, the Office for National Statistics defined a green job as

“Employment in an activity that contributes to protecting or restoring the environment, including those that mitigate or adapt to climate change.”

That definition is sufficiently broad to encompass a range of green jobs, including those related to decarbonisation and net zero. It is anticipated that the ONS will, in the next few months, publish estimates of green jobs in the UK.

Other work has been done in this area. The green jobs fund, which the Government launched in 2021, uses the definition of

“Jobs in businesses that produce goods or provide services that benefit the environment or conserve natural resources.”

In addition, the climate emergency skills action plan from December 2020 states that green jobs include those in

“renewable energy, circular economy and zero waste ... and the nature based sector with wider ‘green skills’ sitting on a spectrum ranging from highly specific requirements in sectors directly supporting the transition to net zero such as energy, transport, construction, agriculture, and manufacturing, through to more generic requirements across all sectors to thrive in a net zero economy”.

I recognise that that definition is broad and all-encompassing, which might, understandably, prompt questions about where one draws the line. However, it speaks to the point that net zero is not something that we do specifically; it runs through all aspects of the economy.

As outline business cases are developed and we monitor and evaluate the progress that is made through the green freeport model, there will be further refinement and greater understanding of what we mean by a green job. I hope that, as an opener, what I have said helps to set the scene and shows some of the developing thinking in Scotland and elsewhere.

The Convener

That is very helpful. However, you quoted three definitions, and it would be good if we could boil things down to one specific definition, because, if we do not do that, it leaves room for ambiguity, which we want to reduce as we move forward.

Another issue that came up was the timescale that will be available for investors. Unite the union and David Melhuish from the Scottish Property Federation felt that five years was not long enough. Unite said that the period should be as long as possible, and David Melhuish said that it can take up to nine years for investments to come through. If we want to ensure that green ports are impactful as early as possible and that they attract as much investment as possible, is the Scottish Government thinking of extending the period beyond five years? What is the logic behind choosing five years?

Tom Arthur

We do not have specific plans to extend the period beyond five years. Part of the logic of five years is to have parity with freeports in other parts of the UK. If the Parliament approves the regulations, the permissive environment for the LBTT relief to come into effect will begin on 1 October, but the relief can be claimed only following tax site designation, which is a process that involves HM Revenue and Customs and HM Treasury. The period is five years to ensure that there is parity with the offer that is being made elsewhere in the UK.

We anticipate that there will be early investment and we recognise that some investment will take place to enable further investment to take place at a later date within the five-year window. Of course, we will keep the overall five-year period under review should there be any delays or unanticipated problems regarding tax site designation. I stress that the five-year timeframe is to ensure that there is consistency and parity with the offer that is available with freeports elsewhere in the UK.

The Convener

The Scottish Government specifically talked about freeports being different from green ports, so why is it not trying to give itself a competitive advantage by making the period seven or nine years? The Government has put a number of strictures on green freeports, which one might say makes them less competitive, albeit that there are some businesses that one might not necessarily want to attract in the first place. If the Government is looking for Scottish green ports to be a success, why not do something different from what the UK is doing? Are you being prevented from doing that, or is it a Scottish Government decision?

Tom Arthur

On the approach that we are taking in Scotland, the need for parity in some areas is recognised. We are also seeking to tailor the model specifically to the comparative advantage that we have in Scotland, hence the particular focus on net zero and decarbonisation.

On the point about a longer timeframe for specific relief, such as for LBTT, I can appreciate the points that have been made around having to assemble capital and put together various bids and proposals. However, we also want to incentivise development to happen as soon as possible, because there is a pressing urgency with regard to the activity that we want to see in green freeports, particularly given the role that that will play in our decarbonisation and net zero agendas.

As I said, the timeframe brings parity with regard to the offer and we want to ensure that we incentivise investment and development happening at the earliest stage possible. Of course, we will have a process of monitoring and evaluation throughout the period during which the reliefs are in place and there will be transparency through the information and data that will be published by Revenue Scotland. Therefore, there will be ample opportunity for Government, other stakeholders and the Parliament to measure the impact that the reliefs are having.

The Convener

With regard to that pressing urgency, I find the numbers that have been suggested to be quite fantastic: 25,000 jobs for Cromarty and 50,000 for Leith. With regard to Cromarty, you will be expecting people to move to those jobs, but what is being done to build the schools and homes that those people will need? You are talking about trying to get those people in early, so how is the infrastructure being upgraded to ensure that that can happen? You will have to provide a huge level of support in terms of the infrastructure behind the green port, to ensure that people have somewhere to live and take their kids to school, apart from anything else.

Tom Arthur

I will highlight two elements. Within the overall package for each of the green freeport sites, there is £25 million of seed capital available. More crucially, on that point about having a coherent approach and taking into consideration infrastructure, including schools, local government is part of that consulting approach and is a key partner with regard to its responsibilities around planning. It is about ensuring that we have all the right people around the table and that, given its statutory responsibilities in that regard, local government is at the table. That will help to ensure that there can be a co-ordinated approach to address the issues around infrastructure that you highlighted.

The Convener

Displacement is a key issue. For example, Cambridge Econometrics said that, of the enterprise zones that were set up in the UK, which lasted from about 1984 to about 2012, 50 per cent of the 126,000 jobs were, in effect, displaced from elsewhere. In a Scottish context, between 2012 and 2017, there was a net increase in private sector jobs in the enterprise zones that were set up in Scotland of just 16,000, compared to an initial forecast of 54,000, and 34 per cent of those were relocated from elsewhere through displacement.

What lessons are being learned from that? I understand that the UK had seven freeports, up until about 2012, when the last one, Liverpool, closed. Therefore, they have not had a great history of success in doing what it says on the tin.

Tom Arthur

The question of displacement is key and it is an active part of our consideration with regard to engagement with the individual green freeport sites and the overall process. It will also be a key concern for local government as partners. The risk of displacement comes with transferring jobs from one part of the country to another, of course, but with this model we are trying to create new high-quality jobs—jobs that respond very specifically to the assets and strengths of particular areas. We can recognise where there are similarities but also where there are distinct differences between each of the green freeport sites.

09:45  

I come back to the discussion that took place at the committee’s meeting last week, to recognise that the model that was referred to, which goes back to the 1980s, is in many respects from a different era. It is important to learn lessons and to recognise the possible risks of seeking to incentivise development in one part of the country. It is also important, though, to recognise that we are in a different era and that some issues that were pertinent in the 1980s and early 1990s are not so now—or not to the same degree. The current labour market is different and we also have a different focus, which is on the primacy of tackling the climate emergency and on decarbonisation.

I also come back to the key point on displacement, which is that our policy is about creating new, high-quality jobs as opposed to moving jobs from one part of the country to another.

The Convener

Assuming that every single job created in the green ports is in a completely new industry, a new manufacturing business or whatever it happens to be, people in other parts of Scotland and beyond who are highly skilled will still want to move there. Will that not exacerbate labour shortages and create inflationary pressures in other parts of the economy?

Tom Arthur

It could create challenges, but in designing the reliefs we have sought to incentivise new developments. The reliefs that the committee is considering today specifically concern LBTT. The policy affects land that is either undeveloped or underdeveloped—that is, land that would perhaps not see any development were it not for such intervention. It concerns a reserved area, but the employer national insurance contributions for new jobs that are created will help to mitigate the risk of jobs being transferred from one part of the country to another.

I am ambitious, in the sense that I hope that if there is any displacement it will not be from other parts of Scotland and that people from other parts of the UK and the world will be attracted by those high-quality jobs and so will come to work in Scotland. Speaking as the minister with responsibility for public finance, such highly paid jobs will help to generate revenue to support our public services. There is a real opportunity for us in cutting-edge industries, in which we have comparative advantages and where we can be world leaders, to attract people from outwith Scotland and from other parts of the UK and beyond. I certainly hope that that has happened.

Where we have been able to take action on the shaping of the tax policy—for example, on LBTT—that has been done to incentivise development that would otherwise not take place.

The Convener

Okay. Just one last question from me. There was loads of information there and I am sure that other members will want to come in.

According to David Melhuish,

“the officials behind the UK Government’s freeports prospectuses ... were very impressed with the prospectus that was put together by the Scottish Government”.—[Official Report, Finance and Public Administration Committee, 5 September 2023; c 46.]

However, Unite the union seemed frustrated that there did not seem to have been much engagement with the trade unions. Its representatives said that the City of Edinburgh Council was not listening to them or keen to engage with them. There was almost an accusation that that was deliberate. What engagement is the Scottish Government having with its trade union partners on such developments?

Tom Arthur

As you will appreciate, on the specific point about how individual local authorities choose to engage, it would not be appropriate for me, as a minister, to comment on decisions that are properly for them. Certainly, the Government’s broader approach, both on the development of fiscal economic policy and on wider industrial relations, is to have close engagement with our trade union partners.

I ask Laura Duffy to provide some background on the broader engagement that has taken place in the process of developing the proposal.

Laura Duffy (Scottish Government)

When we initially looked at the proposal there was engagement with trade unions. When Mr McKee was the lead minister, he met trade union representatives and a wide range of stakeholders on a number of occasions to discuss the developing policy.

As the committee will have seen, we have put fair work at the heart of the policy; the minister referred to that. We cannot mandate trade union recognition, but we have made a strong recommendation for the workers’ voice to be recognised in the governance structure of the green freeport.

As part of the business case, the two green freeports will be required to set out their strategies for embedding fair work principles across their areas. That was part of the policy development that was specific to Scotland that we undertook as a ministerial priority. Throughout the process, we will be looking closely at the level of ambition in that part of the outline business case on embedding fair work.

Thank you. That concludes my questions for now. I open up the session to colleagues around the table. First, we will hear from John Mason, to be followed by Liz Smith.

John Mason (Glasgow Shettleston) (SNP)

Minister, you have used term “underdeveloped” a number of times, and it is used in the schedule, the policy note and so on. Can you clarify what “underdeveloped” means? Presumably, if there is a one-storey building on a site and it is knocked down and a five-storey building is put in, that is developing the site. Therefore, is every site “underdeveloped”?

Tom Arthur

There is “underdeveloped” and there is “undeveloped”. I think that there is also obviously going to be a relation between the two. For some sites to reach their development potential, it will require other developments to take place around that—not to give too convoluted an answer. This is about helping to allow areas to realise their full economic potential. The LBTT relief is designed to support those developments to take place which, as I stated earlier, would not otherwise take place.

As regards what we would define as “underdeveloped”, there will, of course, be variations from place to place. This is a place-based approach, so there will clearly be some latitude in what “underdeveloped” means in specific instances and circumstances, based on the context. Laura Duffy might be able to add something about the terminology more broadly.

Laura Duffy (Scottish Government)

Part of the detail in the prospectus sets out the criteria for land being regarded as underdeveloped or undeveloped. As part of the process that will run alongside our assessment, with the UK Government, of the outline business cases, the Treasury and HMRC will scrutinise the proposed tax sites and look at the maps very closely to ensure that those sites meet the criteria for undeveloped or underdeveloped land. That is part of making sure that we are not attracting businesses into areas that are already quite active. Some of the proposed tax sites are basically just a piece of empty brownfield land. Those that are not will go through a process similar to the brownfield land sites of a very strict scrutiny process by the Treasury before any approval for the tax sites is switched on.

John Mason

I can understand if it is a piece of brownfield where something has been demolished and the land has just been sitting there—we certainly have that in Glasgow. From the Treasury’s point of view, is it quite black and white what is undeveloped and what is underdeveloped?

Laura Duffy

Yes. It is set out in the green freeports business prospectus. I do not have the details to hand, but we can point you in that direction if it would be helpful.

John Mason

That is helpful—thank you. The proposed new schedule talks about “Full relief” and says:

“This paragraph applies to a land transaction if ... at least 90% of the chargeable consideration for the transaction is attributable to qualifying green freeport land”.

I wonder why it is 90 per cent. Why is it not 80 per cent or some other figure?

Laura Parker can come in with those details.

Laura Parker (Scottish Government)

The 90 per cent for full relief is intended to capture scenarios where, in practice, most of the transaction is used for a qualifying purpose. If you have a factory with 95 per cent qualifying use but 5 per cent is used for caretakers’ quarters, which is not typically a qualifying use under the legislation—

Sorry?

Laura Parker

A caretaker’s quarters is technically residential use. The 90 and 10 per cent catches those scenarios where, in practice, the site is wholly used for a qualifying purpose.

On how we identified the right number to use, we gave consideration to the full range, but the range of 10 per cent to 90 per cent was used for stamp duty land tax, so, for consistency, we also used those figures for LBTT.

Okay, thank you. I think I understand that. The schedule also includes the idea of “Partial relief”. Is that tied into the same thinking?

Laura Parker

Yes.

Right. Could “Partial relief” mean a variety of levels?

Laura Parker

Yes. Partial relief could be 20 per cent qualifying use or 50 per cent qualifying use—anything between 10 and 90 per cent. The less than 10 per cent figure allows us to give consideration to the entire substance of the transaction. If more than 90 per cent of the land or the building is not being used for a qualifying purpose, that is not really the type of transaction that we want to seek investment in in terms of the tax sites or to provide relief to, because that is not really in line with the wider objectives of the green freeport programme.

John Mason

That is helpful—thank you. Minister, I think that the Scottish Fiscal Commission has said that the cost is under £5 million and so it is not taking a view, because it does not consider that amount to be material. That is still a chunk of money, however. Do we have an figure on the actual cost?

Tom Arthur

As you correctly identified, the SFC stated that the relief would be below the materiality threshold of £5 million. Given that such things are demand driven, it can be challenging to forecast with the degree of precision that we would like. However, there is an expectation that many of the transactions that would take place would be leases rather than conveyances. If we look at leases as a proportion of total LBTT revenue for Scotland in 2021-22, for example, they work out at about 3 per cent overall. Therefore, we are talking about relatively small sums of money, but such reliefs can be very meaningful and impactful with regard to decisions on whether individual transactions should take place. Of course, we should bear it in mind that we anticipate that the transactions would not take place were the relief not in place.

The convener asked about whether things might be displaced. If a business goes to one of the green freeport sites instead of, say, Glasgow, that would mean less money coming into the Government.

Tom Arthur

The tax designation sites are very specifically drawn, with clearly defined boundaries. Clearly, overall, green freeport sites are chosen for a number of reasons, against criteria, but place is an important part of that. Those sites in particular parts of Scotland will have comparative advantages, but we are seeking to remove barriers to investment that would perhaps not take place elsewhere but that can take place at those sites if those barriers are removed. Again, on the point about displacement, there is potential investment that would not necessarily take place were the reliefs not in place.

Are you saying that there is, in effect, no loss of revenue to the Government?

Tom Arthur

I am not going to try to outthink the SFC on this and say exactly that. The point that I am making is that, if we adduce the evidence that is available—the past revenue from leases as a proportion of overall LBTT, and the assessment in the SFC’s May 2023 “Scotland’s Economic and Fiscal Forecasts” that the relief would fall below the materiality threshold—we find that we are talking about a relatively small amount of money compared to overall LBTT revenue, never mind the whole of devolved and semi-devolved tax revenue. However, that is not to say that the relief does not translate into a meaningful impact on individual transactions that can positively influence commercial and investment decisions.

Liz Smith (Mid Scotland and Fife) (Con)

I will pursue that point, in line with the committee’s job of scrutinising the budget. In your answers, you have given an idea of what the potential costs might be. Has the Government done some arithmetic on the benefits that would accrue, in particular from the creation of new jobs, in the five-year period that you spoke about earlier? The hope is that those would be highly paid jobs, so we would get a greater return through tax revenues from income tax and so on. Have you done any analysis of the benefits and the costs?

Tom Arthur

I do not have a specific set of numbers that I can share with you, but I anticipate that the successful outcome would, as you highlight, lead to a net gain for the Scottish economy and, indeed, the public finances. The exact timescales in which that will be delivered will, of course, be influenced by a number of factors, including individual commercial decisions and the overall macroeconomic environment in which we find ourselves. However, to come back again to the key point, I note that this is about seeking to incentivise investment that would otherwise not take place; clearly, economic benefit and gain would come from that. However, I am not in a position to give specific timescales or to forecast when we would get a return on the investment.

Liz Smith

Nonetheless, one of the criteria that would be used to judge whether we are successful is whether, overall, there is a net gain to the Scottish economy over a certain period of time, because that is obviously what is important.

Tom Arthur

Of course. The convener alluded to the ambitions on job creation at both sites. If those are realised and provide high-quality and high-paying jobs, it follows that there would be a significant return on investment relative to LBTT exemptions, for example.

Liz Smith

On a related issue, the Scottish Fiscal Commission has made a very important point about our demographic structure, which is that one of the problems that we have in the Scottish economy is the size of the working population compared with the total population. Do you believe that the green ports initiative can help not only to create new jobs but to get some people who have left the labour market back into it to help with some of the issues that we have in the Scottish budget?

10:00  

Tom Arthur

I certainly hope that we always consider ways in which to encourage people who are currently inactive and have the potential to re-enter the labour market to do so. Although I cannot speak to any specific strands of work with regard to targeting particular groups, we all hope that that would be an outcome of the approach and that some of the jobs that are created through the initiatives will create opportunities for people to re-enter the labour market and bring their skills to bear on an exciting set of industries.

Liz Smith

It is quite an important aspect. As the Scottish Fiscal Commission set out, the challenges are huge. One of the biggest is in ensuring that our labour market is fit for future developments. It is not just a case of ensuring that new investment exists to create new jobs and attract people into them; we will also need the skills and talents of people who have taken themselves out of the workforce, who tend to be in a particular age group. It might be quite helpful, when considering the two areas that are designated, to have a look at that aspect because that incentive might be increasingly valuable to us.

In relation to the relevant skills that go with new green jobs—I accept the definition that you mentioned earlier, about being as flexible as possible—do we need to do a lot more to ensure that the skills and training that we are providing fit the new green opportunities in a way that can benefit the labour market?

Tom Arthur

You would expect me to say in answer that a priority for the Government is to ensure that our workforce is skilled and able to take up the new opportunities. There is broad recognition that we have a highly skilled workforce in Scotland, which is reflected in a range of metrics—not least of which is our consistent success in attracting foreign direct investment.

Laura Duffy might want to add something specifically on how that thinking will link up with green freeports and how the business cases have been taken forward.

Laura Duffy

Skills is a key strand in the business cases, so we are looking for the green freeports to tell us how they will address the skills need within them. We will look closely at the skills strategy that they will submit as part of the process.

Can I ask for a little detail on that? When ports make their application, is that a key part of what their application must contain?

Laura Duffy

Yes. Part of the business case is about their skills strategy. An outline business case will include a skills strategy, which we will scrutinise closely to ensure that it marries up jobs with supply in the labour market.

Can you give us some detail on what else is in an application?

Laura Duffy

Do you mean in the outline business case?

Yes.

Laura Duffy

The outline business case form is published online and sets out all the various parts of the application. We will look at plans for planning, skills and fair work; the strategy for investing seed capital funding; tax-site management arrangements; and customs plans. As you would expect, the business case will come in two parts: we will look at the outline business case first, which is the part that unlocks the tax incentives alongside the tax-site designation, then at the full business case, which focuses more fully on the detailed financial aspects—the broader-brush skills, security, risk, governance, and fair work. The heavy lifting is done in the outline business case, on which the full business case builds.

So, are applications most likely to be successful if you see benefits to the Scottish economy overall, with regard to the revenue that they will bring in?

Laura Duffy

Applications will be most likely to be successful if they have a full and rigorous business case, which we will consider across both Governments.

Thank you.

Ross Greer (West Scotland) (Green)

The rationale that you have outlined this morning is that companies will be given tax breaks in exchange for being encouraged to pass on the benefits thereof to their workers and to the wider economy. Is that not trickle-down economics?

Tom Arthur

The rationale that I have sought to set out, specifically on LBTT, is that they are sites that would otherwise not be developed. They would remain as they are, or underdeveloped. The intention of the incentive, beyond the points that I made about parity with the UK freeport model, is to incentivise investment in sites where development would otherwise not take place.

A trickle-down approach relates to things that would otherwise take place through alternative models or vehicles. It is also predicated on the notion that people on high incomes will spend their money in ways that are economically, socially and environmentally impactful rather than hoard it in assets or offshore.

It is about getting investment on the ground and development of land in Scotland that would otherwise not be developed or not be developed to its full potential.

Ross Greer

You mentioned the traditional issue with trickle-down economics, which is that the wealth that is generated is then hoarded offshore. Can any offshore entity benefit from this LBTT break? A company that is based in an offshore tax haven will be able to benefit from this tax break, will it not?

Tom Arthur

I cannot speak to the commercial decisions or operating arrangements of companies. If companies are operating in a way that is compliant with overall UK tax law and are in a position where they are making an investment, they would be treated just as any other company, depending on how it is constituted—

Ross Greer

I am sorry to jump in, minister, but this is not about UK tax law: it is about a devolved tax. It is—potentially, if it so wished—within the power of the Scottish Government to, for example, exclude any company that is based and incorporated in a tax haven from benefiting from an LBTT relief. However, you have chosen not to do so in this case. Why is that?

The provisions around avoidance are general avoidance provisions. Laura Parker might want to come in and speak to those, because it is an important point in which the committee will be interested.

Laura Parker

The relief, in and of itself, has its own conditions that claimants must meet in order to benefit from the relief. That involves using the land in a qualifying way, through development and so on.

As part of Revenue Scotland’s on-going compliance activity, it will assess—at the point of claim and throughout the three-year control period—whether a claimant meets the conditions for relief. If any artificial arrangements are put in place for a company to achieve a tax advantage that it is not otherwise entitled to, at that point, the general anti-avoidance provisions that are set out in the Revenue Scotland and Tax Powers Act 2014 will be on point.

Tom Arthur

The important point about the control period is that if development does not take place within three years the relief can be withdrawn. Ultimately, the relief will take place and be utilised only if development takes place on the ground. It is about attracting investment into specific sites and seeking to incentivise and unlock development in sites that would not otherwise see development or—as I said previously—would not be developed to their full potential.

Ross Greer

The emergency measures that the Scottish Government put in place during the pandemic excluded companies that are based in recognised tax havens, such as the Cayman Islands, from benefiting from Scottish Government emergency relief. The Scottish Government is therefore clearly capable of recognising what is, and is not, a tax haven, and whether a company is based in a tax haven for the purposes of—albeit legally—avoiding tax.

The Scottish Government is allowed, within the devolved settlement, to make policy decisions to exclude such companies from, for example, public procurement grants or tax relief. It has chosen not to do so in this case of tax relief, so I am simply asking for the rationale as to why.

The premise of the relief is about providing companies with advantages so that, in exchange, they will pass on those advantages to the wider economy and their workers. Why, then, are companies that have, for the purposes of avoiding tax, based themselves in offshore tax havens such as the Cayman Islands, still allowed to benefit from this further tax break when they could have been excluded? That is entirely a matter for the Scottish Government.

Tom Arthur

I have spoken previously about one of the key aspects being consistency with the SDLT arrangements elsewhere in the UK. However, ultimately, the benefit that is going to be conferred is development. I apologise for labouring this point, but it is development that would otherwise not have taken place. It is not as if there is potential competitive advantage for one particular model of company over another, or the potential of alternative development taking place on the site. It is about whether development takes place or not, or whether it takes place to its full potential. That is the rationale that underpins the relief in relation to underdeveloped or undeveloped land.

That aspect focuses on the fact that the relief will be accessible only if development takes place. If there is a transaction and a commitment to development, but such development does not take place within three years, the relief will be withdrawn. There has to be development. The second aspect is the broader parity that we have sought with regard to the arrangements elsewhere in the UK. Laura Duffy might want to comment on where we have sought parity on the arrangements for freeports and where we have diverged.

Laura Duffy

We have sought parity across the overall package as far as we can within our existing fiscal frameworks. As the committee will be aware, the tax relief package is made up of devolved and reserved reliefs. From a policy perspective, we have sought to design reliefs so that they mirror the UK ones as closely as possible, in order to ensure that there is a level playing field across the piece. If the reliefs start to go out of sync, one or other becomes disadvantaged. As I alluded to earlier, on the development of the policy that is specific to Scotland, the Scottish ministers focused keenly on the fair work aspect, which we wrapped into promoting the creation of high-quality jobs and the introduction of the specific objective on promoting decarbonisation and a just transition to net zero.

Ross Greer

If the fair work criteria are legally required of companies that operate in a freeport or that, in this case, benefit from LBTT relief, could such a company pay its workers the minimum wage—not the living wage—and refuse to recognise trade unions, but still access such relief, which is a tax break?

Tom Arthur

LBTT relief sits separate from the other reliefs. The way in which LBTT is constructed as a tax is that it is transactional—it is based on the transaction. Earlier I set out the criteria for when that could be withdrawn—that is, when development does not take place within the control area.

As for the broader points on fair work and monitoring, those must be evidenced through the outline business case and go into the full business case. Laura Duffy might want to add to that.

Laura Duffy

Because the two tax reliefs that we are putting in the package are property based, applying fair work principles is very difficult. The way in which such principles are built in is by our scrutinising for them at the bid stage. As I mentioned earlier, we will look for the green freeport strategy of embedding fair work principles across the green freeport area. When we come to assess that, we will look for ambition. The monitoring and evaluation framework that will sit across the whole programme will scrutinise that as it rolls forward into the operational phase. We will look closely at what the green freeports say they will do and whether they have delivered on that.

Ross Greer

My understanding, though—please correct me if I am wrong—is that the fair work criteria are not requirements. They are strongly encouraged, there is guidance on them and they are clearly what the Scottish Government wants out of the policy—I recognise that—but if the criteria are not required there is no direct consequence if a company is not meeting them as is defined in the fair work convention that the Scottish Government signed up to.

Tom Arthur

In touching on that point you are colliding with the reality of schedule 5 to the Scotland Act 1998 and the reservation of employment law. For example, we do not have the power to legally require trade union recognition in such contexts. We are trying to work constructively and in partnership with business and other partners to promote fair work. Although the Scottish Parliament does not have the power to legislate in those terms, we have a role, through leadership and the convening power of the Scottish Government, to seek to encourage businesses to adopt such practices. Throughout the process we have been clear about our expectations.

Ross Greer

I recognise that employment law is a reserved area and that power over it is not devolved. For years, we were told that, under schedule 5 to the Scotland Act, it is not legally possible to require businesses that bid for public procurement or which receive business grants from Government agencies to pay their workers at least the real living wage. That is now a requirement that the Scottish Government has delivered on—it is a legally binding requirement—so it turns out that we can do that within our devolved competences.

Let us put aside trade union recognition for a moment. I recognise that that area is untested, although I encourage the Government to test it.

It is clear that we can require businesses to pay workers—in this case, within a freeport—at least the real living wage. We have just done that with procurement and public grants, so why are we not doing it with the freeports?

10:15  

Tom Arthur

As you will appreciate, procurement is distinct. It is a devolved competency, but we have to operate within broader frameworks at UK and World Trade Organization level. It is distinct from employment law. I recognise that we have made significant progress on procurement over the past 17 years since the McClelland review. We published an independent report at the start of the year highlighting the benefits from the journey that we have been on with sustainable procurement. I recognise that there is much more that we can do in that space, and the issue was raised in the recently closed consultation on community wealth-building legislation. The analysis of that will be published later in the autumn. I highlight that in relation to the topical matter of procurement.

Where we can take action, we will, and when we are challenged to go further within devolved competencies, we will seek to do so.

Ross Greer

Why have we not done so in this case? As far as I understand it—I am not a lawyer, but I have tested this particular area through policy a few times—the Scottish Government could require businesses to commit to paying at least the real living wage in order to qualify for the benefits that it will provide to businesses in the freeport areas, but it is not doing that.

Tom Arthur

There is a distinction between procurement, grants and property taxes—that is the important point. There is a distinction between what they are and how they are administered and what is possible. There are also issues with the measures in the programme that is being developed in relation to parity with what is available elsewhere in the UK.

On having responsibility for devolved taxes and non-domestic rates, I am keen to reflect on how we can use those levers and work in partnership with trade unions and businesses to incentivise fair work, but we have to make sure that, in considering that, we do not conflate it with distinct areas of policy such as procurement or giving grants.

Ross Greer

Finally, minister, is not it the case that this is a UK Government policy that, in terms of fundamental economic principles, the Scottish Government does not agree with? The UK Government was going to do it anyway, so is the Scottish Government just trying to make the best of the situation? It would perhaps be better to be honest and say that this would probably not be happening if the UK Government was not doing it anyway, and that you do not want it to happen, but are just trying to make the best of it.

Tom Arthur

We operate in a UK context, and we seek to engage constructively with the UK Government. The freeport model was brought forward by the UK Government, if I recall correctly, following the general election in 2019. We have sought to listen to the voices of business and other partners, including trade unions, and to engage constructively in development of the proposals.

We are now in a position in which we have managed to come to a joint approach with shared decision making. That reflects the fact that we have sought to engage constructively. If we continue to work in a constructive manner with the UK Government and the green freeport operators, we can seek to harness the opportunity to deliver positive economic outcomes for the green freeport sites and the wider Scottish economy, including by strengthening key strategic industries.

I have plenty of other questions, convener, but it is probably time for other members to get a word in.

Indeed.

Minister, how important is a transparent application and assessment process to the strength of the bids?

Tom Arthur

It is incredibly important. A range of material has been published on the UK Government website, setting out various aspects of the criteria. Laura Duffy, do you want to go through what has already been made available and what is forthcoming?

Laura Duffy

The bidding prospectus was published on 25 March 2022. There was a cross-Government assessment process for that, and a decision note setting out why the decision was made and the basis behind it was published shortly after the selected green freeports were announced. The publications that followed that were the guidance for the business case and the forms for the business case outline and the full business case.

We had a number of freedom of information requests on the content of the bids, and we released all the information that we could on all five bids. If I recall correctly, the main information that was not released was commercially sensitive information. We have been as transparent as possible with the process.

Michael Marra

That is useful detail. It is in stark contrast to the process that was followed by the Government for investment zones, on which Neil Gray said in response to a written question from me:

“The invitation to host an Investment Zone was not subject to a bidding or application process”.—[Written Answers, 20 July 2023; S6W-19604.]

Minister, you said that it was “incredibly important” to have a proper process. Why was that approach not followed for investment zones?

Tom Arthur

You must forgive me—I am here specifically to speak about green freeports. As I am not the lead minister on investment zones, I do not have the information in front of me. However, I would be more than happy to ask that a response be provided in writing to address any further points that you want to articulate on the matter.

Michael Marra

We are investigating the potential benefits and value for money for taxpayers of such approaches; as a committee, we also have a general interest in Government decision-making processes. It strikes me that a very different approach was taken for investment zones. No process was put in place. On the day that the investment zones were announced, Russel Griggs of South of Scotland Enterprise wrote that he was bitterly disappointed and that he was still awaiting the publication of the selection criteria. People find that confusing.

I will provide some context, and it would be useful to hear the minister’s reflections. My home city of Dundee has been awarded neither green freeport status nor an investment zone, despite being the fourth-largest city in the country. We have the most prestigious and high-achieving life sciences institution in the whole of the UK, we have an outstanding port and we have huge economic need, yet neither of those opportunities has been delivered. Can the Government provide a justification for that?

Tom Arthur

The decisions that were taken on investment zones were a product of engagement between the Scottish Government and the UK Government. With regard to the decision-making process and criteria, while I seek to provide as much information as possible to the committee, I sincerely apologise: as I am not the lead minister in that area and it does not relate specifically to green freeports, I am not in a position to respond fully. However, I recognise the member’s interests as a committee member and as a regional representative, and I would be happy to respond in writing.

Michael Marra

In that case, I will ask about the generality of the situation. Is what has happened not an inevitable consequence of doing these things on a specific regional basis, rather than taking a national approach? You are here today to talk about a localised, regional approach to economic development, whereby the Government is making certain decisions about how to lift up certain areas. Are we not in a situation in which, essentially, the investment zones are just pork? Is this not just a case of pork-barrel politics, with the Scottish National Party and the Tories deciding to allocate the zones to areas of political priority? Does such an approach not open up that possibility?

Tom Arthur

It is important to recognise that place-based approaches to economic development are integral to a range of the work that is being progressed, from regional economic partnerships to community wealth building. I do not agree with the characterisation of the situation as an example of pork-barrel politics. I do not think that anyone could suggest that, from an SNP perspective, there was any political motivation to the decision in relation to Dundee. I do not think that that is a fair assessment to make.

I think that it is recognised that the Scottish Government has sought to work and engage constructively with the UK Government on initiatives that it has taken forward and with the areas involved. It is fair to say that parliamentarians of all parties regularly call for greater collaboration and partnership working. That is reflected in the fact that we have been willing to engage constructively with the UK Government on those measures, which were initially a UK Government initiative. We have not sought to be obstructive in any way; we have sought to engage to ensure that we can achieve the best outcome for people in Scotland.

Michael Marra

To be clear, minister, I am in favour of locally based regional economic development, but there must be transparency and criteria must be applied. Your Government has two very different policies—one involves the criteria that you have set out today while the other completely lacks any criteria or process.

I do not want to labour the point any further, but it would be helpful if the minister and his colleagues could set out, in writing, the rationale for the distinctly different approaches to the two different policies. I would welcome that, and it would be useful in helping us to assess the general impact of the policies.

Michelle Thomson (Falkirk East) (SNP)

To be fair, I recognise the challenges that the Government faces in the wider environment, and I look forward to hearing calls for greatly increased devolution in order to avoid such challenges in the future.

I consider Ross Greer’s comments to be valid. Minister, you talked about maintaining parity. I took from that that you knowingly accept the considerable potential for tax avoidance that should feed into all of our bottom lines. Am I correct in that assessment?

Tom Arthur

No, we do not, which is why I referred to the general avoidance principles that Laura Parker touched on when she commented on that area. Today, we are considering the LBTT order, which seeks to incentivise development that would not otherwise have taken place—

Michelle Thomson

I am sorry to interrupt. I absolutely get that, and you have made it clear that certain brownfield sites would not otherwise be developed. I accept that point, but it is difficult to make it without being aware of the wider environment. I will again quote a figure that I dug out a couple of years ago: the estimated loss to UK gross domestic product because of money laundering is conservatively estimated to be £262 billion every year, and the National Crime Agency says that the figure could be £100 billion more.

To my mind, we should be very concerned about that, so my question goes beyond the general principles, which, frankly, are not working. What specific discussions have you had with the UK Government to establish how it will counter tax avoidance and tax evasion? Clear warnings from the European Union in 2018 led to the EU issuing a commentary and taking further action on freeports. What recent discussions have you had?

I will make some broader points in a moment. Laura Duffy can speak about our specific engagement with the UK Government on the design of the prospectus and bids and on money laundering and security issues.

Laura Duffy

We are aware of the reputation of previous freeports, which we do not want to see with green freeports in Scotland. Our bidding prospectus clearly sets out that green freeports will be subject to strict conditions. Bidders will be required to adhere to the code of conduct for clean free trade zones, as set out by the Organisation for Economic Co-operation and Development, and to meet the obligations in the UK anti-money laundering regulations. Green freeports will not be a regulation-free zone; they will be required to meet the same regulations as in other parts of the country. They will not get a free pass from the requirements that generally apply to businesses.

Customs site operators will have to be authorised by HMRC, and green freeports will be required to keep a record of all businesses operating within their tax sites and to make that information available to law enforcement agencies. Those agencies will carry out checks on businesses and their owners before authorising them to operate.

Michelle Thomson

All of that is pretty standard, and having it all in place does not stop considerable money laundering and fraud—it is an epidemic—in the UK economy, overseen by the UK Government. I fully accept that most such powers are reserved, but Ross Greer made the important point that we have two choices—we can say, “That’s not very good,” or we can start to rattle the cage and use the powers that we have, which could absolutely disallow any offshore company or structure.

10:30  

Another point that has a bearing is that Scottish limited partnerships are well known for money laundering—they were at the root of the bombing in Beirut, and money that was being funnelled through them nearly brought down the entire Moldovan economy. They are well known and well understood.

Scottish limited partnerships affect our global brand name. If you have not had discussions with the UK Government, I ask you to have them and then return to the committee to set out exactly what assurances you have had and where you dispute points. This is our global brand, which is why I care passionately about it.

Tom Arthur

I will ask for an update to be provided to the committee as the OBCs progress and green freeports come online in order to provide additional confidence that robust processes are in place.

I know that you will recognise from your work in this Parliament and at Westminster that much of what you touch on sits in the reserved domain. That should not be a barrier to us seeking to do all that we can, but we have to recognise where the limitations lie. Seeking to apply property taxes and transaction taxes, for example, in a way that they are not inherently designed to apply can lead to unintended consequences and can work against the broader objective of ensuring parity with sites elsewhere in the UK, so that we remain competitive in the process.

On your specific request for an update, I will ask for that to be provided to the committee on the points that you and Mr Greer have raised.

Jamie Halcro Johnston (Highlands and Islands) (Con)

Good morning to the minister and his colleagues. I make it clear that I was pleased to support the winning Cromarty Firth bid.

A number of the issues that I was looking to raise have been covered; I will address a couple of things that colleagues have raised. In response to the convener’s questions, you talked about the role of infrastructure such as new schools, hospitals and housing, which will be vital to accommodate the new people and new jobs that we hope will come to freeport areas and will probably be vital to the success of freeports. You suggested that such infrastructure is a local government responsibility, and we know that local government is under severe financial pressure in delivering the services that it provides already. As a Government, how will you ensure that such services can be developed, given their importance to the project as a whole?

Tom Arthur

I referred to local government’s statutory responsibilities under the planning system. When development will have an impact on infrastructure, the planning system has mechanisms to ensure that contributions are made, such as section 75 agreements. As the process develops and unfolds, and as we see the additional development that we want, there will be broader consideration when developments go through the planning process for approval, and the impact on infrastructure will be considered. It will be for local authorities, working in partnership, to determine as part of that process the appropriate mitigations and adaptations that are required and the additional infrastructure that needs to be in place.

Jamie Halcro Johnston

That is all fine. You talk about working in partnership, but with whom? Hospitals, schools and houses have to be built. If the money is not there to build them, how do they get built? How will you as a Government work with Highland Council, in the case of Cromarty Firth, to ensure that additional resources are available as you hope that they will be?

Tom Arthur

There is a range of avenues for providing resource. As I said, that can happen under the planning system, when there is justification in planning matters for resources to be accessed as part of a development that is taking place. There are public resources, such as the capital allocations to local government.

As always, we will continue to have dialogue with local government. More broadly, that has been taken to a new and strengthened level across Scotland following the Verity house agreement. Such discussions will continually take place. If particular areas of pressure are identified and we need to consider solutions that go beyond what an individual local authority or group of local authorities was capable of, we would have those discussions at that point, just as local authorities routinely raise a number of areas.

We recognise that what we are seeking with regard to the creation of jobs and the development of land presents a huge opportunity. We also recognise that significant economic development can be attended by a range of challenges, so we will continue to engage. We are not taking an approach of saying, “On you go,” and leaving local government and the areas to it. We will continue to engage, and we will look to understand any challenges that emerge and identify solutions in partnership.

Jamie Halcro Johnston

Is there a specific vehicle for doing that? Obviously, some of the resources that will be needed further down the track will need to be delivered through the decisions that are being made now and the consultations that are being held now, whether those are on the structure that we have just talked about or infrastructure such as the A9, which we know is considerably behind schedule. Is there a specific group that is working on that?

Tom Arthur

I would point to our broader programme of infrastructure investment, which has been set out. The committee will recognise the challenges that we face with regard to our capital budget and the challenges of delivering projects due to cost inflation, which is an issue that is not unique to Scotland; it is having an impact right across the UK and in many countries. Therefore, there is that broader framework. Our capital spending will be kept under review with regard to timing and the phasing of what is feasible within the capital that is at our disposal and the cost of projects. Parliament is well versed in that from engaging with specific capital project issues.

With regard to the particular sites of the green freeports, clearly there will be interaction with broader projects such as the example that you cited of the A9. I have already touched on the point about specific local impacts and we will continue to have that dialogue and engagement to understand any issues as they emerge.

I should also note that, for each of the two sites, there is the seed capital funding that I referred to earlier, which will be available once the sites are active and online.

Jamie Halcro Johnston

On a similar point, there are some areas where you have indicated that you are looking for parity, largely, with the UK scheme, so that Scottish freeports are not at a disadvantage. What engagement are you having on the freeport projects—if, for example, there was a need to change the five-year transaction date? How is that engagement happening?

Tom Arthur

As has been touched on, we are in a situation where, subject to the order being passed, we hope that tax site designation would take place between HMT and HMRC in the near future, which would allow for the next stage. We continue to have active dialogue and engagement, and there is joint decision making between Scottish and UK ministers. Laura Duffy, do you want to add to that?

Laura Duffy

At official level, we meet the UK Government twice a week. We are delivering this as truly in partnership as we can. We jointly developed a prospectus and we have developed a process for assessing the business cases jointly. Green freeports are invited to the UK-wide senior responsible owner forum. We have very close engagement with the UK Government.

Therefore, if there were movement on either side on, for example, a need to change the situation, that is where it would be brought up and taken forward.

Laura Duffy

Yes.

Yes, of course. As I said, there is continued close dialogue and engagement, which will inform any decisions, and earlier we recognised the approach that we have taken from the outset with regard to parity.

Jamie Halcro Johnston

Thanks. The convener, Liz Smith and others have spoken about the impact of displacement as well as the costs involved, such as the advertised cost of £5 million in terms of land and buildings transaction tax, and how that might be offset by increases in income tax take. How detailed will that information be on income tax? Will you be able to determine from local tax figures whether there is displacement? Will that be an opportunity to see where displacement is happening and its impact? How soon would we be able to see that?

Tom Arthur

Specifically on LBTT, as I referred to earlier and as one would expect, monitoring will be done by Revenue Scotland and data will be published. In addition, LBTT revenue can accrue following the end of the exemption period, given that development that takes place now can enable and facilitate future development. You could almost say that LBTT could wash its own face in that regard, before we consider the broader impact of tax.

The monitoring and engagement of each of the freeports will assist us in identifying the level and type of job creation and the type of economic activity that is taking place. Laura, do you want to add anything about the economic impact?

Laura Duffy

We are developing a monitoring and evaluation framework for the programme that will help us to get clear information, and we are working with the green freeports to ensure that they are clear on what the monitoring and evaluation requirements will be so that they are ready to give us the information that we are looking for. In that way, we can have a clear picture of the impacts of the programme across the piece.

Will that operate on a Scotland-wide model, or will it look at, for example, displacement of jobs from the periphery of the freeports, such as within 100 miles or 50 miles?

Laura Duffy

We are looking at both aspects in the development of the framework.

It will not necessarily be needed for a bit of time, but when do you expect the framework to be in place?

Laura Duffy

I do not have the planned end date to hand, but the work on the development of the framework is well under way.

The Convener

Thank you. That concludes the committee’s questions.

Item 2 is formal consideration of the motion on the instrument. I invite the minister to move motion S6M-09584.

Motion moved,

That the Finance and Public Administration Committee recommends that the Land and Buildings Transaction Tax (Green Freeports Relief) (Scotland) Order 2023 [draft] be approved.—[Tom Arthur]

Do any members wish to comment?

Ross Greer

As I said in questions to the minister, the economic fundamentals that underpin freeports are those of trickle-down economics, which is not something that the Scottish Government can subscribe to. There is no evidence base for saying that wider economic benefits are going to be felt as a result of developing freeports. In fact, the evidence base from freeports across the world shows that the companies that are involved in freeports certainly benefit but the wider communities around them do not. I recognise that most of what is involved in setting up the freeports is reserved, but there are levers within the Scottish Government’s powers that have not been used, including to exclude any entity that is based in an offshore tax haven from accessing LBTT relief.

There is a lot of language around fair work, and I recognise the Scottish Government’s commitment to fair work, but in this case it is just language. There are no binding commitments to ensure that the companies adhere to fair work principles. I am concerned about the long association that freeports have internationally, but particularly in Europe, with crime, particularly money laundering, smuggling and the exploitation of workers. The European Commission has highlighted that, and the European Parliament called for an end to the freeport experiment in Europe as a result of that. I do not see evidence that sufficient consideration has been given to the impact of that in the UK and, as Michelle Thomson said, the impact that that could have on Scotland’s international brand.

I am also concerned about the potential for job displacement. We saw the evidence from the UK’s last experiment with freeports in the 1980s that there was up to 40 per cent displacement, rather than new jobs being created. Given the position of the freeports in our economy, as a West Scotland MSP, I am concerned that the economy in the west of Scotland is already not in the same state as the economy in the east. We face significant depopulation issues and growth in wages is nothing like what it is on the east coast, and these developments will only exacerbate that.

I recognise that the Scottish Government is in a difficult position, because this policy is being driven by the UK Government, but devolution exists for the purpose of creating divergence where we believe that it is necessary. I do not think that the opportunity to do that has been taken. Tax breaks and deregulation are not a path to prosperity. Investment is a path to prosperity; working with rather than against trade unions is a path to prosperity. The Greens want to see profits reinvested in local communities, not squirrelled away in offshore tax havens, but I think that that will be the consequence of this so I am afraid that I cannot support the order.

10:45  

John Mason

I have reservations about green freeports. I fear that—as has come out in the questioning—they will involve the displacement of jobs rather than the creation of new ones. Having said that, we are competing with England on some matters, so we are in a difficult position when it comes to supporting them, and my questioning has established that the amounts of money that are involved are relatively small. I am therefore happy to support the motion.

Michelle Thomson

I have indicated some of my concerns about the use of green freeports for money laundering and other nefarious activities. I will support the motion, with the proviso that I will look for a strenuous querying of the UK Government over its pretty appalling record in stopping money laundering. I recognise, yet again, the constraints within which the Scottish Government must operate. That is a function of devolution.

Michael Marra

I share some of my colleagues’ concerns—in particular, about the fantastical nature, to use your words, convener, of some of the numbers and, essentially, the public relations claims on some of this. My overall position aligns with the trade union colleagues we saw last week. In their view, there is insufficient engagement from the Government over some of the issues that Ross Greer has raised. However, recognising the fact that we are in a competitive regime, internationally and across the UK, and that our ports have to be competitive if they are going to attract business, I will, somewhat reluctantly, support the SSI at this stage.

The Government could do an awful lot better on exploring the options that are available to it and dealing with some of the questions that I have raised about transparency and decision making across its economic development prospectus, to make sure that we can have confidence in its decisions.

The Convener

I was quite keen to have a freeport at Hunterston, in my constituency, so I will certainly support the motion. The reason for that is primarily that, if we do not get the jobs and investment in Scotland, those will simply move to south of the border. Teesside would be a major threat to jobs in this part of Scotland if it were not for the fact that Leith is one of the green ports.

Engagement is important. We have to take on board what the unions also said, which is that the City of Edinburgh Council is not engaging with them. That is a Labour-led local authority. Other political parties as well as the Scottish Government have to think more about engagement with trade unions and others.

However, I will support the motion for the pragmatic economic reason that the alternative would be a drain of jobs and money to elsewhere in the UK.

Minister, do you want to sum up before we go to the question?

I am grateful for the committee’s scrutiny and have no further comments.

The question is, that motion S6M-09584 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Gibson, Kenneth (Cunninghame North) (SNP)
Halcro Johnston, Jamie (Highlands and Islands) (Con)
Marra, Michael (North East Scotland) (Lab)
Mason, John (Glasgow Shettleston) (SNP)
Smith, Liz (Mid Scotland and Fife) (Con)
Thomson, Michelle (Falkirk East) (SNP)

Against

Greer, Ross (West Scotland) (Green)

The Convener

The result of the division is: For 6, Against 1, Abstentions 0.

Motion agreed to,

That the Finance and Public Administration Committee recommends that the Land and Buildings Transaction Tax (Green Freeports Relief) (Scotland) Order 2023 [draft] be approved.

The Convener

I thank the minister and his colleagues for their evidence. We will publish in due course a short report to the Parliament setting out our decision on the draft order.

I suspend the meeting briefly to allow for a change of witnesses.

10:48 Meeting suspended.  

10:53 On resuming—