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The next item of business is consideration of Parliamentary Bureau motion S6M-16114, on approval of a Scottish statutory instrument. I ask Jamie Hepburn, on behalf of the Parliamentary Bureau, to move the motion.
Motion moved,
That the Parliament agrees that the Land and Buildings Transaction Tax (additional amount: transactions relating to second homes etc.) (Scotland) Amendment Order 2024 (SSI 2024/367) be approved.—[Jamie Hepburn]
17:39
I rise to speak against the increase in the additional dwelling supplement that is contained in the SSI. In the Finance and Public Administration Committee, Liz Smith and I voted against the change because of the likely effect on the housing market and because it amounts to another Scottish National Party stealth tax.
Although the Government says that its recent policy changes are not negatively impacting the buy-to-let market, that is not the evidence that we are receiving anecdotally from landlords who are leaving the market and those who are not adding to their portfolios. It is not what the sector says, either. Timothy Douglas, Propertymark’s head of policy and campaigns, made that clear when he said:
“With the huge demand for private rented property and long-term rent control measures contained in the Housing Bill, the Scottish Government’s decision to raise Additional Dwelling Supplement ... from six to eight per cent is ... out of touch with the housing needs of Scotland.”
I concede that the change might have less of an impact on the build-to-rent market, because transactions that involve more than six properties are excluded from ADS. However, surely the Government must concede that many buy-to-let investors have only a couple of properties.
When the Minister for Public Finance gave evidence to the Finance and Public Administration Committee, he somewhat casually dealt with a point that cannot be easily disregarded. If somebody buys a buy-to-let property for £200,000, they will have to pay £16,000 in ADS, which will undoubtedly be passed on to the tenant through higher rent.
Does Craig Hoy accept that the change will advantage first-time buyers and make it easier for them to compete with somebody who is buying to let?
I will address that point in a second.
As I pointed out to the minister, the tax will be a contributing factor to significant rent increases in Scotland, because it will constrain supply. Edinburgh has the highest rent rises in the United Kingdom, at 12 per cent, and Nationwide suggests that higher rents are now preventing some tenants who would become first-time buyers from saving for a deposit in order to buy their first home, which is the stated policy and objective of ADS. Nationwide said:
“house prices remained high relative to average earnings, which meant that the deposit hurdle remained high for prospective first-time buyers.
This is a challenge that has been made worse by record rates of rental growth in recent years, which has hampered the ability of many in the private rented sector to save”
for their deposits.
In evidence to the committee, the minister gave us little confidence that the policy intent of the tax rise was being met. He described the picture as being subject to “all kinds of factors”. However, the Government has announced that a review will be conducted to explore various aspects and elements of land and buildings transaction tax, which could include the additional dwelling supplement. I hope that, even if the tax rise passes tonight, the Government will still commit to a review of ADS.
The sad fact is that, in the committee, Scottish Labour voted for the tax rise. Anas Sarwar appears to be spineless when it comes to standing up to the Scottish Government on the Scottish budget. The increase in the additional dwelling supplement is just one bad element of a bad budget—a bad budget that will pass next month because Scottish Labour has caved in without getting concessions from the SNP.
However, the Scottish Conservatives will side with common sense and oppose the latest SNP tax rise.
17:43
The Land and Buildings Transaction Tax (additional amount: transactions relating to second homes etc) (Scotland) Amendment Order 2024 increases the rate of the additional dwelling supplement from 6 per cent to 8 per cent, with effect from 5 December 2024. The increase is intended to further protect opportunities for first-time buyers and home movers by helping them to compete with buy-to-let investors and second-home owners. For example, someone who is purchasing a £200,000 property as an additional home will have to pay £16,600 more in tax than a first-time buyer would.
The increase is also forecast to raise much-needed revenue at a time when public finances are under significant pressure. The Scottish Fiscal Commission estimates that it will generate an additional £32 million through ADS in the next financial year, thereby contributing to a forecast total for net ADS of £258 million. The forecast incorporates the SFC’s assumptions about the behavioural effects of the change, including the extent to which it will result in more main-market purchases by first-time buyers and home movers than would otherwise have been the case.
Some members have raised concerns about the measure’s potential impact on the provision of housing for private rent. Although the stated policy intent of the increase is to support further opportunities in the main market, in particular for first-time buyers, I recognise the private rented sector’s importance in Scotland’s housing system. I know that not everyone can—or wishes to—buy their own home or easily access affordable housing. We are committed to ensuring that the private rented sector in Scotland is an attractive and affordable option for those who make use of it. We are working to achieve that by ensuring that the sector provides good-quality homes through improved standards and effective regulatory systems. We also want to encourage investment in the sector, so I take those concerns seriously.
Although I appreciate that the circumstances might be different, similar concerns were raised when the ADS was first introduced and again when the rate was increased to 6 per cent in 2022. Although a range of factors, such as interest rates and general housing market performance, must be considered, I note that ADS transactions and revenue in 2023-24 were higher than was initially forecast.
I recognise that the tax is just one factor that will be considered, but I am not aware of any systemic evidence that the ADS has had a significant detrimental impact on the availability of homes for rent in Scotland. The latest available data from the Scottish Landlord Register, for example, indicates that landlord numbers have remained relatively stable since the beginning of 2022, and that the number of properties that are available for rent increased over that period. However, we will continue to monitor the situation and consider all available data concerning the private rented sector.
We are supporting the emergence of a larger-scale PRS by maintaining the relief from ADS when six properties or more are acquired in a single transaction. That has repeatedly been highlighted as a positive differentiator for Scotland in our effort to support the emergence of a larger-scale build-to-rent sector. We recognise build to rent’s role as a mainstream housing delivery model that makes an important contribution to the broader housing market. I look forward to continuing our engagement with the sector on that matter.
Members have also raised concerns about the potential impact of the tax, where difficult or exceptional circumstances might apply—
You must conclude, minister.
We are taking forward an ADS review, which will conclude in April 2024, to address many of those matters—
Thank you, minister. I must ask you to conclude at this point.
Finally, Presiding Officer, I need to make—
Finally, minister, I need to ask you to conclude in order to comply with our standing orders.
On a point of order, Presiding Officer. I need to refer members to my entry in the register of members’ interests with regard to private rented property.
That might not be a point of order, minister, but it is now on the record.
The question on the motion that has just been debated will be put at decision time.
The next item of business is consideration of four more Parliamentary Bureau motions. I ask Jamie Hepburn, on behalf of the Parliamentary Bureau, to move motions S6M-16115 and S6M-16116, on approval of Scottish statutory instruments; S6M-16117, on committee membership; and S6M-16118 on substitution on committees.
Motions moved,
That the Parliament agrees that the Electronic Monitoring (Use of Devices and Information) (Scotland) Regulations 2025 [draft] be approved.
That the Parliament agrees that the Rehabilitation of Offenders Act 1974 (Exclusions and Exceptions) (Scotland) Amendment Order 2025 [draft] be approved.
That the Parliament agrees that—
Katy Clark be appointed to replace Daniel Johnson as a member of the Delegated Powers and Law Reform Committee; and
Mark Griffin be appointed to replace Katy Clark as a member of the Social Justice and Social Security Committee.
That the Parliament agrees that Carol Mochan be appointed to replace Mark Griffin as the Scottish Labour Party substitute on the Social Justice and Social Security Committee.—[Jamie Hepburn]
The question on the motions will be put at decision time.
Air ais
Business MotionAir adhart
Decision Time