Seòmar agus comataidhean

Good morning, convener, and committee members. As the committee will be aware, the 2014 Smith commission included a recommendation, which was agreed to by all parties, to devolve to the Scottish Parliament the powers that relate to the commercial exploitation of aggregate in Scotland. The Scotland Act 2016 provided for that.

The bill uses those provisions to set out the key elements of a Scottish aggregates tax. In addition, the provisions that are in part 2 are intended to support the efficient and effective collection of all devolved taxes by Revenue Scotland.

The bill’s development has been informed by partnership working between the Scottish Government and Revenue Scotland, as well as extensive stakeholder engagement. In addition to a consultation that ran from September to December 2022, the proposals have been informed by an expert advisory group. I thank all the organisations that have supported and continue to support the development of the legislation and the preparations for the operation of the aggregates tax in the future.

Scottish Government officials, along with representatives of Revenue Scotland, have visited a number of quarries, other aggregate producers and businesses that are focused on the production of recycled materials. I have also visited primary and recycled aggregates businesses and have seen at first hand how they are supporting Scotland’s economic and net zero priorities.

Overall, the provisions set out a Scottish aggregates tax that will broadly align with the United Kingdom aggregates levy and provide for a responsible and proportionate approach to the transfer of powers. The bill takes into account the views that I have heard through the consultation process and the limited data that is available about the operation of the UK aggregates levy in Scotland.

As members may be aware, His Majesty’s Revenue and Customs does not hold any Scotland-specific data on the volume of taxable material that is in Scotland or on the volume of material that moves throughout the UK. We are thus reliant on survey data and estimates that are based on production shares. There are, however, some important areas of distinction in the bill, with specific provisions to address compliance concerns relating to unregistered quarries and Revenue Scotland’s ability to take a more tailored approach to tax administration and compliance. In addition, the bill will provide scope for the Scottish Government to take a more distinctive approach to the tax in the future, which will be based on operational experience and an improved evidence base.

The bill is focused on the establishment and operation of the Scottish aggregates tax. As was the case with previous tax legislation, it does not set out a specific tax rate. I appreciate that the committee has a strong interest in what any future tax rate might be. However, the proposed introduction date is two years away, and decisions on any tax rates should be set out as part of the Scottish budget process. We have worked collaboratively to develop the legislation and I want to do the same for the tax rate. I will therefore work closely with stakeholders to inform the setting of the tax rate. Without wishing to pre-empt the process, I will say that stability and continuity will be important considerations as we initially devolve the tax.

The proposals in part 2 of the bill are intended to support the effective and efficient administration of tax by Revenue Scotland. I recognise that there was no formal consultation on part 2 and appreciate the concerns that stakeholders have raised, but the proposals are fully supported by Revenue Scotland and reflect the detailed engagement that has taken place with the tax authority.

I note that the committee recently heard directly from representatives of Revenue Scotland about the benefits of the provisions and how the provisions might be exercised. The proposals include minor changes to create consistency with powers that already apply in Scotland to UK taxes, and measures that will be subject to full consultation prior to any regulations being proposed.

The bill seeks to deliver on cross-party agreement to devolve further tax-raising powers to the Scottish Parliament. It takes account of extensive stakeholder engagement and is intended to support the efficient and effective collection of all devolved taxes by Revenue Scotland. I welcome the committee’s scrutiny of the bill and look forward to our deliberations.

I recognise the challenges that we have with regard to data and what those mean with regard to being able to make assessments and forecasts.

The answers to questions about the revenue that will be raised and how it would compare to the counterfactual position of the UK aggregates levy being maintained UK-wide are dependent on a number of factors such as economic conditions, the block grant adjustment process and decisions taken around the UK aggregates levy, which we are all familiar with through the BGA process. The scenarios will ultimately reflect policy changes and broader economic factors.

I completely accept the point, however, and I have sought to acknowledge from the outset that the limitations that we currently have around data, which can be remedied with this tax coming online, present challenges to our ability to fully assess what the impacts of particular policy choices might be. That, to an extent, underlines the approach that I have set out. If we had a full suite of data and could say exactly what the scenario had been in each of the past X number of years, that would perhaps facilitate a somewhat different conversation. However, we have to operate with where we are at the moment and what we have available. I have set out the work that is being undertaken to address those data gaps.

Good morning. The amendments in the group all relate to the meaning of the term “overnight accommodation” in the bill, which takes a broad approach to the types of overnight accommodation to which a visitor levy could apply. That means that all relevant types of accommodation that are offered for residential purposes—other than as someone’s usual place of residence—are covered by the bill. That approach allows a local authority to decide, after the consultation that it must carry out on whether to introduce a visitor levy, whether there are any types of accommodation that it would wish to exclude from that levy.

Amendment 26 seeks to remove camping sites and caravan parks from the list of accommodation types to which a visitor levy can apply. Such sites are an important part of the accommodation sector, especially in rural areas. There is no consensus within local government or the tourism industry that a visitor levy should never apply to a camping site or a caravan park, so I believe that it should be left to local authorities—after consultation—to make decisions on the matter in a way that reflects their judgment about local circumstances. On that basis, the Government does not support amendment 26, so I ask Miles Briggs not to press it.

In relation to amendment 18, I put on record my appreciation and thanks to Stuart McMillan for the work that he has put in on the issue of boat moorings and berthings, which he raised during the course of stage 1 and in the stage 1 debate.

In its stage 1 report, the committee recommended that the bill should not capture boat moorings and berthings. Stuart McMillan’s amendment 18 would implement that recommendation. There has been consensus from local government, the tourism industry and the committee on the matter. Therefore, the Government supports the amendment, which will remove moorings and berthings from the types of accommodation that the bill covers.

I turn to Liam McArthur’s amendments 1 and 2. I am grateful to Mr McArthur for lodging the amendments and for bringing his experience as a constituency representative to bear. As the amendments work together, I will speak about both of them.

Amendments 1 and 2 seek to bring within the scope of any visitor levy scheme

“accommodation in a vehicle, or on board a vessel, that is undertaking a journey”.

As I understand it, and as Mr McArthur has highlighted, the intention behind the amendments is to highlight the issues of a cruise ship levy and a motorhome levy. Given their relevance to the bill, I will briefly set out the Government’s position on both those issues before addressing the effects of the amendments.

On a cruise ship levy, the Government’s position, as we announced in October, is that we will seek to give local authorities the power to create such a levy. Therefore, we have been working with the Convention of Scottish Local Authorities and local government to scope out the work that is needed on a levy and to assist them with developing a formal proposal for it.

On Friday last week, COSLA wrote to the Government setting out its formal proposals for a cruise ship levy. In line with the new deal for business, we have committed to a public consultation on such a levy once proposals have reached a suitable stage of development to hear the views of all relevant stakeholders.

If policy work and a consultation can be completed in time and Parliament agrees, we will seek to amend the Visitor Levy (Scotland) Bill to include a cruise ship levy. If that is not possible, we will explore other ways of passing the required legislation. I do not want to delay this important bill by waiting for that policy and consultation work to be undertaken, but neither do I want to rush work on a cruise ship levy to meet the bill’s timescales.

I draw the committee’s attention to the fact that I set out the position on VAT in a factual manner. It is a tax that is ultimately decided on by the UK Government, and I respect that. That is just a statement of fact.

With regard to the position of local authorities, the power to impose a levy is a discretionary power. It will be up to individual local authorities to decide whether to use it. A key principle underpinning the bill is the fiscal empowerment of local authorities. To be clear, that is the rationale for giving local authorities that level of discretion in areas such as exemptions and deciding how best to respond to VAT. Local authorities are best placed to make such decisions, as they will ultimately choose whether to implement a visitor levy and administrate it.

Before I focus on the amendments related to funding, I will make some general points on that issue. In developing the proposals in the bill, the Government consulted and engaged with local authorities and the tourism industry. It was and is the very clear position of the tourism industry that funds raised by a visitor levy should be invested in the visitor economy. The bill therefore will ensure that that is the case, by putting in place a measure to give local authorities the freedom to use the funding that is raised as they believe appropriate to support the visitor economy in their areas.

The current wording in the bill has been carefully crafted to mean that the use of net funding raised by a visitor levy shall be spent on facilities and services with a strong connection to the visitor economy. If there are things linked to the visitor economy that members believe the current wording would preclude a local authority from funding, I am open to constructive suggestions from the committee or other members on how to address that, and I would be happy to consider refining the wording as necessary ahead of stage 3.

It will be for a local authority, following consultation with local communities, tourism businesses and local tourist organisations, to decide how the funding that is raised by a visitor levy is spent. Local authorities will want to use the funding in a way that best supports their local visitor economy. I am aware that those needs will differ across the country—ranging from improving street dressing to supporting work to promote a destination, investing in relevant regeneration and, potentially, supporting affordable housing projects, recognising that tourism businesses can struggle to retain and recruit staff due to accommodation issues, as part of the wider pressures on local housing markets.

I should make it clear that it will not be for the Government to permit or exclude any particular use of the funding. Within the broad parameters in the bill, that is rightly a decision that will be made at a local level, after local consultation. This is an area that I would expect the national guidance that is currently being developed by local government and the tourism industry—and that is to be given a statutory basis under amendment 15—to address.

In that context, I now turn to amendments 20 and 24 from Sarah Boyack. They relate to the objectives that a local authority sets for a visitor levy scheme, under section 12, and the use to which the funding raised by a visitor levy can be put, under section 17. The Government’s position is that funding raised by a visitor levy should be used on facilities and services that have a clear link to the visitor economy. The wording in section 12 requires scheme objectives to

“relate to developing, supporting or sustaining facilities or services which are substantially for or used”

by visitors. Section 17 requires scheme proceeds to be used to further those objectives or otherwise to be used for

“facilities and services which are substantially”

for visitors.

As I outlined earlier, I am open to constructive suggestions from members if the current wording in the bill would preclude a local authority from funding something related to the visitor economy. However, the Scottish Government believes that simply removing the word “substantially” would weaken that aspect of the bill. It is there to ensure that there is a clear link to the visitor economy in respect of the use of revenue that is raised from a visitor levy. That has been a consistent ask of the tourism organisations and the accommodation providers that would collect and remit any visitor levy. On that basis, I ask Sarah Boyack not to press amendment 20 or move amendment 24.

Mr Briggs raises an important point. I would be happy to consider how the existing provisions in the bill around reporting, transparency and review mechanisms, not to mention the consultation that precedes the introduction of a visitor levy and the guidance that will be produced, can strengthen those processes to give greater clarity and certainty.

I recognise that it is important that local authorities have the flexibility to invest as they see fit following that process of consultation, but I also recognise that there might be concern around transparency, and I would want to provide assurance on that point. We can probably address that effectively through the guidance that will be provided.

I am happy to engage further with the member on that basis before stage 3.

I have no further comments, convener.

Amendment 17 agreed to.

Section 36, as amended, agreed to.

Sections 37 to 75 agreed to.

Long title agreed to.

With regard to the engagement that we have had with COSLA, as I touched on, we received a formal proposal from it only last week. I am conscious of the appetite in local government for the provisions in the bill to come online as soon as possible, hence my not wanting to unduly delay it. However, I recognise that, given the nature of a cruise ship levy, which has some similarities with but is nonetheless distinct from a visitor levy, it is important that there be proper consultation and engagement to ensure that we get it right.

My hope is that we will be able to amend the bill to enable a cruise ship levy to be captured. However, if we are unable to do that, we will identify an alternative vehicle, and I will be more than happy to keep Parliament and individual interested members up to date on that work.

I recognise Mr McArthur’s point about wanting the provisions to come into effect simultaneously, but I must also recognise the appetite of local government to get the provision for a visitor levy in place as quickly as possible, subject to its being agreed by Parliament. Notwithstanding that, I will be happy to continue to engage with Parliament to explore ways in which we can ensure that, once we have a developed and worked-up proposal on a cruise ship levy, there is public consultation and extensive engagement with business and relevant stakeholders so that we will be in a position to introduce it as soon as is practicably possible.

I am happy to do so.

The amendments form an important group, as they relate to how businesses will be affected by any visitor levy that a local authority seeks to introduce.

Amendments 3 and 5, which were lodged by Pam Gosal, seek to exclude from having to collect and remit a visitor levy any visitor accommodation that is operated by a body with an annual turnover that is below the VAT threshold. I know from my discussions with business organisations that there is a concern about the VAT treatment of a visitor levy, which would be decided by the United Kingdom Government. The Scottish Government cannot decide the position on VAT. The Scottish Government’s position is that any local authority that is thinking of introducing a visitor levy will need to consider the potential VAT implications for relevant businesses in its area.

Under the bill as introduced, a local authority, when creating a visitor levy scheme, could choose to create an exemption from the scheme for businesses that are near the VAT threshold. However, I am not persuaded that that should be imposed at the national level. Local authorities are best placed to know their local circumstances and the businesses in their area. I do not want to remove the discretion for local authorities to decide what exemptions work in their area, including in relation to VAT.

For those reasons, the Government does not support amendments 3 and 5, and I ask the committee not to support them.

I understand the motivation behind Daniel Johnson’s amendments 38 and 39. The Government continues to listen to businesses, and we will seek to minimise the administrative burden as much as possible for businesses that are implementing a visitor levy. However, I am not persuaded that we should remove from local authorities the flexibility to decide what is right for their local circumstances, or that a national definition of a small business, imposed by ministers in regulations, is the correct approach. A local authority could choose to create an exemption for small businesses in its area if, after consultation, it was decided that it was right to do so. Given that flexibility in the bill, the Government does not support amendments 38 and 39, and I ask Daniel Johnson not to move them. However, I am happy to continue to have discussions. I think that aspects of the administration and Mr Johnson’s well-made points can be captured through the guidance process.

I appreciate the intention behind Miles Briggs’s amendment 42. I agree that it is essential that businesses are fully engaged in any decision to introduce or modify a visitor levy scheme. I also agree that any impacts of a visitor levy scheme on a local authority’s area should be fully assessed. Section 12 of the bill already requires a local authority to carry out such an assessment, so I do not think that amendment 42 is necessary. The expert group on bringing together business organisations and local government is currently developing national guidance for local authorities on the use of any visitor levy power. I expect the guidance that it produces to cover the impact assessments that it would be good practice for local authorities to produce. I have also lodged amendment 15, which is in a later group, to put the guidance on a statutory footing. If Mr Briggs still feels that further details are needed on the impact assessments to be completed by local authorities, I would be more than happy to meet him and potentially to write to the expert group to ensure that it is taking that important aspect on board.