���˿���

I am conscious that that goes beyond my remit on public procurement, and I recognise that, when the committee has previously considered LCMs regarding the ratification of trade agreements, its concern has primarily been with the contents of those LCMs. The Scottish Government’s position, in its constitutional aspirations and the policy position as set out in “Scotland’s Vision for Trade”, which was published at the start of 2021, is well understood. Our views are clearly set out.

With regard to how things operate at the moment, we always seek the maximum engagement possible with the UK Government to ensure that Scottish interests are represented, and our endeavours to that effect have been set out in the correspondence that the committee received and that I referred to earlier.

Again, it goes back to the point about seeing the power being utilised in a broader context of policy interventions. Tax can play a role. We set out the various functions of the tax system in the framework for tax that we published two years ago. Those functions can include, for example, revenue raising, promoting behavioural change, providing economic stimulus and carrying out redistribution.

Clearly, revenue raising will always be taken into consideration in any tax policy, but behavioural change is also an aspect of tax policy consideration. Again, the particular circumstances will be for local authorities to determine. It is a completely discretionary power, and it will be for local authorities to decide, on the basis of their local understanding of the priorities in their area, whether to use it.

The questions that you raise get to the heart of why this is a discretionary power for local government. Local authorities are best placed to determine whether tax measures can be utilised in a way to support their policy objectives, recognising, as I pointed out in my introductory remarks, that second homes in some areas might be making a positive contribution.

Equally, in other areas, it might be the view of local authorities that they are causing pressures and that a way of helping to address that, in tandem with other policy levers at the disposal of a local authority, would be to use these discretionary powers. We very much recognise that this is a decision for local authorities, to be informed by their expertise with regard to their local priorities and the best way to address them.

Again, those matters will be determined by the local authority. This power provides for something that is discretionary, and local authorities have existing powers to apply a discount. It would really be a question for an individual local authority in recognition of the fact that the decision is ultimately taken by elected members who are democratically accountable to the people who live in that local authority area. We recognise that there may well be a range of views in a particular area, but I note the broad support for the proposals in the consultation and the evidence that the committee has taken from some local authorities, which recognised—at this stage, at least—an intention to explore the utilisation of these powers.

Thank you very much, convener, and good morning to the committee.

The draft instrument under consideration has a twofold purpose. First, it is intended to provide councils with discretion over the council tax treatment of second homes. If introduced, it will enable councils to charge up to a 100 per cent premium on second homes. The instrument also seeks to allow councils to grant a six-month grace period from the 100 per cent empty homes council tax premium, which is aimed at incentivising the reoccupation of empty homes. The regulations seek to deliver both changes with effect from 1 April 2024.

In the spirit of the Verity house agreement, both of the policies contained in the instrument have been developed in partnership with local government. Last year, I convened the joint working group on sources of local government funding and council tax reform, which was co-chaired by Scottish ministers and the Convention of Scottish Local Authorities. That group has considered and endorsed the final policies in the instrument.

In April 2023, we published a consultation in partnership with COSLA on the council tax treatment of second and long-term empty homes. That consultation sought views on giving discretionary powers to local authorities to increase the rate of council tax on second and empty homes, and the 100 per cent council tax premium on second homes received majority support from respondents to the consultation.

The discretion to apply to second homes a discount of up to 50 per cent or a premium of up to 100 per cent ensures parity with the treatment of long-term empty properties. If implemented, the discretionary power would put councils front and centre in deciding how to achieve the right balance in the use of housing to meet local needs, enabling them, where necessary, to encourage more residential accommodation to be in occupation and used as homes for living in. That is consistent with our intention, set out in the Verity house agreement, to provide greater flexibilities to local government. It also dovetails with the Scottish Government’s “Housing to 2040” strategy, which commits to providing local authorities with greater discretion to encourage greater occupancy of second homes. It should also be noted that the UK Government has very recently legislated to provide councils in England with the same power to apply a 100 per cent council tax premium on empty homes.

Let me turn to the empty homes grace period that is contained in the instrument. The issue was considered by the joint working group following the publication of an independent audit report on the effectiveness of Scotland’s long-term empty homes policy that was produced by Indigo House. That report recommended that the council tax premium on empty homes could better incentivise bringing empty homes back into use. Reflecting on that recommendation, in partnership with COSLA, we agreed that the council tax premium on empty homes could be a disincentive to bringing empty homes back into use when a long-term empty property changes hands after a sale.

Therefore, the regulations provide for a six-month exclusion from the 100 per cent council tax premium when a long-term empty property is purchased by a new owner and renovations or repairs are being undertaken, and local authorities will have discretion to extend that six-month grace period. The measure will prevent the empty homes council tax premium from becoming a deterrent to new ownership.

The draft regulations that have been laid before Parliament deliver on our commitment to a fairer housing and taxation system. They empower local authorities to make decisions about the council tax treatment of second homes in determining the balance in the use of housing to meet local needs. They recognise that local areas differ across the country and that what may cause pressure in some communities could equally provide a benefit to others.

Convener, I will conclude there. I hope that members will agree to support the instrument today.

We want the discretion and flexibility of the existing premium on empty homes to apply to this measure. As I say, we are committed to engaging with COSLA in dialogue on joint guidance. We recognise that it is a discretionary power for local authorities, so we want the approach to how the revenue is used to be consistent with that discretion.

That is demonstrative of our commitment to address the issues. We are utilising all the powers at our disposal in the progression of our wider ambitions around housing to 2040. It was identified via the housing audit report, which I referred to in my opening statement, that the 100 per cent premium on empty homes could act as a disincentive for those who are purchasing empty homes. The regulations help to address that through the six-month grace period. Individual local authorities also have the discretion to extend that period, but that is a matter for them.

I understand the premise of the question. It is inherent in our empowering local authorities to have that discretion that variation will be part of it, but it will be a matter for local authorities to determine. It is a shared ambition with local authorities to ensure that we bring as many empty homes back into use as possible, and I am sure that that will inform the decision-making process that local authorities follow. The discretionary elements across the board that we have discussed today are, however, matters for local authorities to take into account. Ultimately, they reflect the fact that local authorities are democratically accountable to their electorates. James, do you want to make any further points?

As, I am sure, the committee appreciates, the changes in Wales were relatively recent. As you would expect, we continue to have dialogue at official level with the Welsh Government and, indeed, with our colleagues in the UK Government. We will, of course, monitor with interest developments in Wales as more evidence becomes available. As you highlighted, in our consultation we posed the question whether there should be the option to go beyond a 100 per cent premium, and we are reflecting further on that in the on-going work of the joint working group.

In a broader sense, we will continue to monitor that and keep it under review. I appreciate that I am coming back to this point, but it will be for local authorities to consider what monitoring of any behavioural response takes place and, in doing so, to reassess whether any policy decision that they take in utilising the power has had the desired effect.

More broadly, we considered the existing thresholds for non-domestic rates in the consultation, but we recognise that the existing thresholds are relatively new. Therefore, we propose not to make any changes at this stage; rather, we will allow those to bed in further.