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Alex Doig, can you add anything on the data that we have available?

I take your points, but there is the question of impact. I mentioned fuel duty, but VAT is a key element of the cost at the pump, too. I take your point about the tensions around potential administrative complexity and deliverability, but those can be worked through by designing and implementing the devolution of tax in a way that is consistent with the Adam Smith principles. When it comes to what we would do if we had such levers at our disposal, control of VAT and national insurance contributions would be quite impactful in allowing us to shape policies more appropriately for Scotland.

Yes, I do. There was an opportunity for those matters to be covered in that dialogue.

I would also mention that although the bill does what was set out in the order, it uses the date of April 2020 rather than April 2021, and there was an opportunity for consultation and direct engagement on that issue between ministers and business organisations—and, importantly, the Parliament—when that order was considered. I am confident that there has been sufficient opportunity for engagement and consultation in the extensive process that I have outlined. The process has allowed issues to be aired and considered, and business has had the opportunity to feed into it.

I am happy to do that. I sought to address the point about consultation and stakeholder engagement in my response to Mr Dey. Certainty is at the heart of what the bill seeks to do.

On how we go forward, as I said in my opening remarks, the key ask on non-domestic rates from business ahead of the budget was to avoid the cliff edge on 31 March. That is exactly what we have avoided through the RHL 50 per cent relief for the first three months of the financial year.

The certainty that the bill will provide, the engagement that took place between the announcement of our intentions and the order being made, and the non-domestic rates policy for the forthcoming financial year, which was informed by the key ask from business, show that in relation to engagement and providing certainty, the Government is absolutely committed to being consistent with the principles that are outlined in the tax framework.

That is a good question and, in answering it, there must be recognition that it has not been possible to help every single business. We are restricted, to an extent, by the mechanisms for getting money out of the door that are at our disposal.

One of the ways that we are seeking to solve that is through the discretionary funding that we have provided to local government, and I have already referred to the latest tranche of £80 million. That reflects the recognition that councils have local knowledge that they can bring to bear in supporting businesses.

We have also sought a few other mechanisms, such as the Scotland loves local fund, to provide support for businesses in other localities more generally. However, the key point to come back to is the fact that we have provided a total of £4.5 billion, £1.6 billion of which responded to the key ask of business, which was to avoid the cliff edge on 31 March.

Obviously, the targeted business support covers a range of actions. Extensive and specific reliefs have been delivered through the NDR system in the past two financial years, and they will address the ask in the coming financial year to avoid the cliff edge. Various business programmes have also been in operation throughout the pandemic. Finally, there has been the discretionary money for local authorities, the last tranche of which is £80 million, and local authorities will have the discretion to decide how to apply it to their own areas.

I hope that that gives an overview of the support that has been provided and how it relates to what we have done on NDR relief. [Interruption.]

I do not have the details of that in front of me. We have published our most up-to-date statistics on the delivery of resource on the Scottish Government website, and local government provides the Scottish Government with returns on its spending for statistical analysis and monitoring.

On how funding is agreed with local government through the Convention of Scottish Local Authorities, the £80 million was subject to principles agreements about what we are trying to achieve. Whether it be through the publication of overall business support, monitoring the returns from local government, or the principles agreements that we have with COSLA for allocating funding, there is a range of ways in which we monitor the money, which is what Mr Briggs is driving at, and make sure that we can evidence that it gets to those who need it.

No, the money has been committed as part of the budget process.

I will not get into the intricacies of the budget process but, as you will be aware, we have found ourselves in quite a challenging situation. I do not want to draw direct correlations between the MCC money and other parts of the budget, because it is quite complex. However, with, for example, the resources that we anticipated as supplementary estimates towards the end of last year and in the early part of this year, we have received less than we expected. Beyond that, we were led to believe that we would receive additional money to support the cost of living, but we did not receive that and we had to find that £290 million from within money that we had already committed.

Fundamentally, the UK Government gave us an indication of money that was going to come, but the money was less than indicated and new commitments had to be met from it that we had not been led to believe would have to be met from it, such as the cost of living package. To take an example, we expected to get £841 million of supplementaries. That went down to £827 million, if I remember correctly. Then, rather than getting £290 million of additional money for the cost of living, we had to take that £290 million from the £827 million.

We explored that situation last week at the Finance and Public Administration Committee in the spring budget revision. I mention it to give you an example of the complexity that is involved at this point of the year. The key point that I come back to is that we have delivered significantly more in business support than we have received in consequentials and we have worked to get that money out of the door as quickly and effectively as possible to the businesses that need it.

As you will be aware, we indicated our intention to act on this in late June. In other words, it preceded the order, which went before Parliament in the autumn. In the interim period, extensive consultation was undertaken by me and my colleagues, the Cabinet Secretary for Finance and the Economy and the Minister for Business, Trade, Tourism and Enterprise, and we met and engaged thoroughly with all the major business representative organisations across Scotland. If memory serves, I conveyed to the committee that the issue that you have highlighted was not raised as a priority at that point.

Following that, the Valuation and Rating (Coronavirus) (Scotland) Order 2021 was considered, with Parliament taking extensive oral and written evidence, on which I was able to answer questions at a meeting of this committee in November. Throughout that process, we have been clear about what we are doing. Indeed, we even announced in the programme for government that we would introduce primary legislation in year 1 of this session, a commitment that I reiterated to this committee in November.

We have continuous and regular engagement with business. As I have said, in the period between announcing the intention to act on MCC and the order being considered in Parliament, we had extensive engagement with the business community, and—in my experience, at least—the issue that you are talking about was not raised to any meaningful extent.

Last year, amendment regulations were laid in response to the financial pressures faced by local authorities as a result of the pandemic. The Scottish Government worked jointly with the Convention of Scottish Local Authorities to identify ways for local government to address the funding pressure. The amendment sought through the Local Authority (Capital Finance and Accounting) (Scotland) (Coronavirus) Amendment Regulations 2021 allowed a local authority to reduce the amount of any of the statutory repayments that it was due to make to the statutory loans fund in either the financial year 2020-21 or 2021-22, but not both. That would reduce the expenditure of a local authority in that financial year, thus creating additional financial capacity to meet Covid-19 costs.

Given the on-going challenges of responding to the pandemic, COSLA requested a further one-year extension to that flexibility to allow a local authority to reduce repayments to the statutory loans fund in 2022-23. Again, councils can make use of that flexibility only in one financial year. Most councils did not utilise that flexibility in either 2020-21 or 2021-22, but they have indicated that they may choose to use this flexibility in 2022-23.

Under normal circumstances, that is not something that ministers would support. Requiring the repayments to be made in the financial year when they are due is prudent financial management. It ensures that both current and future taxpayers are charged for their share of the capital expenditure costs of assets being used to deliver services. However, these are not normal circumstances, and it seems right to allow the flexibility to be extended through the amendments made in the draft regulations before you. We have made it clear to local government that the flexibility should be used only as necessary to address funding pressures arising from the pandemic, and it may not be used to grow reserves.

The 2021 regulations include a provision to ensure that future changes to loans fund accounting arrangements can be delivered through statutory guidance, rather than requiring further amendments to regulations. That change, which was due to come into force on 1 April 2022, is to allow future harmonisation between accounting standards and statutory arrangements. In order to facilitate the extension to the loans fund repayment flexibility, the draft regulations defer by one year the effect of that provision in the 2021 regulations.

Separately, the draft regulations change the audit completion deadline for local government 2021-22 annual accounts, as requested by Audit Scotland, in order to address the continuing challenges resulting from the delay in auditing the 2019-20 and 2020-21 accounts. Both Audit Scotland and councils are keen to return to the original statutory deadlines for 2022-23.

In summary, the draft regulations provide a financial flexibility that has been asked for and will be welcomed by local authorities. The extension of the audit deadline will alleviate some of the strain on council staff and auditors.

I encourage the committee to support the instrument.

I am grateful for the opportunity, convener. Good morning and thank you for the opportunity to participate remotely.

The aim of the bill is to ensure fairness for all ratepayers. Members might recall that, when I gave evidence on 16 November 2021 on the Valuation and Rating (Coronavirus) (Scotland) Order 2021, I commented that subordinate legislation could apply only to the period beginning on or after 1 April 2021 and that to go back further would require primary legislation.

The bill builds on that order and extends similar provisions to matters arising on or after 2 April 2020 by ruling that the effect of coronavirus on or after that date cannot be considered when calculating a property’s rateable value or net annual value in the current valuation roll. The significance of that date is that it aligns with the date from which the definition of

“a material change of circumstances”

was clarified by the Non-Domestic Rates (Scotland) Act 2020.

The bill provides ratepayers with clarity and consistency on the policy.? Typically, the term “material change of circumstances” has been used to reflect either physical changes to a property, such as an extension or demolition, or certain major changes in a specific area, such as the tram works in Edinburgh. The intention of the change in definition was to reflect recent case law and the move to a three-year revaluation cycle by restricting the circumstances in which general economic factors can be regarded as being relevant to a change in valuation.

Since the start of the coronavirus pandemic, more than 40,000 non-domestic properties have been appealed on the basis of an MCC.? Given the timing, it is likely that those appeals were lodged as a result of the pandemic. The Scottish Government is of the view that economic changes to rateable values that have resulted from Covid-19 should be considered not under the MCC provisions but at revaluation, at which point the impact across all properties will be taken into account.? That view, which is shared by the United Kingdom and Welsh Governments and in Northern Ireland, ensures fairness to all ratepayers by ensuring that any effects of Covid-19 are considered for all properties at the next revaluation in 2023, rather than through the use of the MCC provisions.

The bill under discussion provides that, when net annual values or the rateable value of any property on the 2017 valuation roll are calculated, no account can be taken of any matter arising on or after 2 April 2020 that is directly or indirectly attributable to coronavirus. It does not apply to changes to the physical state of a property or whether a property should or should not be included on the valuation roll if, for instance, someone had started working from home as a result of the pandemic.

Although appeals were submitted for more than 40,000 properties in 2019-20, that is still less than a fifth of all non-domestic properties in Scotland and, as the Federation of Small Businesses has previously pointed out, there are not many small businesses among them. That situation might reflect our generous existing support package for small businesses, but the likelihood is that it also reflects the fact that well-resourced and professionally advised property owners and occupiers are more likely to know about the material change of circumstances provisions and to have appealed as a result.

Meanwhile, a number of large and multinational firms, which have been largely unaffected or have even been successful during the pandemic, have made appeals in relation to their properties. As was discovered in the evidence-taking sessions on the order, there is a disconnect between how Covid has felt to businesses and how it has impacted rents in the commercial property market. That issue is hugely complex and the outcome is uncertain, so it cannot be assumed that those appeals will be successful or their outcomes fair.

We believe that the right time for reflecting market-wide economic changes is at revaluation. Following the independent Barclay review of non-domestic rates, we have strengthened revaluations to ensure that they more closely reflect market circumstances. First, we have increased the frequency of revaluations from five to three years and reduced the time between the tone date and revaluation, and secondly, with the support of your predecessor committee, we delayed the next revaluation by one year to 2023 and also brought forward that commitment to a one-year tone date, which will be 1 April 2022. Both measures have been universally welcomed by the business community in Scotland.

Covid-19 has had a major impact on the economy, and we responded swiftly and on an unprecedented scale to support businesses throughout the pandemic. We introduced 100 per cent retail, hospitality, leisure and aviation relief in 2020-21 and were the first Government to confirm a full extension of that relief for 2021-22. In 2022-23, we responded to a key ask from the business community to prevent a cliff-edge return to full liability on 31 March 2022. For businesses in the retail, leisure and hospitality sectors, we are continuing relief at 50 per cent for the first three months of 2022-23, which will be capped at £27,500 per ratepayer. Since the start of the pandemic, businesses have benefited from £4.5 billion of support, including £1.6 billion of Covid-related reliefs. We acted quickly to support the business community when it needed it most, and we have continued to support businesses through the pandemic.

Before closing, I will highlight one parallel development. As I have stated, more than 40,000 appeals were lodged following the outbreak of the pandemic. When the committee considered the previous order, it raised with me the issue of workload around those appeals.

Appeals that were lodged between 1 January 2020 and 31 March 2021 currently have a disposal deadline of 31 December 2022, which is the date by which all appeals lodged between those dates require to be heard. Valuation appeal committees are required to provide appellants with a minimum 105-day notice period, which means that any request by one party to an appeal for referral to the Lands Tribunal for Scotland, as often happens in complex cases, would have to be made by the end of June.

Although the bill will provide clarity for ratepayers, I have been clear that it does not remove the right of appeal. It will be for appellants to decide whether they want to pursue or withdraw their Covid appeals, but as I am sure the committee will appreciate, appellants might not feel that they are in a sufficiently informed position to take such a decision until Parliament has finished its scrutiny of the bill. For that reason, we intend shortly to introduce legislation to extend the disposal deadline by a further year beyond 31 December 2022.

In closing, I return to my opening comment that the bill seeks to ensure fairness for all Scottish ratepayers while maintaining the integrity of the non-domestic rates system and the stability of Scottish public finances.

I look forward to any questions that the committee might have.