 Felly, wrth ni'n ddewch i gilydd y mwyaf ar y lleol Senedd Cymru yn 2018, maen nhw ddim iawn i'n ddigital fformat yn gwahanol o'r gwirionedd newydd o'r gwirionedd newydd, sy'n ddim yn ddigital ffaith i gael ddiogelwyr gan sut yn ei ddawr. Rwyf wedi'n bobl hon i gynllenu. Gennie Górdd yn ni i gyd yn ddod. Gennie g���wyr gan wrth ni ddewch i chi gyflei i brwyf yn rhan, ac nid oedd gwyddiad, 1—the decision on taking business in private—the committee will decide whether consideration of its draft report and homelessness should be taken in private today and at future meetings. Are we all agreed? We now move to agenda item 2, which is the Barclay review of non-domestic rates. The committee will take evidence from Derek Mackay, Cabinet Secretary for Finance and the constitution welcome cabinet secretary and from Douglas McLaren head of local taxation Scottish government. So thank you for joining us I was going to fellow buster slightly there cabinet secretary because you've just arrived and now you do have an opening statement prepared for us before we move to questions. If we're ready for that we'll just we'll just move on and do that now if that's okay. Okay, thanks convener. I'm pleased to be back before your committee Ie become my evidence on the draft budget on 20 December. I welcome the scrutiny of the Government's response to the Barclays review and suspect when it's judged that it has a lot of non-domestic rates. I found that Barclays review and the response to the positive process that takes in the wide range and the ongoing engagement across the private, public and third sectors, the stakeholder relationships and dialogues. I have an invaluable and informed decision making and long may this continue. I reiterate my thanks to Ken Barkley and the other group members for their efforts and engagement. As the committee will be well aware, I set out an initial response to review. In a ministerial statement on 12 September, that was just three weeks after the Barkley report was published and that site swiftly, as promised. Responding substantively, we are possibly accepted the vast majority of Barkley's recommendations at that time. I truly took time to engage further on certain aspects and our full response to the 30 recommendations was set out in the implementation plan published alongside the draft budget on 14 December. Some of the Barkley measures from a part of our 2018 draft budget proposals, its statutory instruments will be laid where appropriate shortly and other measures are longer term, some requiring primary legislation. There is, of course, further work to do as outlined in the implementation plan and we have convened an advisory group of stakeholders to help inform and develop these next steps. Its first meeting is later this month. I would reiterate my key aim in all of this, which is fair and sustainable taxation in line with Scotland being the best place in the UK to do business. Clearly, there is a range of issues and details across the respective Barkley recommendations and I look forward to your questions. Thank you very much, cabinet secretary. That is helpful for setting the scene. Can I start off with a very general question? One of the clear remits of the Barkley review was to make sure that whatever the recommendations were that some of the parts should be revenue neutral if they were all to be implemented. If in hindsight you think that that might be stifled, how radical the review could be, whether you thought that it was radical enough, whether there are other things that are lurking about that the Government has and that it might be keen to progress. Do you have some general comments on whether you think that the context in which the review was held limited any radical proposals? It is a very fair question. I did not personally set the remit. Of course, there was a change of ministerial portfolio before and after, but it was a fair remit to set. The review was intended to be neutral, budget neutral, as you have described, convener. I have a very specific question. Despite that, what some could argue was quite a tight remit. Did it impede the panel from looking further at alternative forms of taxation or going beyond a revenue neutral position? It did not impede their discussions. It meant that they had to produce a report that met its remit and that requirement, but you can see through reading the Barclay report that they did look at other matters. They did ask about other matters. They did consider submission by people who went further than the remit maybe would have initiated or expected. In relation to the report itself, yes, ultimately, its final recommendations were neutral ffiscally, but in the narrative it said, if you could, you should do these other things which, in the fullness of time, is exactly what I am proposing. For example, it was not a hard recommendation of Barclay to switch the poundage uplift from RPI to CPI, but it was desirable. In fact, it was business organisation's number one ask of the budget, but it was referred to in the Barclay report, but it could not become a hard recommendation because it tried to give that neutral figure. Despite what might have been a perception about rigidity of remit, it did not impede their ability to debate fully and comprehensively other matters and make recommendations to me that I was able to then go further on. Assuming, cabinet secretary, it is not impeding the Government's consideration of its recommendation because, just looking at the measures that you have accepted and seeking to put into place just now, our briefing on some advice from SPI shows that that is not revenue neutral, that is at a cost to the Government of £93 million. Is there constraints that the Government is operating under and which recommendations it does or does not consider? That figure, I would want to double check. It is in the range of about £90, that might be right. If the relief for independent schools is delivered also, it brings that figure back down, but about £93.96 million. That makes the point to be there. I was answering your question. Did the remit impede the committee? No. Did it also impede the Government? No. It informed the Government. I suppose that that is the beauty of the dynamic that has been created. I think that it strengthens stakeholder engagement. It is giving assessors a focus, it is giving local government a focus and it is giving Government a focus post-revaluation of the actions that we can take and how we can improve things going forward. So I think that there has been a number of consequential improvements that have come from the report itself. I know the recommendations that I have accepted. The business support measures will come at a cost. The nursery, the new nursery relief, as well. The other side of the coin, of course, was raising revenue. That was going to be a chief for a number of measures. The most high profile one was lifting the relief from allios. There was no appetite in Parliament to do that. When some folks say, why is that in balance? Well, Parliament is very enthusiastic, largely, for the business development measures, for supporting nursery, so on and so forth, but it was not so keen on those recommendations that raised extra revenue. There is no loss to local government as a consequence of that, because those decisions are taken in full approach in the budget, as you have described, convener, where we have recognised that I wanted to accept as many recommendations as was sensible to do so, but then there are wider budget considerations. The question that was asked previously in Parliament was, would I have to make up the sums for the extra support and the Barclay recommendations elsewhere on the domestic rates? No, Government can make that up through wider budget decisions. I will be looking at each of those individual proposals, recommendations and a bit more details as we know members want to ask those lines of questions, but the overall Barclay review remit was to enhance and reform the business rate system in Scotland to better support business growth and long-term investment and reflect changing marketplaces. Given the limitations that are on the annual business survey, for instance, how do you evaluate the impact of MDR policy measures on business growth and investment? In other words, how do we know that it is working? There are so many external factors that impact on the economy. How do you know that the levers that you have are having the desired effects? It is a good question, convener, but it would be hard to strip out of any business what has solely the non-domestic rates decisions meant for your business. They might be able to tell you what it might mean in terms of investment or balance sheet or profitability, indeed, for some survival. Some businesses have made a difference in terms of the release between survival or not. To quantify that in a qualitative way, it is quite difficult to do to strip out the rates bit from what part of Government intervention is making your business more or less viable. The strength of the economy, overall, is judged through GDP, employment and the business survey. In itself, it is helpful, but it is very hard to extrapolate out of that what individual difference would overall rates policy mean. If you take an issue, I am sure that it will come to a small business bonus, the best evidence to have on that in terms of surveys is from the FSB, who consulted their members on what the small business bonus support means for those businesses. As to the overall health of the economy, I suppose that we will have to use a range of measures to judge that. Overall, GDP, business start-ups, success and sustainability rates, then direct engagement with businesses and their representative organisations to get a sense of what difference rates, relief, support and poundage are making. Sometimes, in non-domestic rates, we get focused on just business. I make the point that a whole body of other parts of society benefit third sector charities, religious organisations and education. Although you are very focused on business, a large part of relief is for non-business organisations as well. That is an important point. I want to go into that in a second. You said that a range of measures that you might consider to see if current NDR measures are having that economic boost to businesses in the wider economy, but you did not pin down what that would precisely look at. I think that the committee would welcome more information in the future, just to get a better idea of that. One of the reasons for asking the question is that, going back to that remit about supporting business growth, we have just finished an inquiry into city region deals in this committee. There was a creative tension between the UK Government and the Scottish Government over whether it should maximise economic growth or whether it should be the concept of inclusive economic growth. Where does NDR sit as part of that? Are you looking to get the biggest bang for your buck out of economic growth by the measures that you take in relation to NDR, or does the idea of inclusive economic growth transfer between portfolios? Keith Brown is very keen to see that in relation to investment in city deals. We want all businesses to engage in inclusive growth, whether that is signing up to the business pledge, which includes material considerations such as are you paying the living wage? Do you support investment in young people apprenticeships? My next engagement after this committee convener is to go and visit the 425th business that is signed up to that pledge. We are absolutely emphasising responsible policies with the business community and engagement, and yes, there is an expectation that that focuses on inclusive growth. A few weeks before the draft budget presentation, we convened a conference in Glasgow with international experts as well, invited the key business organisations to make the point around inclusive growth, so absolutely non-domestic rates should be part of that. In how we provide support for the business community, there is a quid pro quo that they deliver more around living wage, socially responsible policies, investment in training and skills and apprenticeships, as well as overall. Part of the issue is that you talked about the conflict, the creative tension that you recharacterised it as… Unusually diplomatic, cabinet secretary. I would say in terms of non-domestic rates. If you take our overall approach, of course, we want to support all business in Scotland, but it is clear that we have been more targeted towards small and medium-sized enterprises in terms of the rates that we propose to levy. Why? Because we have kept it as local as possible. The biggest beneficiaries of small business bonus are local independent properties, which are not part of a chain. There is a sense of localism and a non-domestic rates policy, but the point that I was coming to on creative tension is that I have to be mindful that many businesses are competing across the UK and the regime in Scotland should give the perception and, in reality, be attractive so that Scotland is in an attractive place to live, work and invest. Having resources to spend on inequality and tackling inequality will come from having a healthy economy, so they go hand in hand with a successful, healthy economy and progressive taxation. Thanks, cabinet secretary. I should put on record the tribute to our last deputy convener, Elaine Smith, when she was pursuing the evidence with Barclay, she was very keen to point out to Mr Barclay and others that it was not just business rates, it was non-domestic rates and chargers in other sectors that were involved in that, and that is something that she was passionate about. I am glad to hear you mirror some of that back to the committee today. He did mention the small business bonus scheme. I am going to move to other committee members to tease out some more information in relation to that in a second. There is a review on going or about commencing relation to how effective that has been as well. You have said before about how the NDR more generally is quite challenging to work out what the direct impact has been in relation to that. 100,000 businesses benefiting from small business bonus, and other businesses benefiting from various other reliefs, but no conditionality put on that. For example, you do not have to pay the living wage if you are in receipt of some of those reliefs. You do not have to demonstrate growth. I get the issues around that, but you give a bit more information on how you intend to gauge the success of the small business bonus. I do not want to be childish about it. I see businesses in my high street that I suspect anecdotally, but I would say that anecdotally is still in business because of the small business bonus. I support it, but I say that anecdotally is very different Cabinet Secretary for my measured Scotland-wide approach to the effectiveness of it and perhaps improving it. I would just gently, since we have been diplomatic, challenge an assertion that reliefs are not targeted. They are, and there is an essence of conditionality. I can share this with the committee if you do not have it. The table of reliefs that are available to get some of them, you absolutely have to fit in that category, whether it is empty property, relief, whether it is disabled, that would be £63 million. I could go through the list, conditionality, but you have to be, by definition, eligible to get many of those reliefs. I just want to make that point, because any sense that it is all generic is not the case. Very specific reliefs for very specific entitlement. That said, specifically on small business bonus, it is the most substantial relief in terms of relief, and I absolutely take that point. The relief may amount to about £235 million for 2018-19. Of course, those are just forecasts, but hopefully they are reliable forecasts. At the point that I would make around small business bonus, just like you, I could produce a number of anecdotal cases. The cafe I visited in Paisley went from not being eligible for SBBS to being eligible for SBBS. When I asked the owner how she would be spending that saving, she said, I will be training a new member of staff. We would all welcome that. That is what the saving would mean for her. We could all provide examples of that. We have anecdotal information that has been a lifeline, particularly in our towns centres, in a period of economic challenge. There is no doubt about that. That said, if SBBS, now the Federation of Small Businesses, would say this, wouldn't they? However, they surveyed their members to find that they were asked what would happen if the support through SBBS was abolished. They conveyed back the information from proprietors that about a fifth of small firms, 18.9 per cent reported to close the business, with similar proportions arguing that they would have to cancel investments and amend their plans for growth. That was 19.9 per cent cancel investment and 18.3 per cent amending their plans for growth. That is what the representative organisation for small businesses in Scotland, the small and medium-sized enterprises, tells us in terms of savings. Members may say, they would say that, wouldn't they? I understand that, but that is what the survey said. That is what businesses said would be a consequence of abolishing the scheme, which takes me to your key point around the evaluation. Barclay asked us to evaluate the effectiveness of the scheme. I want to be very clear about that. I want the evaluation to be about how we can maximise the social and economic benefit of that relief. As to the exact remit of that work, which we want to undertake this year, the Barclay recommendation was that the evaluation leads to an evaluation. I would imagine that any change is taken into account for the next revaluation. I have not determined yet what the remit, focus or sense of that work beyond what we have already stated should look like. I will give an invitation to the committee. What would you like me to evaluate and what do you think that could lead to? In assessing the social and economic benefits of the scheme, we may have different perspectives on that. You have already touched on one example. Would a recipient be paying the living wage? That is something that I have considered in the past. To get to that point, it would probably require a massive administrative new burden. The question might be, is that worth it? It may well be. I think that that is all the more reason to evaluate it and then assess what options may look like. I am giving an open invitation to the committee for your deliberations. What would you like me to do as part of that evaluation? Rather than me simply proposing it and you say that it does not do what you would want it to do. My mind is not set in concrete on what that should look like any further than what I have announced, which is the evaluation, should be maximising the economic and social benefits. In tandem with a commitment that there would be 100,000 beneficiaries, 100,000 properties will be taken out of rates all together because of the small business bonus, but I want to get that evaluation asked for by Barclay right. I think that I have taken quite a collaborative approach on how I have conducted non-domestic rates decisions and I want that to continue. We also have a new forum to look at some of the implementation issues around amendment and as representations from sectors that are being referred to as well. I want that to feel quite collaborative as well rather than a ffata comply. Okay, thank you cabinet secretary. I will restrict myself from following up on any more of that because I know that Monica Lennon wants to come in relation to some similar aspects. Yeah, thank you. That is a good opportunity. I am sure that we will take that on board. I am just a bit concerned though that from my perspective shouldn't there be a plan in place when you develop policy about how you are going to monitor and evaluate that, so it feels a bit strange that we are going to do that in a retrospective fashion in terms of setting out how we measure if a policy has been fit for purpose, but I think that that is a welcome opportunity and I am sure that we will feed into that. Cabinet secretary, you mentioned non-domestic rates obviously affect other users, not just businesses. I wanted to pick up on the Scottish Sports Association because I know that you have been engaging with them and you will be well aware of their concerns about the 13,000 community sports clubs that they represent. Are you able to give us an update on how they could or could not be impacted on the relief recommendation? Two key points there, just on evidence. The Scottish Government was elected on a manifesto proposition around a small business bonus. The Scottish Government believes that it has been working, but we are responding to a request from Barclay. I said that I would try to accept as many of the recommendations as I could, so if there is a request for more monitoring, more evaluation, then we are responding positively to that whilst holding true to our manifesto commitment on that. I think that it should be well received that the committee also has an opportunity to feed into what that evaluation should look like and then how we go forward. I think that that is the right collaborative approach as well as the consultative committee. I would not say that we do not know if the policy is working or not. We believe in it. I believe that small business bonus has been a lifeline for many small businesses across the country, particularly in their town centres. When I mapped out as a constituency member what small business bonus and other reliefs meant to my hometown in Renfrew, it was undoubtedly a factor in the fact that there are very few void i.e. closed properties. Different communities will face different challenges, so I absolutely believe that it has been working. There is a request for an evaluation and an assessment, and we are responding positively to that, but I have no doubt that a positive effect and not having it would have caused great difficulties during what has been quite a difficult few years for the economy, clearly, and we are all very well aware of that. Going forward, we have an opportunity to refine it in a fashion that the members would support. On sports specifically, I want to make the intention. One thing that we all now know is that non-domestic rates are incredibly complex, and it is not good enough just to say what we need as a radical overhaul, because every time we look at it we all come back to the same conclusion that actually there is no good radical overhaul that resolves all the issues that may have been raised. It is that refinement that we are now taking a forensic look at. So when you look at the recommendations specifically for sports clubs and even within that golf particularly, what was Barclay driving at? It wasn't an intention to lift relief, I think, from every sport club in the country, as per Barclay. What it was about, I suppose, was a sense of fairness and a sense of there are some large clubs out there that have policies that might not fit with an inclusive agenda, that are cash-rich, that are profit-making, and there was a question mark as to what feels more like a commercial organisation than a sporting organisation, how they should be interpreted in non-domestic rates policy. So it's reasonable then to have a look at that and refine it. I don't have the statutory instruments yet, but the policy intention stemming from Barclay. Golf is a good example. It's not that every local golf association or golf course in the country members' clubs should now be subject to rates. It's the very particular sense of asset-rich, particular policies behaving more like a commercial function that Barclay had in mind. I will consult and engage to get that regulation absolutely right, so we don't unintentionally lift relief from those that we would say, that's a bona fide community organisation providing the service and it doesn't fit within the spirit of that which Kim Barclay and his panel were fairly trying to identify as different. So I hope that this committee appears to give some reassurance to the sporting community world that this is more about those organisations that I've referenced as opposed to many, many organisations just delivering a grass-roots community facility. Committee will see that regulation as I propose it because it's secondary legislation, statutory instrument, before it's voted on or determined by Parliament and before I even get to that I'll consult on it, which was a key recommendation of course on Barclay that I consult on any major change of policy. I've just been advised that it'll be primary legislation so that'll be even longer than I had anticipated but still require that engagement, that consultation to refine it to get it right. The Barclay report may have caused a bit of consternation in the sporting community world. Probably that and the recommendation around Allios, which would have been more profound for the sporting community and clearly that recommendation has not been taken forward by the Government in the fashion that Barclay requested. That's given certainty to those Allios in sporting and cultural organisations and then the refinement for those outstanding recommendations that we've very carefully considered but hopefully I've been able to give some clarity around those that are in scope as opposed to those that aren't. Now what it wouldn't be right to do is then say, is that golf course on or out? Is that club on or out? I could do that but that wouldn't be fair and it would also predetermine that which Parliament might propose or amend. No, I'm pleased that the cabinet secretary is alive to the concerns that have been expressed by the Sports Association. You talked earlier about on-going engagement and the advisory group. Are they one of the bodies that have been invited on to that advisory group? No, but I tell you what, I'll invite them on it. There we go. I don't see any reason why they shouldn't be because I've clearly been responding but if you think their attendance and membership would help them, we can do that. I think they'll be very pleased to hear that invitation today. I think there are big concerns about some of the unintended consequences and I think the conveners touched on the Government's aspiration for inclusive growth and I think we all agree that we need strong communities and resilient communities. If anyone was listening last night, there was quite a lively debate, a members' debate, about some of the funding that's been stripped away from the Scottish Sports Association's £70,000 so we're hoping that you might have a whip round in St Andrew's house but if you go back and look at that and I'm sure if you speak to Aileen Campbell you'll see some of it, they're really genuine concerns that they have and I think they're already very concerned and I think if you reach out that would be reassuring to communities right across Scotland. I haven't had the opportunity to see a read-out from that debate but we are continuing to engage with the association and during and after Barclay, I met with a number of associations, including the Scottish Sports Association, for their evidence, as I did with independent schools and others I have to say, for their evidence on consequences if I had enacted Barclay and that was one of the key issues around how Government responded on allios. We've touched on wider budget issues as well and it's only fair that I respond to that as well, is that another substantial risk to the income of sporting organisations in sports Scotland, similar to culture, was the downturn in lottery income, that's a substantial issue and for that reason I've been trying to be as supportive as possible for culture and sport, recognising that they're failing the punch from that downturn in lottery income. No support for UK Government, ultimately UK Government determines the conditions around lottery but I've tried to be helpful in overall budget, not proceed with the allio recommendation from Barclay and in relation to that ensure that there's specific on-going consultation to get it right. I can't be any clearer around policy intention without showing you the legislative composition but we've not got to that yet because I want to engage with how you design the right statutory content to do that but in relation to that as well we're not taking a rushed approach we're going to take the time to get it right because again that was in the spirit of consultation as per the Barclay report and should be a shock in the system for the sport community. Cabinet Secretary, you already mentioned and touched on nursery relief this morning in earlier evidence but how will the Scottish Government evaluate the nursery relief and what specific indicators will the Government use to ensure the outcomes and benefits from the relief? The view of Barclay was that it would be helpful in the delivery of our child care policy so how do a judge success? Will it be helpful in delivering our child care policy? Will it give a wee bit more financial support I suppose? Now I have to be clear it's a relief which means stated limits apply as well because they have to even if I made it exemption rather than a relief I'm advised it's still stated limits would have applied so the testimony of success was how overall you know how well is our child care early learning and child care policies going. I want to put it in context though the financial cost of non-domestic rates to the child care sector is less than 2% so that's the scale of economic shift that is from a fiscal point of view to the sector but nonetheless it was argued by Barclay it would be a helpful intervention and the Government supporting that recommendation. To what extent will we make sure that the savings are then transferred to the nursery costs and the parents and carers and that's going to happen between now and April 18 rather than the evaluating after three years which was talked about from the review? We can still do our best to evaluate it after three years but it's a bit like the overall approach non-domestic rates. Now I've shared the fact that the cost to nursery education is less than 2% I think that just contextualizes the difference it makes financially as to the overall policy delivery there's a commitment to deliver that 1,140 hours by the end of the parliament so success will be down to delivery of that policy. I can't make a guarantee that a private nursery provider eligible for the relief passes it on in terms of cost it's just I can't absolutely guarantee that that's the nature I suppose of the relief but will it help the sector? Yes. Was the sector giving a view that they wanted the relief? Absolutely. If you look at the overall impact of revaluation those impacted most through the most recent revaluation were as we well know the hospitality sector, utilities and then fairly high up and those whose values had increased by the independent assessors was nurseries and I think that led to the recommendation to give them a relief. Andy Wightman. Thanks very much convener. You invited comments on the remit of small business bonus game I should suggest that you should look at whether it should even exist at all whether what is a generic relief because it is generic the only qualification is under a certain valuation threshold whether that's appropriate in light of some of the people who are getting the benefit and look at the capitalisation effect as well I'm happy to write you with further ideas about what you should include. Could I just ask about annex C in the Barkley review contains quite a lot of suggestions they're not formal recommendations and in your opening remarks you said that Barkley had gone further than its remit but when it came to recommendations it stuck to its remit have you any intention of responding to the proposals in annex C? No in terms of Barkley the 30 recommendations are the 30 recommendations that's what I've responded to in the implementation plan so I won't respond formally to anything other than the recommendations that have been presented to me it would seem a bit strange if I was then delivering a response to other ideas considered as opposed to what Barkley actually recommended that said if you look at issues such as digital that will need on going work because no one has yet been able to crack the issue but how you adequately tax digital transactions that I have seen anywhere yet so I won't be responding any further beyond the Barkley recommendations because the implementation plan is about how you implement what's been recommended are these other matters still able to be debated though yes whether it's either the first one's digital or a methodology specifically now just looking at the annex methodology will be a matter for assessors I am engaging still with assessors in terms of their plan and a small business bonus to say we're proposing to evaluate so the debate on any of these matters can still be live but in terms of formal response I responded to Barkley's recommendations not matters beyond that in terms of the implementation plan it's going to turn to recommendation 28 that you do not accept the recommendation agricultural land or basically all property which agricultural land is the biggest current exemption should be added to the to the role the argument you give for this there are administrative burden implementing this where there's no intention to levy non-domestic rich and state aides we know now that there's over 10,000 properties being added to the role for 2018-19 which are eligible for under the under the shootings and sportings category so in fact given that there are only about 14 or 15,000 agricultural properties virtually all of them are in the role anyway at the moment and given that of October 2017 you provided information that showed that of the 2,000 of the 10,246 properties that have been added to the role 10,174 in other words all of them bar 72 are under the 15,000 threshold and therefore all eligible from all business builders so you've added over 10,000 properties that are not going to be paying any NDR and yet your argument is we shouldn't add all properties because there's no intention to levy non-domestic race that seems a contradiction. No it's it's quite clear I'll ask Douglas McLaren to cover the specific point around a forestry and shootings once and forth but in terms of the Barclay recommendation specifically the recommendation was to put all agricultural land on the valuation role but without an intention to tax it and frankly any amount spent on that any amount would be a waste of resource because the Government has absolutely no intention to generically tax agricultural land or remove relief and I can't be clearer on that so when there's no intention to do that I think it would be unnecessary to ask assessors to put effort into that i quantifying that which we don't propose to tax as opposed to all the recommendations and all the energy that should be spent elsewhere from the Barclay report and beyond so I wouldn't have them waste resources on an area not willing to tax and it isn't true to say it isn't as simple as they're all going the role anyway because of the decisions around forestry and hunting and shooting that's not true that's that that's not the case that all automatically or indirectly end up on the role and that was the assessor's view as well that it would be it would come at administrative cost without any real effect now it would be it would be it would be interesting an interesting exercise but it would be a distraction for assessors when we're trying to get them to refine all the matters that have been deemed to be a priority but fundamentally it's point of principle that it would create a necessary burden administration assessment maybe even dispute around assessment because it'd be a fear that it was then moving to additional levy or removal of relief or exemption for agricultural land in terms of the detailed point around the number that then entered the role in the category of forestry and hunting so on and are then eligible for relief do you have more information on that? It was just really to add that the eligibility criterion for small business bonus the 15,000 rateable value relates to a rate payer's cumulative property so if you know if it's a farm as a farm shop or a BNB that would be considered together with its rateable shootings so if the rateable shootings are under 15,000 rateable value they might not cumulatively be eligible for 100% relief so hence the Scottish Fiscal Commission estimated about 6 million or so of net income from shootings in deer forests so as 100,000 properties are taken out of rates by the small business bonus there are considerably more properties on the roll with rateable value up to 15,000 they don't all qualify for 100% relief that's just the point. I can understand that your other argument was around state aids and you've just said in relation to nurseries that you've been advised that whether something is exempted as agricultural land currently is or whether it goes on the roll and gets relief state aid rules apply equally so I don't understand the argument that bringing agricultural land would engage state aid rules when at the moment they're exempted. State aid interpretation always brings great joy to ministers and been told what we can and can't do should and shouldn't do and what two lawyers might give perspectives. Some have said that Scottish Government lawyers are on the more conservative side but Douglas McLaren is not a Government solicitor but is familiar with the legal advice and why there's a difference here why state aid doesn't apply to the same effect. It's largely to do because agricultural properties have been exempt, have been excluded from the roll since pre-EEC accession in 1973 so exempting, excluding agricultural properties from rates is materially selective and where are we to end that exclusion from the roll but then at a future point try and apply a rates relief that might then come into state aid consideration but because it's a pre-EEC accession you know it's been there for decades. I don't want to pursue the legal technicalities about pre-EEC accession but the point is that one of the things that Parkley says in Annex C is that as a matter of principle in fact they urge the Government, that's why I'm asking whether you're going to respond to Annex C, they actually urge the Government to revisit the topic about the fact that they suggest that all properties should pay something as a democratic principle because all properties benefit from the provision of local government services to an extent and therefore even if it's a modest contribution of £100 per property as a matter of principle that should be paid by all rate payers and therefore if you were to bring agricultural land on you would actually be increasing the tax burden if you were to implement that so the change in terms of now would be an increase in taxation not and therefore not I wouldn't suggest engaging the state aid rules but I don't want to get into debate about state aid rules but I would be interested in your view on the principle as to whether all non-domestic properties should pay something if even a token amount. I have to say convener I'm gobsmacked that Andy Wightman of all people doesn't want to look at the legal technicalities of a particular issue because we don't have time yet I thought it might be as simple as that because Mr Wightman to be fair is always forensic in such matters so it's a point of principle and it's a I've been asked a direct question I mean first of all I want to say that Kim Barkley is I think satisfied with the Government's response I mean that was a question as part of that in terms of the two key points of principle first of all I in relation to agricultural land I don't I don't see the I again in principle I don't see the point of putting in that administrative effort when there's not an intention to tax or indeed lift any exemption or relief so it would feel unnecessary and a I don't see the purpose of it Barkley recommended it but government is entitled not to accept every recommendation we've not done it we've not accepted the recommendation for allios and we've refined some of the other recommendations that maybe we will come to my final point because there were a few questions in that and one was you know why aren't we simply doing what a Barkley asked and I've tried to give a reason for that as to the this very direct question do I believe every person on the role should pay a contribution as a point of principle no I don't and I referred to some of the relief seller on there's reliefs for religious for disabled for charity there's a range of people who don't pay a penny and that's the nature of the reliefs so to apply the principle that everyone should pay something would mean that all those that currently enjoy all those reliefs should pay something no I think we have to have a distinction and I believe that the policy it can be more progressive in the fashion at how it determines reliefs at what point do we reach a threshold that gets a maximum support less support or indeed no support but the point of principle about paying something I mean a lot of these reliefs are not 100 reliefs even charity reliefs not necessarily 100 relief the principle of Barkley was saying that everyone should pay something and said for example this is an example a minimum charge of 250 pounds would affect 110,000 to 120,000 properties that currently do not pay rates that would bring in 30 million that's my idea with agriculture that's things on the roll so that's the question we're not talking about 100 relief we're talking about the principle the principle that everyone pays something albeit a modest sum to acknowledge the fact that there is a link between the services non-domestic properties received from local government and the cost of providing them just because of time constraints I don't want to curtail this exchange but I think you might have had an answer to that question could we get it again maybe briefly cabinet secretary so we can move on to another line of questioning 100 relief means that you know someone pays nothing I'm just I was asked the direct question do I as a point of principle believe that everybody everybody should pay something no I don't believe I think that's too generic I think it should be a bit more refined and I think there's reasons that some people pay nothing some properties have zero rateable values some are entitled to maximum relief it's a fair question a fair point it would raise money if there's a change of policy policy to say everybody should pay something that is not what is recommended that is not what I have found a support from stakeholders and it's not a government position there is some anecdotal evidence that some people for example in some areas say we'd be willing to pay something but if you proposed to remove their relief I think they would quickly change their mind so I've tried to answer the question as best I can it's a different view it's a different perspective but it's not a government policy equally you could say the same for income tax you could say the same for income tax everybody should pay something but it's not the case for income tax either because of the personal allowance and and that which is a discounted as well it's all dependent on how much yarns so the policy proposition is not that of the government I'm happy for you to explore further if you want to just that specific question I think you had an answer to it just wasn't the answer that you wanted you could explore the line of questioning further if you want no I was just challenging the cabinet secretary's idea that some of these reliefs are not all of these 100% I'm happy to leave it that it's all on the record so okay five months apart we're in Egdom Simpson thanks thanks very much just to go back to the advisory group can you tell us who's on that and share that the full membership and a composition with the committee if you want to see more now or I can share it with you yeah it's generally the business groups you would expect CBI Scottish chambers but others such as cos law the professional practitioners group called the IRRV but we can write with the full details okay that would be useful can I ask you about universities so Barkley recommended I'll just read this out to you that that Barkley was referring to things like renting out halls of residence or self-catering flats and other commercial enterprises that universities carry out we're just quote this said these commercial elements of the university should be liable for rates where they compete with the private sector this should also be the case for commercial activities such as renting out venues for conferences and other functions however the government's response to that was that we recognise that a range of charities and other not not-for-profit organisations undertake some commercial activity and continue to be eligible for charity relief aside from the principle in question there would also be practical issues in distinguishing commercial from non-commercial use I'm just wondering why well first of all what's that principle that you refer to in your response I think it was the principle around essentially a part of the state been used for commercial functions was the driver behind Barkley looking at this recommendation so that was sorry what's your what was the principle that you're referring to so if I can cut to the chase on this particular issue Barkley took the view that universities were conducting some of their affairs say student accommodation over the summer period for accommodation generates income not not students not related to education and they reinvest that if there's a profit into the university so from Barkley's point of view this is about fairness and equality from government point of view of course we support the higher and further education sectors we want fairness in the rate system but it was clear on really looking at the issue and engaging with the sector that for the sums involved which which were far from a massive saving again similar to agriculture was going to become complex hard to define quite fluid and difficult to assess and it really wasn't worth the effort of changing the regulations to achieve the principle which was that it was around fairness and equity in terms of treatment because the private sector would say it's competing with them now similar to allios you can take a view around where profits are invested or reinvested and reinvesting back in a university will have a different you'll take a different view to that than someone hiding personal wealth for example which is why I think Parliament takes a different view on allios yes allios constructing their affairs in the fashion that they are is tax avoidance yes it is by definitions it's tax avoidance but those sums are reinvested for public good and invested into community facilities as we've described earlier so that was the nature of discussion in relation to universities so if I understand you're right and correct me if I've got this wrong you think that the principle of applying rates to these commercial activities is fine but it's just too tricky it's too difficult it's too complex I'm trying to be clear I think the overriding matter here was the administrative nature of it and we do also want to support both high and further education as well we support and understand what Kim Barclayne's team were saying around fairness inequity but to change it here was too complex administratively cumbersome and wouldn't be worth any savings that could be achieved and that's why the government arrived at the decision we did okay Alexander Stewart asks you about nurseries and you've decided to apply relief to privately run nurseries which make profits but you haven't taken that approach with nurseries in the independent school sector which don't make profits what that seems inconsistent to me can you explain that we will have yet to conclude the necessary legislation that would achieve that we clearly are supporting nurseries and each nursery will be judged because it will be through application essentially because it's a relief will be judged on its merits and within that there's obviously the complexity of what's a dedicated nursery what's a dedicated independent nursery and the eligibility around that as I say will come through in the legislation that we'll consult on so I don't know why there's a view that we're not we're not proposing the right balance in terms of state nurseries and a private nurseries and if there's a nursery attached to an independent mainstream school it'll all be how it's defined as part of the structure of that organisation so I don't think it should generalise I don't know if Douglas McLaren would want to say anything further on that as the cabinet secretary says the detail come out in the legislation we're not trying to be exclusive here but we have to deal with rates can be a bit of a blunt instrument we look at a property that's on the assessment that's on the valuation role so if that property is a nursery or or wholly or mainly a nursery then we'll try and give it the relief if it's predominantly a school campus with a nursery you know on a smaller part of the campus then it's difficult to look at that property and say it's a nursery so like I say we'll we'll try to contend with that in the legislation so that that as I described inconsistency might might be sorted out in this legislation yeah I'm trying I'm trying to be clear that first of all the policy intentions clear that's 100% relief for nursery subject to state aid in the public and the private sector the definition of each will be determined by those allocating the relief complying with that legislation so the intentions clear the detail will be based on consultation but beyond that the eligibility will be based on compliance with the criteria so it's not you can't generalise it will be down to as Douglas McLaren's tried to clarify is it a bona fide nursery with that dedicated use within those criteria or is it separate because essentially of course non-domestic rates is a property tax which property is judged on its characteristics okay now last time you appear before the committee I asked you about independent schools and rates and I asked you if you'd done any assessment of the effect of imposing non-domestic rates on the independent school sector the reason I asked that is because if there is an extra bill for that sector there could be a knock-on effect on councils um if um if schools start to put up put up their prices um then kids may end up in the state sector and that's why I asked the question um at that point you told me you told the committee the information that I have this is yourself I have seen suggests that there will not be a mass exodus uh from independent mainstream schools to state schools the sums involved in non-domestic rates can be absorbed by independent schools so a couple of questions there is what what was the information that you've seen that suggests there will not be a mass exodus um and why do you say the sums involved can be absorbed what evidence have you got for that okay in I think one leads to the other actually um and the figure that I would look at um is again in understanding the overall context of non-domestic rates bill potentially to that sector so you look at that and say what is the impact of the change we're about to make that's a fair assessment so I described for nurseries that it's less than 2% of of expenditure for that sector for independent schools I believe it's also less than 2% let me run through why I believe that to be the case the estimated average charity relief per pupil is £225 the average daily fees paid per pupil is estimated to be around £13,700 per annum now these are averages based on the work that we've done total fees is estimated to be around £374 million so charity rate relief therefore represents around 1.6% of the average fees paid so for around 80% of pupils that we've been able to look at and the numbers that we have the average charity relief will be £300 or less so I'm trying to put into context that if the response of those independent schools that would be covered by the policy that's mainstream independent schools it is such that amounts to those figures that is not such a financial shock that I think would lead to a mass exodus from independent schools to the state sector and I've had no concern raised with me that I am aware of from the main local authority that would be affected by such a policy Edinburgh that they are concerned about pupils returning to the state sector I also said in those comments at the committee and I do believe this that it will be for mainstream independent schools to respond accordingly this doesn't affect their charity status it only affects non-domestic rates status and I mean it has been put to me that some schools might respond by curtailing bursary entitlement to less well-off students I don't think that there would be a rush from independent mainstream schools to become or have a perception that they're becoming elitist or more elitist but if they pass on directly that removal of relief that's the scale we're talking about less than 2% and it's from that analysis I conclude that that would probably be absorbed by the vast majority of fee paying students and pupils in their families but look I didn't just assume that I did listen and I did look at the evidence that was presented by the independent schools representatives and asked them for further information but you know you've asked for my opinion and my opinion is that that can be absorbed so just one final question convener so you mentioned you had evidence from the independent school sector yeah what was that evidence so in the same way that I would you would count as a committee a presentation of an opinion as evidence that's why you call evidence taking sessions I got I had personal meetings with the association there was written correspondence as well to to Barclay who would have considered that and then directly to government when the Barclay report was published and I looked at those letters and you make a judgment same as business same as I referenced Federation of Small Businesses and their evidence about what an impact on a change of small business bonus would lead to I looked at what the association said an individual correspondence they felt they believed that the impact of any removal of relief would lead to the other thing is as well is that I've been able to show how I've respond to evidence because it was a fair question around specialist schools and schools was a very particular focus on special needs in a disabled so that's why I'm not taking the approach to Justin Barclay which was all independent schools removed have their relief removed I've been far more specific and refined to say no again policy intention is independent mainstream schools because I believe there to be a case for further support for those with those very dedicated functions and again when it comes to the legislation we'll make sure that we refine that to get it right and that will also involve further consultation and keeping in the spirit with the Barclay review I'll lead in time as well so that's at least a couple of years away to get the consultation engagement the legislation and refinement right but the policy intention is not to go as far as Barclay because I recognise there is a very special case that can be made for those schools with those very special functions and that's why in engagement with the sector I've arrived at that conclusion I'm just wondering cabinet secretary just given the exchange was about concerns in relation to displacement of students from independent schools into the state sector no that was a kind of resource issue rather than any other type comment would you agree with me that a lot of people will make a positive choice to educate their children in the state sector because I think I wouldn't want Ellen just picking up on this evidence session to think there's a concern about children having to be educated in the state sector as a positive choice for the vast majority of families in Scotland absolutely I mean I've not got into the principle behind it because I'm giving you as best I can straightforward finance secretary answers to the fiscal position to the analysis to the response to Barclay I think every member surely on this committee would take the view that we want all children to be educated to the highest quality possible level and that's why frankly in the draft budget there is more dedicated around attainment and financial support for education particularly but Barclay recommended this let's not forget on the basis of fairness council local authority schools paying on domestic rates so why not independent mainstream schools and so you can make a very special case for others and I'm looking at that as I've described but this is about fairness and education but I say again it's the government's ambition to give every young person the best possible quality aim of education and I would certainly as you have hinted at convener dispute any charge that going from an independent school to a state school is any diminution of education it's not and nobody and I'm simply saying that because the convener has asked me to be clear on this and I think I'm not suggesting anyone did say that I think there's a context but if anyone is turning him cabinet secretary just just in relation to that but also I'm conscious this is this is not the education committee you're not the cabinet secretary for education but if you do review the churn of students between the state sector and the independent sector in conjunction with Mr Swinney I'd urge you to also have a look at the higher end the senior levels of secondary schools where I've heard that what quite happens is independent schools sometimes cherry pick some of the highest performing state students into the independent sector so just look at churn in both directions that's what I'd encourage you but I'm conscious this is the local government committee and not the education committee and we're looking at non-domestic rates Can I give you just a further piece of probably important evidence on that regard then which was if you look at the through the course of the recession because I'm asked I'm been asked about the cost of change of policy on the level of fee and the consequent outcome during the course of the the recession the number of independent schools pupils was actually sustained and over recent years it's continued to grow actually even though there's you know pressure on household budgets so I just make the point that the evidence we have from previous economic more difficult times it suggests that there's not a mass movement between the independent sector and the state sector based on that kind of fiscal movement and that's just helpful evidence to be aware of okay that that is helpful and I'm hoping we're going to go for a final question to Mr Whiteman but can I just pick up on Alio's point again just briefly cabinet secretary that you said yourself look it is tax avoidance but if you like it's tax avoidance for all the right public interest reasons and if it's tax avoidance for all the right public interest reasons in relation to Alio's can the same not be said of the local authorities out there who have not moved to Alio's so therefore what consideration have you done to equalise the impact of non-domestic rates across all local authorities in the context of Alio's well convener as you know the system of local government firms distribution is complex enough I think it's a fair point there are there are very few local authorities who haven't gone down the the Alio route but there's no I'm not suggesting any further change to equalisation frankly because the overall settlement is needs based and then there is equalisation measure known as the floor which leads to as much convergence as possible I'm not proposing a further financial mechanism beyond the current statement on Alio's the good news is of course those local authorities who thought that we're going to have the relief lifted are welcoming that decision and I've clearly had to draw a line somewhere so that there are no new Alio's conducting their affairs in the fashion that leads to questions about tax avoidance I share your view convener that you know there's tax avoidance people hiding personal wealth to be condemned and here we have the public sector designing structures in a way that can reinvest those sums in the public sector provision for good well-meaning reasons there's a world of difference between both behaviours but it is by definition tax avoidance okay it's like a cabinet secretary mr whiteman thanks convener I've just done a few other questions we have a little bit time for I asked a written question on this and that they're not often the best way of getting answers I think in this case it might be more to do with my interpretation in your answer but in the passage of the land reform act which reintroduced shooting rates there was a policy intention announced that the monies raised by that with the fiscal commission estimate to be six million pounds next year wouldn't be retained in the non-domestic rate pool but would be used by Scottish government to finance the Scottish land fund is that the position of the Scottish government now two years after that policy intention was made yeah I was I was more closely involved with that at the time I think when Mr Swinney was the cabinet secretary and the state there's no changement to treatment of non-domestic rates income for this I think because it helps with the totality of the budget it enabled us to direct more budget from more resource from another part of the budget to the Scottish land fund that was the rationale so there's no treatment no difference in treatment for non-domestic rates so when when it was announced that that money would be retained by the Scottish government for the land fund that's no longer in fact the case the money is going into the pool I don't think I suggest I want to have a personal look at this and coming right back if you could write just to clarify that I'll do that just to note I did put a written question in and it's a difficult question and answer to provide. I'll endeavour to do my best to get the straightforward answer to that question. I'll write to you convener at the clerks and Mr Whitman direct. Before we close this particular evidence session cabinet secretary I'm just wondering if there's anything else you would like to add we've got a small amount of time. I think we've covered it quite comprehensively but I say that my suggestion around SBBS evaluation is a serious one there is time to help shape that engagement I'm happy to have further discussion on that. I think that that was the last comment I was going to make cabinet secretary before we closed the session it's just in relation to the offer to the committee to talk about how we would like to seek the success of the small business bonus scheme to be evaluated that that is welcome I would hope maybe one of the things we could look at is decide what future success would look like for the small business bonus scheme so not just saying how effective has it been to date but what would we like to see as a committee for what positive outcomes would like to be for say the next five years of the small business bonus scheme because I think that puts us in a proactive position rather than just deciding what the criteria by which you judge current success or otherwise. Okay that's fair and if the committee has a collective view on that then that gives me a greater focus. Okay I think that that would certainly be welcome so can I thank the cabinet secretary and Douglas McLaren for coming along this morning we've found it very very helpful and we now move to agenda item 3 thank you gentlemen. So we now move to agenda item 3 as I said and the committee will consider negative instruments 428 and 430 is listed on the agenda. These instruments are laid under the negative procedure which means that their provisions will come into force unless the Parliament votes on a motion to annul the instrument. I confirm the committee that no motions to annul rather plural have been laid. I can invite members to make any comments on the instruments before us. No one's indicating that they have any comments so can I invite the committee to agree that it does not wish to make any recommendations in relation to these instruments rather are we agreed? Okay thank you very much everyone and we will now be moving to agenda item 4 which is previously agreed we're taking in private so we now move into private session thank you.