Aggregates Tax backed by MSPs in first stage of Holyrood debate

The first part of the Aggregates Tax and Devolved Taxes Administration (Scotland) Bill will allow for the introduction of a devolved replacement for UK Aggregates Levy. The second part makes amendments that will allow Revenue Scotland to more effectively administer each of the fully devolved taxes.

The debate was consensual in tone (reflecting cross-party support for the Bill) and led by the business minister Tom Arthur. In opening remarks, Arthur said the Bill would implement proposals agreed by the cross-party Smith Commission in 2014, ensure the effective and efficient collection of the devolved taxes by Revenue Scotland and support Scotland’s circular economy ambitions.

Arthur confirmed that the expert group set up by the government to advise on the Bill’s development would continue and that ministers were keen to use the new tax to help with its circular economy ambitions by incentivising material reuse and innovation and minimising exploitation.

The minister acknowledged that a lack of Scotland-specific data on aggregate from HMRC made it harder to quantify potential behavioural change as a result of a new tax diverging from the UK levy and said this was one of the reasons that alignment with Aggregates Levy was ‘pragmatic and sensible’. He added that the Scottish Government, Revenue Scotland and the expert working group were working with a view towards improving the evidence base so that the tax could continue to evolve.

No indication was given about what the rate of the new tax will be, Arthur saying that this decision would be reserved for the last Scottish Budget immediately prior to the levy’s expected introduction date of 1 April 2026.

The minister also used his contribution to acknowledge the concerns from professional bodies (including CIOT) over the lack of consultation for the proposals in Part 2 of the Bill to improve Revenue Scotland’s administration of the devolved taxes. Arthur assured MSPs that the provisions were ‘informed by detailed engagement with Revenue Scotland’ and represented ‘minor points of clarification’.

Liz Smith (Conservative) responded on behalf of the Finance and Public Administration Committee, highlighting several aspects of its recent report on the Bill. Some of the committee’s concerns have included the ability of the new tax to incentivise the use of recycled aggregate and the lack of Scottish-specific data on UK aggregates levy, which Smith said ‘is essential’ to understanding how the tax will work and the rate it should be set at.

Smith also shared the committee’s reservations about the lack of consultation on Part 2 of the Bill, noting that this ‘does not support effective policy-making”. In closing remarks, she added that the committee ‘would like to support the principles of the bill’ but that ‘we do not feel that we have enough information to enable the scrutiny process to be as accurate as it could be.’

Jamie Halcro-Johnston (Conservative) said that his party would support the Bill and used his contribution to reflect on the concerns raised by Liz Smith and the Finance and Public Administration Committee. He said he hoped for ‘reassurances and possible amendments’ from the government as the Bill progresses through parliament.

Michael Marra (Labour) welcomed the new tax and the ‘sensible’ approach taken by the Scottish Government to ensure that the levy would be able to interact with its UK-wide predecessor. He voiced some concern about the powers Revenue Scotland would be given to offset taxpayers debts and credits, citing evidence from CIOT and others about the proportionality of the measure.

Ross Greer (Green) backed the Bill, describing the debate as ‘not headline grabbing, but important’. He suggested that to help incentivise the recycling and reuse of aggregate, and preserve Scotland’s built heritage, the Scottish Parliament should legislate for a locally-set ‘Demolition Levy’ that would sit alongside the new tax and make it more expensive for developers to demolish existing buildings.

Willie Rennie (Lib Dem) said the Bill was ‘incredibly important, but incredibly dull’ and was pleased to see the Scottish Government working with the aggregates industry and other stakeholders to develop the Bill. He praised the government for its engagement and sought clarity on how future changes to tax policy could be made, hinting at support for an annual Finance Bill that CIOT and others have called for.

John Mason (SNP) said he was ‘unconvinced’ that the new tax should ‘slavishly follow’ the existing UK levy. He was also critical of the costs that the Scottish Government will need to pay to HMRC to ‘switch off’ the UK tax in Scotland (a concern shared by Michelle Thomson (SNP)) and of the legislative requirement that the tax can only be levied on imports of aggregate.

Mason also expressed his support for the idea of a Scottish Finance Bill, highlighting the lack of consultation on the measures contained in Part 2 of the Bill.

Both Rennie and Mason asked the government to consider whether it could bring forward amendments relating to Land and Buildings Transaction Tax (LBTT) as the Bill continues its parliamentary scrutiny.

Brian Whittle (Conservative) also spoke of the merits of a Finance Bill, arguing that ‘a simpler approach’ would be ‘well worth considering’. Fergus Ewing (SNP) and Daniel Johnson (Labour) said businesses should continue to be consulted on the development of the tax and Maggie Chapman (Green) suggested the levy could help fund research into more sustainable methods of construction.

In his closing remarks, Tom Arthur said the government would consider whether the scope of offsetting powers available to Revenue Scotland should be made clearer in the legislation. He added that the government would give ‘serious consideration’ to the amendments suggested by Rennie and Mason. The minister added that he was ‘open’ to discussions about a Scottish Finance Bill but that this would need the support of the parliament and ‘detailed consideration’. He said this had the potential to be a ‘fruitful project that could inform how we take forward our processes’ and that a Finance Bill ‘could provide more certainty and continuity, with a clear rhythm of opportunities for care and maintenance’.

The full debate can be read here.