Edinburgh tourist tax: Using revenue for affordable housing and regeneration would be ok, minister tells MSPs

Affordable housing would be a valid use for money raised by the proposed tourist tax, the Scottish Government minister in charge of the legislation has said.

Public finance minister Tom Arthur said it was up to councils to decide how to use the revenue, provided there was a clear link to the visitor economy. But he pointed to the problems of hospitality staff finding somewhere to live as an issue which cash from the visitor levy could help to tackle.

His comments came as he took part in consideration of amendments to the Visitor Levy (Scotland) Bill at Holyrood's local government committee. He also agreed to have further discussions ahead of the final stage of the Bill on a series of concerns raised by MSPs, including the extra burden for small businesses and possible exemptions from the scheme.

The Bill gives councils the power to introduce a levy on overnight accommodation, with the money raised to be reinvested locally in "developing, supporting or sustaining facilities or services which are substantially for or used by persons visiting the scheme area for leisure purposes".  

Lothian Labour MSP Sarah Boyack called for the word "substantially" to be removed. She said: "Visitors use a number of the same services and facilities as local residents, but they can impact on them dramatically, so proving that they're used to a significant extent could be difficult. I know Edinburgh council is concerned that if we get into legal arguments, that's not good for anyone."

Mr Arthur said local authorities would want to use the funding in a way that best supports their local visitor economy.  "Those needs will differ across the country, from improving street dressing to supporting work promoting a destination, investing in relevant regeneration and potentially supporting affordable housing projects, recognising that tourism businesses can struggle to retain and recruit staff due to accommodation issues as part of wider pressures on local housing markets."

He said it would not be for the government to permit or exclude any particular use of the funding. "Within the broad parameters of the Bill, that is rightly a decision that will be made at a local level after local consultation." But he added that he expected the matter to be covered by national guidance, currently being developed by local government and the tourism industry, which is to be given a statutory basis.

Committee convener, Green MSP Ariane Burgess welcomed the minister's assurance that investment for housing and regeneration was a legitimate use of revenue. She said: "There is a significant connection between the visitor economy and the housing sector, for example in the provision of accommodation for visitors that does not reduce access to housing for residents and in recognising the visitor economy itself requires accommodation for the many staff that work within it. A ready supply of affordable housing is a foundation of a thriving visitor economy."

Ms Boyack also welcomed Mr Arthur's indication that housing and regeneration would not be precluded, especially given Edinburgh's housing emergency.

Edinburgh Southern Labour MSP Daniel Johnson highlighted the "practical realities" for many small businesses who could face a "very significant additional administrative burden" in implementing the new charge. Accommodation may not be their main business, perhaps farms for example, which might have one or two bedrooms they let out. "Those businesses are being run essentially from a school exercise jotter and a cash tin." He argued the very smallest businesses which find it difficult to administer the levy could be exempted from the scheme.

Lothian Tory MSP Miles Briggs argued the levy should be a flat-rate charge rather than a percentage, saying it would be easier to calculate, administer and explain to guests. Mr Arthur said there was no consensus within or between businesses, tourism organisations and local authorities on the matter. And he said the government would continue to explore the issue as the Bill progressed. But he said a percentage charge would reflect what a person was willing or able to spend on their accommodation.

Mr Briggs put forward a list of groups he argued should be exempt from the levy, including parents staying in a hotel while their child is in hospital, those visiting a family member in prison and NHS staff travelling for work purposes. Fellow Lothian Tory MSP Jeremy Balfour argued people receiving disability benefits should also be exempt.

But Mr Arthur said: "Exemptions are an area where the government believes it is best for local authorities to decide and put in place arrangements that reflect local circumstances." He added the government was open to introducing national exemptions if there was a consensus between councils, businesses and parliament, but that neither the local government nor the tourism industry backed specific national exemptions.

And Mr Briggs also argued the Bill should contain a requirement for the government to review the visitor levy after year. Mr Arthur said under the legislation councils would have to report every year on their schemes and review them after three years. Any national evaluation would be better once a number of schemes has been established and after a longer period. But he said he was open to further discussions.

Mr Arthur also told the committee the government would bring forward proposals for levy on cruise ships. It was working on such a scheme now and if it was ready in time it would be proposed as an addition to the visitor levy. But he did not want to delay the current Bill waiting for the cruise ship plans to be developed and did not want to rush the cruise ship scheme to meet the Bill's deadline.