New plans to raise money

Tourist tax and asset switch give councils new finance

Glasgow Royal Concert Hall

The Royal Concert Hall is among the properties in the Glasgow deal (pic: Terry Murden)


Scotland’s two biggest local authorities are putting new plans in place to raise funds to meet spending commitments and budget shortfalls.

Glasgow City Council today agreed to transfer a number of its venues into an arms-length organisation in a leaseback arrangement that will help it raise £548 million required for an equal pay settlement.

Edinburgh councillors backed a plan for a controversial tourist tax which has divided opinion and created hostility in the hospitality sector, particularly among hoteliers who will shoulder the burden of what they see as a “bed tax”.

The Glasgow move will see ownership of a number of assets such as the Royal Concert Hall, sports venues and the Riverside Museum switch to a body called City Property Glasgow (Investments).

It was set up specifically to acquire the Council’s non-operational investment portfolio for £120 million in March 2010. The LLP is a sister company to City Property (Glasgow) LLP.

The portfolio is one of the most significant commercial portfolios in the City and extends to around 2,500 commercial properties across a range of sectors including industrial, retail, office and ground leases.

No properties will be sold in the ownership transfer. City Property will re-mortgage its existing portfolio and buy the new assets which the council will rent. The council says the public will see no difference in the way these facilities operate.

Edinburgh councillors supported the introduction of transient visitor levy, or tourist tax, which will make the city  the first in the UK to levy a such a tax. The council says it could raise £11m a year. The City Council was effectively given clearance to introduce the tax by Finance Secretary Derek Mackay who announced in last week’s budget settlement that the government would support the idea.

The city council is proposing a charge of £2 per room per night, capped at seven nights, but opponents say that it may be enough to deter some from visiting the city.

The council argues that with 4.5 million visitors a year, residents are beginning to feel the pressure on local services.

The new tax will not come into effect until the Scottish Parliament has passed enabling legislation, which is unlikely to happen before next year.

Liz McAreavey, CEO of Edinburgh Chamber of Commerce, lent the chamber’s support to the plan. She said: “Tourism is a huge sector for Edinburgh, generating over £1.4bn of revenue for the city, and supporting 36,000 jobs. As the gateway to rest of Scotland, Edinburgh’s tourism sector also makes a significant contribution to the economy of the country as a whole.

“After consulting our members, we found broad support for the principle of a transient visitor levy, support which increases further if funds were ring-fenced and re-invested entirely in the city’s infrastructure. What we require now is some more detailed information from City of Edinburgh Council as to exactly what they propose to do with the funds raised via a TVL.”

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