Retailers today led criticism of Finance Secretary Derek Mackay’s package of rates reforms, accusing him of applying “another sticking plaster” to an unfit system.
Trade body the Scottish Retail Consortium said his “tailored package” – additional measures introduced in response to the general outcry – will not deal with the underlying problem caused by revaluations coming into effect in April.
Mr Mackay earlier unveiled a series of changes to his original plans, bringing relief to a further 9,500 more businesses.
He said his tailored package will help those in hospitality and renewables nationwide and with offices in Aberdeen and Aberdeenshire to deal with increases to their property values under the forthcoming national revaluation of business rates.
The Scottish Government has already cut the poundage by 3.7%, take 8,000 businesses out of the Large Business Supplement and extend the Small Business Bonus scheme so 100,000 properties – half of all business premises – benefit from 100% rates relief. The additional support package includes:
Almost 8,500 hotels, pubs, restaurants, cafes and other accommodation will benefit from a cap on any increase to bills of 12.5%
Support for more than 1,000 offices in Aberdeen and Aberdeenshire with increases in bills capped at 12.5%
Relief for renewables companies, including hydro
Confirmation of free revaluation appeals – with no fees or restrictions as in other parts of the UK
Early Government action on the findings of the Barclay review into Business rates – due in July
Working with any local authority to introduce a local rates relief scheme to support key sectors or localities
Mr Mackay (right) said: “I have listened and decided that we will act nationally to tackle the impact. These additional measures come on the back of significant support for business already set out in our Draft Budget 2017/18.
But Ewan MacDonald-Russell, SRC head of policy, said: “Mr Mackay’s announcement today is yet another sticking plaster on the suppurating wound of the unreformed business rates system.
“Today’s measures will hopefully help some of the businesses affected by the revaluation, albeit only by adding even further complexity to an already fiendishly complicated system.
“However, it will do little to deal with the underlying problem caused by revaluations which take place too rarely to flex with the economic conditions.
“The rates system is no longer fit for purpose. It regularly fails to reflect economic or trading conditions, with rates bills way too high, especially for the 21,000 commercial premises in Scotland which continue to pay a higher tax rate than competitors or counterparts in England.
“Profound structural changes are changing the Scottish economy. For example, in retail almost a quarter of non-food retail sales are done online, and over the past seven years the number of shops has fallen by 1,700 in Scotland. These changes are likely to accelerate, calling into question the very wisdom and financial sustainability of the tax.
“The Finance Secretary today reaffirmed his commitment to implement the recommendations of the Barclay Commission as swiftly as possible. Retailers will hope to see action once the review’s conclusions are published later this year.”
Retailers particularly feel the impact of the current unreformed rates system. Retailers pay a quarter of all business rates yet account for 5.5% of Scottish GVA.
Scottish Government figures show that 10,000 jobs and 1,700 shops have been lost in the last seven years in the industry. In that time revenue from rates has grown by 42.5%.
Liz Cameron (right), chief executive of Scottish Chambers of Commerce, said the reforms “do not get to the root of the problem.”
She said: “That is why Scottish Chambers of Commerce has proposed a full expert review of the methodology of valuations in the hospitality, motor trade and energy sectors, with a view to ensuring that every business in Scotland can be confident that it is subject to a correct business rates valuation of its premises.
“This would complement the ongoing work of the Barclay Review of Business Rates, which is a more general and less technical appraisal of the system.
“The Scottish Government’s additional measures, together with such an expert review and the Barclay Review of business rates can combine to enable long-overdue change to the structure of Scotland’s outdated business rates regime. Scotland’s business community stands ready to assist in making reform work.”
Colin Borland (right), the Federation of Small Businesses’ head of devolved nations, said: “The sensible measures announced today should provide some comfort for Scotland’s vital tourism and hospitality industries. Targeted help for the economy of the north east will also be welcomed by local firms.
“The furore associated with this year’s revaluation shows why the system is long overdue for reform. And, it’s important to note that much of the help outlined today is only funded for one year.
“Therefore, a programme of modernisation must be delivered soon after the Barclay review reports. In addition, Scottish councils should considering supplementing these measures, with a particular focus on smaller businesses on local high streets and nurseries.”
Brian Rogan, head of rating and taxation at property agency CBRE in Scotland, said: “Whilst any measures to alleviate the burden of rates increases are welcomed, the package of limitations on increases in rate liabilities announced by the Finance Secretary does little to support the credibility of the Scottish Government’s policies on this area of tax and will do nothing to rebuild confidence in the current business rate regime.
“The fact that these measures have had to be introduced shows the extent to which the current rating legislation is not fit for purpose. Businesses needs a system that quickly and properly reflects changing economic conditions without having to wait for the Finance Minister to bring forward complex and reactive provisions every time there is a revaluation.”
David Melhuish (right), director of the Scottish Property Federation, said: “Today’s statement underlines the need for a more comprehensive package of reforms of the rating system that will support sustainable economic growth and in so doing grow the tax base.
“We note the commitment to move quickly on the proposals of the Barclay review of the rates system once it is completed this summer. We need a business rates system that is more responsive to the economy and is more transparent and predictable for ratepayers than the current system has become.”
Hannah Smith, Policy Manager at Scottish Renewables, said: “We broadly welcome today’s announcement of a one-year 12.5% cap on select business rate bill increases, given that some hydropower schemes had been facing rateable value increases of up to 650%.
“We also welcome the introduction of 50% relief for district heating schemes for the next 12 months.
“However, businesses have no idea what their bills will be from April 2018, so it is important that government, the assessors and industry work together to review the way values are calculated and ensure that renewable energy projects are taxed in a fair and proportionate manner from next year.
“It is disappointing that there will be no specific relief for small-scale onshore wind and solar generators, which are also facing very large increases, but the relief for new-build schemes and those with an element of community investment is welcome.”
Scottish Conservative finance spokesman Murdo Fraser (right) said: “For weeks the SNP has been ignoring this issue, claiming it had no control over this process.
“In the typical style of this SNP government, it fell asleep at the wheel and only woke up when it crashed into the wall.
“We’ve heard on more than one occasion that this budget has been maxed out, yet once again Mr Mackay has been able to find a bit more money down the back of the couch.
“It’s a desperate eleventh-hour move which will do very little to ease concerns within Scotland’s business community, given that it is for one year only.”
Scottish Labour’s economy spokesperson Jackie Baillie said: “Derek Mackay’s last-ditch U-turn is welcome. For too long the SNP simply refused to listen to firms who were crying out for support.
“But question marks remain over how much this additional relief will cost and how it will be funded. The money is only in place for one year and the danger is that businesses face another cliff edge in 12 months’ time.
‘And it is deeply concerning that public services, such as hospitals and universities, could face a steep rise in rates. That could be as much as a £30million tax rise for the NHS, at a time when the SNP is preparing to pass a budget that will decimate valued local public services.”