Tourist tax approved as Greens back Mackay’s budget
Derek Mackay: business retains some reservations about the budget
Scottish councils will have the power to introduce a “tourist tax”, impose a levy on workplace parking, and introduce new controls over rates relief, following an eleventh hour agreement reached between the Scottish government and the Green Party.
An additional £90 million of funding has also been found to boost council budgets which were facing major cuts, along with the ability to raise an extra £97m through higher council tax hikes and new flexibility in social care spending.
In letters exchanged with the Green party leader Patrick Harvie, Finance Secretary Derek Mackay outlined a package of reforms to local government.
The agreement ensured the Budget passed through its first stage by 67 votes to 58 and will give some certainty to Scottish businesses.
Mr Mackay said: “These additional measures will deliver the most significant empowerment of local authorities since devolution and provide additional funding to support local services.
“This enhanced package offers up to £187m of increased funding and flexibility to councils, on top of the £11.1 billion local government settlement. In total overall spending power for local authorities next year will be £620m higher than it is currently.”
CBI Scotland director, Tracy Black, said: “The Budget brings forward a number of measures supported, and long argued for, by the business community. On business rates, the scrapping of the proposed out-of-town levy, capping the poundage rate and confirming the switch from RPI to CPI for the duration of this parliament are all welcome and will support businesses to grow the economy.
“If there is an added winter chill in the air, it’s the growing income tax gap between Scotland and the rest of the UK, alongside the emergence of a new ‘tourist tax’.
Tracy Black: winter chill (pic: Terry Murden)
“At a time when firms are struggling to attract talent and investment, and amid continued Brexit uncertainty, protecting Scotland’s competitiveness has to go hand in hand with productivity enhancing measures to give our economy the boost it needs.”
On the decision to halt progress on the proposed Glasgow Airport rail link, Ms Black said: “Businesses will be disappointed to see that the long-anticipated rail link to Glasgow Airport appears to have been kicked into the long grass.
Andrew McRae, FSB’s Scotland policy chairman, said: “The Scottish Government’s draft budget was a spending programme that most firms could welcome.
“But today we’ve seen concessions from the Cabinet Secretary for Finance that will erode the small business community’s trust in his administration. Instead of Brexit help for firms, we see more tax changes, including a levy on our vital tourism industry.
“Ministers repeatedly promised firms that they would not pave the way for tourism taxes without industry support. They’re breaking that promise today.
“Increased plastic bag and cup charges and new workplace parking levies won’t be the end of the world, but it hardly sends out the message that Ministers understand the pressure that households and businesses are under.
“We are also concerned that the decision to allow local authorities to control empty property rate relief sets a worrying precedent, could lead to the full localisation of the rates system and eventual higher bills for local businesses. It also runs roughshod over commitments associated with the Barclay review of business rates.”
David Lonsdale: ‘new powers risk higher costs’ (pic: Terry Murden)
David Lonsdale, Director of the Scottish Retail Consortium, said firms would be relieved that the Budget was passed in a timely fashion, during a period when there is already more than enough political uncertainty.
“Whilst far from perfect, the previously announced moves on business rates, protecting ordinary workers from tax rises, and rejuvenating town centres all should help support retailers and the wider economy.
“Nonetheless, the new announcements of further tax raising powers for local authorities means there is a risk that costs to consumers and businesses will rise.
“Similarly, introducing extra costs on businesses through further levies is unlikely to lead to sustainable revenue in the long term – especially for retailers grappling with an industry going through fundamental transformation.
On the workplace parking levy Mr Lonsdale added: “We would be concerned if this opened the door to levies being applied to parking spaces provided for customers of retailers, in retail parks and shopping malls.
“Restrictive and costly parking is already seen as a deterrent to shopper footfall. A levy like this could well be seen as yet another tax on firms which they can ill afford, and we understand business rates are already paid on workplace parking spaces anyway.”
On the proposed devolution of empty property rates relief to councils, he said: “We oppose repatriating control over the poundage rate to local authorities and hope this is not a step in that direction.”
He said it was disconcerting to allow councils to siphon off some of the revenue from an increase in the carrier bag charge to 10p.
“There has been a massive reduction in the use of single-use carrier bags since the levy was introduced. Allowing councils to siphon off some of the levy revenue is disconcerting and is at odds with the approach taken thus far of allowing retailers to determine how the receipts are spent which our research shows are invariably given to environmental charities and good causes.”
Scottish Conservative finance spokesman Murdo Fraser said: “Thanks to the SNP, Scots across the country are about to be hit by a triple tax bombshell.
“We will pay the highest income taxes in the UK, council tax will go up, and now you might even be taxed hundreds of pounds a year for taking your car to work.
“Derek Mackay has torn up the promises he and Nicola Sturgeon made to voters at the last election on tax.”
The SNP said they would cap the council tax at 3% to protect low paid workers but councils will be able to hike charges by 4.79%, he said.
“This disgraceful betrayal of Scottish voters shows once and for all that Nicola Sturgeon’s government simply cannot be trusted. The truth is that none of these tax rises were needed.
“The SNP’s budget is rising by £2 billion this year and today Derek MacKay revealed he was being bailed out by a further Barnett consequentials of funding from the UK Government.
“Yet the SNP has the brass neck to attack the UK Government in the same breath. Derek Mackay is squandering this union dividend, and it is taxpayers who are having to pay.
“We need a Scottish Government that will grow the economy, protect taxpayers and – once and for all – dump its plan for an unwanted second referendum on independence.
“This budget delivers on none of those objectives and so the Scottish Conservatives will oppose it.”