There has been a slightly odd lull in the last month as business awaited the outcome of the contest to replace Nicola Sturgeon. With that hiatus passed we now have a new First Minister and Cabinet, who take on the job of leading a Scottish Government which has a range of touch points with retailers and consumers.
The contours of the First Minister’s economic and business agenda were sketched out during the leadership campaign. Pledges included helping parents back into work, promoting fair work, ensuring devolved regulation takes greater account of the impact on smaller firms, accelerating city centre recovery, redoing the consultation on restricting alcohol promotions, and alterations to the deposit return scheme.
More detail on the First Minister’s priorities will be forthcoming in in two weeks’ time when he is expected to make a statement in the Holyrood Parliament.
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One pledge which caught the eye of retailers but which has had relatively little scrutiny was a commitment to consider introducing a Local Democracy Bill. The detail is hazy at this stage, however the thrust is about handing “extra powers” to Scotland’s 32 local authorities.
Of course, local councils already set council tax and various local charges. They have also been given the ability in recent years to introduce a workplace parking levy, which Edinburgh City Council is reportedly shortly to consult on. Over and above this the government is already due to legislate to allow councils to introduce local tourist taxes.
The implications, if any, for firms and consumer spending from a Local Democracy Bill are unclear. However, the reason for the Scottish Retail Consortium’s wariness is that proponents of scrapping the Scotland-wide uniform business rate (UBR) and handing control over this £3 billion tax to each of Scotland's individual councils may seek to hijack the Bill. After all, it's only three years since some MSPs alighted on the then Non-Domestic Rates Bill in a bid to end UBR and make councils responsible for setting the business rate, reliefs, supplements and surcharges.
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Retailers and other sectors support the consistency, simplicity, and predictability that UBR and Scotland-wide rates reliefs brings and indeed has brought for the past three decades. Furthermore, past experience of locally determined rate-setting was not a happy one for many ratepayers.
Retailers account for over a fifth of rates paid. With the business rate already at a 24-year high, fragmenting the rates system would likely push up costs and complexity for ratepayers, and exacerbate the challenges being faced by property-intensive sectors like retail and hospitality at a time when they are trying to recover from three difficult years of pandemic and the costs crunch.
Frankly, firms have greater confidence that the needs of the economy and trading conditions will be factored into ministerial decisions on the poundage rate, as opposed to local authority decisions on rates. Firms fear that ending UBR would take us back to the bad old days when businesses felt treated like vote-less cash cows. One only has to look at the sizeable increases in council tax coming into effect this month to see what might happen if councils set the business rate.
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Many of our members have a store presence in Northern Ireland, where local authorities already set a poundage rate. That precedent is not encouraging. Rates bills in NI are significantly higher than here and council-determined rates bills are rising by 7.3% on average, compared to the rates freeze here in Scotland. Applying this uplift here in Scotland could have seen retailers alone forking out an extra £47 million in business rates in this new financial year.
We want Scotland to be a great place to grow a retail business and there is certainly more to be done on making Scotland’s rates regime more competitive. Hopefully, Scottish ministers will swiftly make clear that they remain resolute in their support for the retention of the uniform business rate.
David Lonsdale is director of the Scottish Retail Consortium
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