ALL this week, the evidence has been gathering. On day one, we heard from the owners of pubs and hotels who said large rises in their rates could put many of them out of business.
On day two, we heard from retailers who said they fear the rise in rates, due to come into force this April, could further damage struggling high streets.
Then on day three, we heard about the damaging effect the rises could have in the north-east of Scotland which is already struggling in the aftermath of the downturn in the oil and gas industry.
And now the latest in The Herald’s series on non-domestic rates brings yet more evidence of the effects of the current system with a joint memo from the heads of all of Scotland’s 22 health boards. According to the memo, the rise in rates could saddle the NHS with extra costs of more than £30million a year because of the decision to apply the highest rate in the UK at a time when the service is having to make unprecedented savings.
The idea of a rise in rates turning the screw on hospitals is bad enough, but we now know that the Scottish Government also had fair warning of this crisis. The joint memo from the health boards was a response to the consultation on rates which closed in October.
Not only that, it has now emerged that the assessors who set the new business rates were warned of the potential consequences and told that the revaluation would have a dramatic impact on pubs, hotels and other licensed businesses.
The central problem is that the rates for the hospitality trade are calculated partly on turnover, whereas the rates for other types of commercial property are calculated largely on square footage with turnover excluded, which leads to anomalies such as small pubs facing rises while some supermarkets enjoy a cut. As this newspaper pointed out earlier this week, it would be much fairer to calculate rates on the profit that a pub or club makes rather than turnover.
A number of chartered surveyors also made this point to the assessors when they were asked for their views ahead of the revaluation, but it seems their views were ignored. One of the chartered surveyors who gave his view was Douglas Lambie, of the property firm Ryden, whose assessment of the situation could not be clearer: the assessors’ scheme, he says, bears no resemblance to market reality and should take account of profit margins and costs.
In his response on the subject, the finance secretary Derek Mackay quite rightly pointed to the Government’s rate relief package for small businesses and no one is denying that businesses need to pay their fair share.
However, Mr Mackay failed to address the critical point about the anomalies in the system. The Government has another question to answer too: with the Barclay Commission on business rates due to report this summer, why is the Government forcing through rate rises now before the commission has done its job?
Instead, it should listen to the many businesses who have been warning in The Herald all this week about the consequences of the rises, and work towards a model that is fairer, clearer and sustainable.
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