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rating fairness

You could not help but notice the regularity with which the word ‘fairness’ was used in the manifestos emerging from the political contenders in the general election.

Recently the Chamber has been acting on your behalf to draw attention to the un-fairness of the Scottish Government’s proposals for the Business Rates Revaluation. By the time that you read this, I hope that the Minister has responded to the reasonable concerns of businesses in the North -east that they need time to deal with imposed and unexpected cost increases at this stage of the economic cycle, and that local politicians have woken up to the potential damage.

At the heart of the lobbying that we are doing on your behalf are a number of issues that Government would do well to heed:

There was little or no expectation that the Scottish Government would withdraw transitional relief at such a late stage, and not follow the established practice of matching the terms of rates revaluations elsewhere in the UK. The decision came as a surprise and it has taken us all a little time to catch up and understand the consequences. Business does not like surprises, especially those that are unwelcome. This is not a ‘fair’ approach.

The PR spin at the time looked compelling: few businesses would be impacted and most would be better off with the targeting of reliefs at smaller businesses. There was no need for transitional relief. Ministers are still defending the decision in this way, despite the evidence. In retrospect, it looks very much like calculations were done on a national scale, and argument for the ‘greater good’ overlooked the massive impacts on certain businesses. Their pain is no less for being the exception rather than the rule, and no less galling for being imposed by their own government. It is not ‘fair’ to treat impacts on the minority as acceptable collateral damage.

One of the arguments from Government has been that, although rateable values have increased, the reduction of the ‘poundage’ from 48p to 41p has neutralised any increase. This is simply not true for the region. Figures for the City of Aberdeen show that the total rates ‘take’ by government has increased year on year by 14% from £166.6m to £184.4m. If this is the average increase, then there are going to be many businesses paying more than they should. Bear in mind that transitional relief in the rest of the UK cuts in at 12.5% and lasts for up to five years. It is not ‘fair’ for government to drop a competitive disadvantage on the businesses struggling to cope with weak trading conditions, rising prices and tight credit. Oh! and by the way, business does not believe you Government when you say that higher rateable values will not lead to higher rates payable. Business doesn’t trust politicians’ promises – just like the electorate at large.

Though Government revenues from Aberdeen city will grow by 14% year on year, the proportion that is returned to the City Council shrinks from £88.1m to £84.2m, a decrease of 4.4%. Most businesses that I know would like a slice of that action. We already know that the City and Shire Councils do not get their fair share of funding (c. £800 per head per year less than Glasgow for example), and you can’t help but conclude that this looks like political suicide.

Built in to the new approach, which is now based on turnover rather than property, is the excruciating time-bomb of a penalty on success. The more income you generate the higher your rates bill will be – ouch!

It looks increasingly that the decision to extend reliefs to small businesses, though welcome, was political opportunism, and that a late decision had to be taken to spike transitional relief to pay for it. Many will conclude that it is only fair that Government reaps what it sows, but it is not ‘fair’ that business picks up the tab.

Of course, the party in government at Holyrood does not have the weasel word ‘fairness’ in their manifesto title. No, their manifesto boasts the phrase ‘elect a local champion.’ Hats off to a couple of local champions who’ve got the message (no names no pack drill) – the rest of the politicians in the region need to wake up to this issue.

Here’s what the manifesto of the party in government at Holyrood says: “From April 2010, as a result of Scottish Government actions, Scottish business will enjoy a £220 million competitive advantage over companies elsewhere in the UK because we lowered the business rate poundage. This is £220 million that can be invested in growth and jobs. And we are extending the small business bonus, which means that more businesses in local communities – the sorts of businesses that form the life blood of local high streets – will pay no rates at all.”

It is clear that, so far, Ministers still believe this. The evidence from the North-east is to the contrary, and our response on behalf on of members is: If a £220m competitive advantage for Scottish businesses translates in to a 14% increase in business rates in the city of Aberdeen, where the heck is the money going?

So, for members facing real increases in rates payable we’ll keep fighting on your behalf to get a fair result for the region – I guess that makes the Chamber one local champion that you can rely on.