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Scottish Chambers of Commerce - Policy Update - Business Rates

Introduction

Since the publication of the Scottish Budget on 21 September 2011 and SCC’s subsequent meeting with the Cabinet Secretary for Finance, Employment and Sustainable Growth, John Swinney MSP, on 5 October, SCC have been engaged in further work to ensure that Scotland’s businesses get the best possible deal on business rates in 2012-13 and beyond. Subsequent to our initial meeting with Mr Swinney, we met with him again on 17 October alongside the CBI, the Wine and Spirit Trade Association, the Scottish Retail Consortium and a group of large retailers. On 27 October, we met with Enterprise Minister Fergus Ewing MSP followed by a meeting with Scottish Government officials and on 9 November we attended the Scottish Ratepayers’ Forum. These meetings have elicited further information which we require to update you with.

There are three areas of the Government’s plans on business rates that will result in additional cost for business.

1. Annual Inflationary Rise in Business Rates – Cost to business: £585m over 3 years

In England, the business rates poundage is usually adjusted each year in line with the previous September’s Retail Price Index. This means that in 2012-13 the UK Government is expected to raise the poundage by 5.6%, the highest rate of RPI inflation in over 20 years and probably, according to the Governor of the Bank of England, at a historic peak. This matters to Scotland because the Scottish Government have committed to match the poundage rate in England (as has been done since 2007-08). If the UK Government exercises its right to raise the poundage by lower than 5.6%, then there would be a knock-on benefit for Scottish businesses. We have therefore called upon the UK Government to so. Fergus Ewing has confirmed to us that if the UK Government opt for a lower increase, the Scottish Government will mirror this.

2. Empty Property Relief – Cost to business: £36m over 3 years

The Scottish Government are maintaining the line that the reduction in the value of Empty Property Relief is necessary in order to raise £18 million per year and that the position is still more generous than it is in England. Ministers state that they are open to alternative suggestions and we will continue to push on this.

3. Public Health Levy – Cost to business: £110m over 3 years

Information on the proposed Public Health Levy is improving but still incomplete. Here is what we know:

• it will apply to businesses with a rateable value over around £300,000

• in order to be subject to the levy, businesses will require to sell both alcohol and tobacco

• it will be set at a flat rate that will be in addition to the existing rates poundage supplement of 0.7p paid by businesses with a rateable value of over £35,000

• the rate of the Public Health Levy has not been announced but will be variable in future years if it does not raise the expected levels of revenue

• it is expected to apply to approximately 240 premises in Scotland

SCC have been working to get more information about this proposed levy both by meeting with Mr Swinney and by participating in two joint letters to the Cabinet Secretary alongside the Scottish Retail Consortium, CBI Scotland and the Wine and Spirit Trade Association. Our line at this stage is that business needs more information about the levy. We have not yet taken a firm position either for or against it.

Ongoing Work

SCC are planning to submit a response to the Scottish Government’s Draft Budget and Spending Review consultation, which closes on 21 December 2011. If you have any input on Business Rates or any other budgetary issue, please contact Garry Clark on 0141 204 8337 or at gclark@scottishchambers.org.uk

Scottish Chambers of Commerce

November 2011

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