Government defends changes to business rates

money3The Scottish Government has defended its changes to the way business rates are assessed. It carried out an analysis to monitor the impact of the revaluation which came into effect last month. It published this today, with the report saying that Scotland’s small businesses were “significant beneficiaries of the Scottish Government’s decisions”.

In particular, it suggests that 79 per cent of all ratepayers would have been worse or no better off had the Government decided to introduce a transitional relief scheme similar to that in England. Such a scheme would have meant that money was taken from the many small firms to cushion the increases in the public sector and some large private sector businesses.

It claims that over 80 per cent of small and medium sized enterprises and, in particular, 63 per cent of properties in the hotels sector have benefited from the reforms. However, the CBI in Scotland responded to the report by pointing out that this is amongst the sectors most concerned by the change.

Its assistant director, David Lonsdale, explained that “a number of businesses in the retail, hospitality, energy, whisky, and agricultural sectors have been in touch to voice their deep disquiet over the decision not to place a cap on and phase in bumper increases in rates bills which have emerged from this year’s revaluation.

“Many of these firms are already struggling to emerge from recession, and believe they have been put at a disadvantage compared to competitors down south who are benefiting from a cap on any hefty rises in their rates bills.”

That view was supported by the Federation of Small Businesses. Its Public Affairs Manager for Scotland, Colin Borland, said that “we were cautious about spending money on a transitional relief scheme and why we’ve been an enthusiastic backer of the Scottish Government’s landmark Small Business Bonus which continues to deliver for the small business community.

“However, big increases in rateable values can kill businesses and the business community really needs a more comprehensible system. That is why the FSB has been pressing for the release of this information for some months and we will be closely scrutinising the high-level trends.

“What circumstances justify a 50% plus increase in rateable value and who is scrutinising the methodology used? We need more light and more consultation regarding elements of the system which the Scottish Government says are outside of its control.”

Finance Secretary John Swinney told the Scottish Parliament that the Government’s priority was “to ensure the burden of taxation on business is distributed in the fairest possible way. Revaluation means that almost 60% of ratepayers in Scotland will be better or no worse off – with average savings of over £1,300 per property.”

He added that at least half of all firms in Scotland would be eligible for a discount on their bill through a total rates relief package of £2.4bn over the next five years which he claimed was the most generous package of reliefs in the UK. However, he was willing to discuss the package with business leaders.