Rates rise below inflation

Scottish Government draft budget caps business rates increase

Finance secretary Derek Mackay had some rates rabbits to pull from his Budget hat

NEXT year’s business rates increase will come in below inflation, Scottish Government finance secretary Derek Mackay announced today (12 December) in his draft Budget for 2019/20.

Mackay announced that the poundage rate, on which business rates are calculated, will increase from 48p to 49p, an increase of 2.1%, but below the Office for National Statistics latest inflation figure of 2.2%.

The finance secretary also revealed that for the remainder of the current parliamentary term — which runs until 2021 — he will freeze annual poundage increases at the Consumer Price Index (CPI) inflation figure, rather than the RPI figure which was used previously. Historically CPI has been the lower figure of the two.

Other measures in the draft Budget included the introduction of a £50m capital fund to help support town centres through diversification.

Mackay also said that following appeals from business, he had decided not to introduce an out-of-town levy for businesses outside of town centres.

That announcement followed an open letter appeal from 21 organisations including the Scottish Grocers Federation, Scottish Retail Consortium and Scottish Wholesale Association, urging the finance secretary not to introduce such a charge.

The Small Business Bonus Scheme, which offers rates relief for business premises with a combined rateable value of £35,000 or less and individual premises with a rateable value of £18,000 or less, will also be maintained through 2019/20.

SGF head of public affairs John Lee said the organisation supported in principle the £50m investment in town centres, but added it “has to produce something meaningful, impactful and relevant to retail.”

Commenting on the rates measures included in the draft Budget, Lee said: “Business rates are one of the main costs that retailers face and we welcome the Scottish Government’s commitment to capping the rate rise. Retailers face significant pressure from a range of costs in a hyper-competitive market and any measure which assists in keep costs down is beneficial.”

Scottish Retail Consortium director David Lonsdale said the organisation was glad Mackay had been “more Christmas Elf than Mr Scrooge” in this year’s Budget.

He said: “The move to set the most competitive headline poundage rate in the UK is welcome, as is the move to scrap complex and costly proposals for an out-of-town rates levy.

“The new Town Centre Fund appears to be a promising initiative and we’ll await the details with interest.

Lonsdale added the SRC was pleased the Finance Secretary “listened to the chorus of concern led by the retail industry” and opted not to pursue an the proposed out-of-town levy.

SWA chief executive (designate) Colin Smith — who takes up the post in the New Year — said of Mackay’s business rates proposals: “This will come as welcome relief to SWA members’ customers.

“We also welcome the announcement that the Scottish Government will maintain the Small Business Bonus Scheme,” added Smith.

Addressing the Scottish Parliament, Mackay said: “Our decisions on business rates also mean that more than 90% of properties in Scotland will be charged a lower tax rate than the rest of the UK.

“This, alongside our commitment to lift 100,000 properties out of business rates altogether, will support businesses, contribute to economic growth, boost employment and generate the revenues that enable continued investment in public services.”

While associations may have welcomed rates measures announced by Mackay, the draft Budget must still win the approval of the Scottish Parliament. As the SNP currently operates at Holyrood as a minority government, this will mean gaining support from MSPs from another party.

The Liberal Democrats have been reluctant to back Mackay due to the SNP’s support for a second independence referendum, while the Scottish Greens have signalled reluctance to support the finance secretary due to a lack of “meaningful progress” on local tax reform — including council tax and business rates.