Concerns raised over devolution of business rates in Scotland

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Business organisations have raised concerns over the proposal to hand over the control of Sottish business rates system to local councils, saying this could cause big business rates hikes.

A stage 2 amendment passed in the Non-Domestic Rates (Scotland) Bill at the Sottish parliament’s Local Government committee sets out to devolve the powers to set business rates to councils, instead of Scottish Ministers.

The scrapping of rates poundage at the national level would automatically end business rates relief system, Scottish Finance Secretary Derek Mackay warned.

“A majority of Scottish businesses benefit from the lowest poundage anywhere in the UK and incentives that only exist in Scotland. All that is under threat as ministers would not be able to set a consistent rate and provide national reliefs,” Mackay said on Twitter.

“More than 100,000 businesses benefit from the Small Business Bonus and the Business Growth Accelerator ensures that businesses that build new premises or enhance existing ones pay no more for the first year. Both of these would disappear under the opposition proposals,” he added.

Under the current system, business rates amount is set by the Scottish Government, with local councils collecting the fees. The amendment moved by Andy Wightman of the Green Party and supported by Conservative and Labour MSPs would give councils the power to increase or decrease rates value.

Wightman said the proposal would have no effect on rates relief, accusing ministers of behaving “aggressively”.

“There are no proposals to end national relief powers. Don’t know why Cabinet Ministers are behaving so aggressively. There is a drafting error to be fixed. Purpose of amendment is to return control of rates to councils,” he tweeted.

FSB Scotland, the Scottish Retail Consortium (SRC) and UKHospitality have met with Mackay to raise their concerns.

“Across Scotland, small businesses will be alarmed to hear that nationwide rate relief for smaller operators is under threat,” commented Stuart Mackinnon, external affairs manager for Scotland at the Federation of Small Businesses.

“This Bill is supposed to be looking at new ways to make the rates system more user friendly and introduce more frequent revaluations. Instead, we see a policy adopted which could costs businesses far more than the tourism tax or the workplace parking levy. At the earliest opportunity parliamentarians must put this significant Bill back on track.”

Association of Convenience Stores has also stated their disapproval for the move, terming it as “huge step back” for rate reform.

“We are extremely concerned over proposals to devolve business rate setting powers to local councils,” said James Lowman, chief executive of the ACS.

“Up until now, Scotland has led the rest of the UK in implementing measures like the Business Growth Accelerator Relief which incentivise investment among retailers and other businesses, but local rates setting could mean a huge step back for rates reform.

“Scotland-wide rate reliefs must be retained in the future, and businesses must not be left with the threat of higher rates bills and additional local levies.”