David Lonsdale: MSPs must support business rate reform

Mr David Lonsdale, director of the Scottish Retail Consortium Agenda, urges MSPs to support business rate reform to mitigate the decline of the Scottish high street.

David Lonsdale: MSPs must support business rate reform

David Lonsdale

On every Scottish high street, there is visible evidence of how retail is changing. Successful shops are embracing technology and well-trained staff to provide interactive and innovative customer service, whilst other town centres contend with empty shops and deserted streets.

Stiff competition, muted demand and changing shopping habits are forcing retailers to reinvent themselves to survive.

Regrettably, public policy is exacerbating the struggle. Mushrooming tax and regulatory costs come at a time when retail sales are flat, and mean retailers are diverting resources away from investment in digital platforms, skills, and logistics capabilities. Public policy is ratcheting up the cost of employing people and operating from premises, accelerating the pace of the structural change in the industry.

One of retailers’ biggest outgoings is business rates, with the sector accounting for 22% of rates. Retailers’ rates bills increased £13.2m this Spring.

A more fit-for-purpose system which provides greater predictability is desperately needed. It’s why the Scottish Retail Consortium is asking MSPs to back the Non-domestic Rates Bill when it comes before Parliament this Thursday.

Headway is being made on recasting rates for the future. We applauded the Finance Secretary’s actions at the last budget to bring in a below-cpi uplift in the poundage/tax rate and to shelve plans for a new levy on out-of-town premises.

The Non-domestic Rates Bill introduces more frequent revaluations and halves the period between valuations being undertaken and coming into effect. It should mean the system better flexes with trading conditions, keeps pace with structural changes in the economy, and provides a more effective shock absorber against future economic bumps in the road. Each property will pay a fairer share of the rates burden relative to others and a more accurate one. It should also decrease the likelihood of major fluctuations in property values and reduce appeals.

Scottish ministers are heading in the right direction with these changes and MSPs should back them.

We also ask parliamentarians to reject calls from some for control over the poundage rate to be handed to councils. This would be a retrograde step, anomalous with the thrust of the reform agenda of predictability and competitiveness.

However, this bill shouldn’t be the limit of our ambition. The rates burden remains onerous, with the poundage/tax rate having escalated to a 20-year high and with a further £60m hike pencilled in for April.

Furthermore, many firms occupying medium-sized and larger premises pay a supplementary levy higher than competitors or counterparts down south. Ministers revealed last week that 5,040 of these are retail premises, who pay an extra £13.95m for this surcharge annually. The Barclay Review, upon which the bill is based, was very clear that this higher supplement was ‘damaging perceptions’ of Scotland as a place to invest and that parity with England should be restored by April 2020. The levy sticks out like a sore thumb.

So let’s deliver a rates system which better reflects economic conditions, restores the level playing field with England on the large firms’ supplement, and begins to lower the overall rates burden. This would support retailers and increase their confidence about investing in new and refurbished shop premises.

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