No help for small firms until 2018 at this rate

DATE: Mar, 3   COMMENTS: 0   AUTHOR: Allan Azarola

Forgive me for being a killjoy. But since we finally have some debate, and clear blue water, between the political parties on income tax, can we now also have a discussion about the increased tax burden on Scottish business?

George Osborne threw a lifeline to small businesses in England and Wales, particularly small retailers such as corner shops, when he more than doubled the small business rate relief threshold in his budget, meaning properties with a rateable value below £15,000 would be exempt from the tax.

Meanwhile, for viewers in Scotland, the tax haul from business rates here has risen by more than 40% in the past seven years. In contrast, council tax has risen by just 7% over the same period.

Last week the Scottish Retail Consortium (SRC) last week reminded us that, from last Friday, about one in eight businesses will be hit with a £60m “super-tax”, courtesy of the SNP’s decision to double the large business supplement from 1.3p to 2.6p in the pound.

The levy applies to any business with a rateable value of more than £35,000, which in addition to medium-sized offices, includes many retail businesses.

It is worth pointing out that finance minister John Swinney increased the large business supplement, which doesn’t exist anywhere else in the UK, to help fund Holyrood’s rates relief scheme, the Small Business Bonus, which he insists has “saved” Scottish small firms £1bn over the past eight years.

However, small firms I spoke to in Edinburgh, Glasgow and Aberdeen told me the bonus scheme does little to help their companies because of the higher property values in those cities. Interestingly, the devolved government in Northern Ireland is considering scrapping its scheme for small firms, Small Business Rate Relief (SBRR), following a review that found its economic benefits to small businesses were limited.

The report goes on to say that in the five years since SBRR was introduced in Northern Ireland, there was “little evidence of any significant economic return from a scheme which to date has had a total cost of £61.5m”. It believes the money would be better spent funding Business Improvement Districts (BIDs), where businesses identify opportunities locally.

Colin Borland, who has the devolved nations brief with the Federation of Small Businesses, believes the bonus scheme still has a place, but adds England now has a higher proportion of business premises attracting 100% relief. “What Northern Ireland has right is the idea that we need a business rates system that encourages investment — the Scottish system doesn’t and that needs to change.”

Unfortunately, changes to the system in Scotland have been kicked into the long grass in the shape of Holyrood’s latest review of business rates, under the chairmanship of Ken Barclay, former chairman of RBS in Scotland.

The review is not due to report until next summer, which means any changes will not be implemented until 2018 at the earliest.

Moreover, it was noticeable last month when first minister Nicola Sturgeon announced the “three clear principles” that would guide the review that she studiously avoided any mention of maintaining competitiveness on rates with the rest of the UK.

SRC director David Lonsdale told me: “The problem is the tax burden on businesses in Scotland is growing. That isn’t how you grow an economy and create jobs. I’ve yet to hear a convincing explanation as to why firms operating from medium and larger-sized premises in Scotland are better placed to be forking out more in rates than firms in comparable premises elsewhere in the UK.” Over to you, Nicola.

Dugdale in dog’s dinner
Who would have thought it? Scottish Labour no longer needs to help the less well off because George Osborne — Mr Austerity, the man booed at the 2012 Paralympics for slashing disability benefit — is doing a stellar job of looking out for them already.

Considering that the Tories appear to be more toxic than ricin in Scotland — witness last week’s STV leaders debate — it’s ironic, to say the least, that Scottish Labour leader Kezia Dugdale’s plan to give poorer families a £100 rebate was scrapped because Osborne’s increase to the tax-free personal allowance meant her daft giveaway was no longer necessary.

Earlier this year, I wrote her idea that local authorities could step in to compensate those made worse off by her planned tax hike with a £100 cash payment was laughable.

So it has proved. Dugdale was never able to explain how her ill- thought-out rebate cashback system would work and has sensibly consigned it to the dustbin. Unfortunately, she has kept the rest of her dog’s dinner of a tax plan, so income taxes for everyone, including low- income families, will still increase in the unlikely event of a Labour victory this May.

That means only one mainstream political party in Scotland, Ruth Davidson’s Conservatives, believes taxes should be kept at the same level as the rest of the UK. If that doesn’t detoxify the Tories in Scotland, nothing will.

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