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Local Government Committee, 10 Nov 1999

10 Nov 1999 · S1 · Local Government Committee

Item of business

Rating Revaluation

Patrick Browne (Scottish Retail Consortium): Watch on SPTV

Thank you, convener. I shall introduce my colleagues. Mike Flecknoe is the rating executive with Boots, which is one of our members and operates approximately 130 stores in a range of locations throughout Scotland. Brian Smillie is the national president of the British Hardware Federation and managing director of James Gray and Son, which is based in George Street in Edinburgh. I want to start by thanking the committee for giving the consortium the opportunity to address members this morning. I shall say a little about the Scottish Retail Consortium. We were established in April of this year. We represent most of the major high-street retailers and supermarkets, but we also represent a number of trade associations that, in turn, represent smaller and medium-sized retailers. Among our corporate members are: Safeway, which operates 200 outlets in Scotland; Dixons, which operates more than 90 outlets; Tesco, which operates 85 stores; B&Q, which operates 31 stores; and Argos, which operates 34 stores.Our trade association members also include organisations such as the Scottish Grocers Federation which, through its 700 members, represents 2,500 food retail outlets in Scotland, and the British Hardware Federation, which has just over 300 members in Scotland. Other association members include the National Federation of Retail Newsagents, which has 2,200 members in Scotland, and the Booksellers Association of Great Britain and Ireland, which has 274 members. You can see that our organisation has a diverse membership. Retailing employs 216,000 people in 25,000 outlets across Scotland. The figures for 1996 show retail turnover at £15.5 billion, so it is a major sector in the Scottish economy. I turn now to the submission that we made to this committee two weeks ago. We drew attention to the weightings survey that we recently carried out. It showed that business rates, as a cost, represent on average 1.5 per cent of the turnover of a retail business, or 17 per cent of a retailer's operational profits. We also draw the committee's attention to a recent survey, conducted among its membership by the British Hardware Federation in 1997, which found that rates represented 10.1 per cent of the operational turnover of a typical hardware business and 22.5 per cent of the business's operational profits. The figures suggest that rates are a more significant cost to a small to medium retailer than they are to other types of business. For the information of the committee, I mention that the average rateable value of premises covered by the BHF survey was £18,600, the average rates bill payable being £8,000.Rates are one of the major fixed costs of all retail businesses, whether small or large. In our written submission, we supported a system of transitional relief to protect retailers from the large one-off increases in their rates bills. The consortium asked for that system of relief to be modelled on the regime that was used at the last revaluation of non-domestic property in 1995.I stress that we are not advocating the status quo. Having considered the options for transitional relief that are available and can be implemented prior to next April's revaluation, we have reached the conclusion that the model that was used in 1995 would be fairest to all businesses. The current rating system is not perfect and neither is the system of transitional relief, but we feel that it is well understood by the business community, having been used before, and is perceived to be fair as it limits across the board the percentage increases that businesses will face in their rates bills as a result of the revaluation. The 1995 scheme also gave proportionately more benefit to smaller properties by capping their rates increases at a low level. One of the central elements of the transitional relief scheme that was used in 1995 was that it was largely self-financing, which meant that the relief to businesses that lost out under the revaluation was paid for by limiting the benefits that other businesses got from the revaluation process.As the committee has heard from the Scottish Executive, there is likely to be an increase of 13 per cent in the total rateable value of non-domestic property as a result of next year's revaluation. The consortium believes that retailers will be among the businesses that will lose most as a result of the revaluation process and that therefore they will be in most need of the protection that will be offered by a system of transitional relief.Mike Flecknoe will now give the committee an insight into the operation of Boots in Scotland and what rates mean to its business.

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Local Government Committee, 10 Nov 1999

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