Hansard

I am pleased to make a statement to Parliament today on the support that the Scottish Government is providing to business and our economy.

As everyone across the chamber is aware, in common with England and Wales, a revaluation of business rates is taking place in Scotland. It is the first revaluation since 2010 and takes account of the changes in property values during the economic recovery. It is being conducted by independent assessors appointed by local government.

In December, I announced a range of actions that the Government will take from 1 April—if the budget is passed later this week—to minimise the impact of the rates revaluation, to respond to concerns raised by business organisations and to ensure a competitive system of business rates in Scotland.

First, to reduce the impact of bills overall, I confirmed plans to reduce the poundage—the rate at which the tax is paid—by 3.7 per cent. Secondly, we looked at what more we could do through the small business bonus scheme. Over the past nine years, the small business bonus scheme has provided more than £1.2 billion of support for our small firms, keeping them going through the recession and enabling them to expand and create jobs.

We could have opted, as some have suggested, to reduce the small business bonus so that more businesses would pay rates, using the extra cash to support transitional relief for larger firms. This Government chooses not to do that. Small businesses are the lifeblood of Scotland’s economy and we are committed to helping them. Therefore, to help small business, we are extending the small business bonus scheme to provide 100 per cent rates relief to business premises with a value of up to £15,000. Last year, 80,000 premises benefited from 100 per cent relief. From 1 April, a further 20,000 business premises will benefit, bringing the total number of premises that pay nothing at all to 100,000—almost half of all rateable premises. A further 3,500 premises with a rateable value of between £15,000 and £18,000 will benefit from a 25 per cent discount on their bills. That is the best package of support for small business in the United Kingdom, and it is one that I am proud to deliver. That package of support, along with other existing reliefs, means that more than half of all premises in Scotland will pay absolutely no rates at all in the coming year.

In addition, I took a further step in the budget. I listened to concerns about the large business supplement and focused its impact on the very largest premises. I increased the threshold for payment from a rateable value of £35,000 to a rateable value of £51,000, meaning that 8,000 premises that would have been liable for the supplement—including as a result of the revaluation—will no longer have to pay that higher rate of tax.

By extending the small business bonus, reducing the poundage rate and restricting the scope of the large business supplement, we are cutting business rates by £155 million in 2017-18. Indeed, the combined impact of the measures that I have put in place will result in seven out of 10 business premises in Scotland paying no rates at all or receiving bills that are either the same or lower in the coming year.

In total, reliefs in excess of £3 billion will be available during the 2017 revaluation period, and around £660 million for next year. Seven out of 10 premises will be better or no worse off, and in most cases will pay nothing at all. That is a good deal for Scottish business.

Notwithstanding all that, I recognise that, in any revaluation, bills for some will increase. I understand that it is difficult for those who face increases. In seeking to provide as much help as possible, the challenge for Government is to find a balance that allows us to support the economy and invest in public services and employment.

Some argue that there should be transitional relief, which works by restricting the reduction in bills for many properties whose value has fallen to support those whose value has increased. Having examined such a scheme, we know that the biggest beneficiaries would be the very large utility companies. For example, a scheme that was similar to the last one that was applied in Scotland would mean that 33p in every pound transferred in a transitional scheme from smaller businesses would go to utilities. It would take money off medium-sized businesses in sectors such as retail and offices to reduce the bills of the largest and richest companies in the land. I cannot in good conscience take that route and I do not believe anyone in the chamber, if they look beyond cheap political point scoring, realistically wants that to happen.

However, I want to do more to help, and in recent weeks we have been examining how best we can do that. It has become clear that some sectors and regions will see an increase in rateable values that is out of kilter with the wider picture of the revaluation. Without action, the average rise in bills across the hotels sector would be 37 per cent, subject to reliefs. That is significantly more than the next highest sector. Hotels and pubs also point out that their rateable value is assessed by reference to turnover, which sets them apart from other sectors. Similarly, I have heard the concerns of businesses in the office sector in the Aberdeen City Council and Aberdeenshire Council areas in light of the downturn in the North Sea economy. I have also listened carefully to the renewable energy sector, where United Kingdom Government cuts to subsidies put the sector’s continued development at risk. I have listened and decided that we will act nationally to tackle the impact as follows.

I confirm today that we will now offer a new national relief that caps increases for hotels at 12.5 per cent. Because we recognise that we must maintain fairness between hotels, pubs, cafes and restaurants, the cap will also apply across those businesses. That will benefit approximately 8,500 premises and provide proportionately more support to the sector in Scotland than is available in the rest of the UK.

For office premises in the Aberdeen City Council and Aberdeenshire Council areas, we will also lift the pressure by applying a 12.5 per cent cap next year, which will benefit a further 1,000-plus premises.

For the renewables sector, we will offer a package of reliefs, which will include rolling forward current rates relief up to 100 per cent for qualifying community renewables projects and new-build schemes, lowering the eligibility threshold that is related to community profit share schemes from 1MW to 0.5MW; capping rates bill increases at 12.5 per cent for small-scale hydro schemes of up to 1MW; and offering a new 50 per cent relief for district heating schemes.

Those support schemes must operate within European Union guidelines, with the maximum support limited by the state aid de minimis regulation to approximately £170,000 per business, but that restriction will affect only the largest properties or chains.

To further support the hospitality sector, I have discussed the issues with Ken Barclay, who is conducting a review of the business rates system and who will report on his findings in July. He has confirmed that his group is aware of the issues that the hospitality trade has raised, and he is actively engaging with the sector. The Government will consider his report carefully and when we can act swiftly, we will.

I have worked with Aberdeenshire Council and Aberdeen City Council, and with others, to help them use the power that we gave councils to offer rates reliefs locally. Despite Tory opposition, Aberdeenshire Council has proposed a £3 million local rates relief scheme, and I know that Aberdeen City Council is set to debate proposals later this week. Other councils that are considering local schemes now know that the Scottish Government has provided extra local government funding at stage 1 of the Budget (Scotland) Bill, and that we have acted on key sectors that have been impacted by the revaluation.

We acknowledge that some hard cases will remain, where individual or highly localised impacts present a challenge. By acting nationally, council resources have been freed up to provide support where local or individual challenges remain. Any local authority that wishes to offer a local relief or discretionary assistance scheme will have the Government’s full support in developing its plans. I have placed information in the Scottish Parliament information centre this afternoon which sets out the changes.

The Government is ensuring that, in light of the revaluation of non-domestic premises in Scotland, we are maintaining a highly competitive rates regime. We will ensure that 100,000 small business premises—half the total number in Scotland—pay no rates at all; that about a further 3,500 premises will benefit from a 25 per cent discount; that 8,000 fewer large firms will pay the large business supplement; that no restaurant, pub, hotel or cafe will see their rates bill increase by more than 12.5 per cent on 1 April; that additional support is injected into the economy of the north-east in recognition of the impact of the oil and gas downturn; and that our renewables sector has the Government’s full backing. We will take early action on receipt of the Barclay report to ensure that the rates system is fit for purpose.

Overall, next year, seven out of 10 businesses in Scotland will pay the same as or less than they currently pay, with more than half paying nothing at all. The total package of support through rates relief is worth more than £600 million and I commend it to the chamber.