I am pleased to make a statement to Parliament today on the support the Scottish Government is providing to businesses and our economy.
As everyone across this Chamber is aware – in common with England and Wales – a revaluation of business rates is taking place. This is the first revaluation since 2010 and takes account of the changes in property values during the economic recovery. It is conducted by independent assessors appointed by local government.
In December, I announced a range of actions this Government will take from 1 April, if the budget is passed later this week, to minimise the impact of the rates revaluation, respond to concerns raised by business organisations and ensure a competitive system of business rates in Scotland.
Firstly, 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%.
Secondly, we looked at what more we could do through the Small Business Bonus Scheme. Over the last nine years the Small Business Bonus Scheme has provided over £1.2bn of support for our small firms – keeping them going through the recession, 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 pay rates, using the extra cash to support transitional relief for larger firms. This Government chooses not do that. Small businesses are the lifeblood of Scotland's economy and we are committed to helping them.
So to help small business we are extending the Small Business Bonus Scheme to provide 100% rates relief to business premises with values up to £15,000.
Last year 80,000 premises benefitted from 100% relief and from 1 April, a further 20,000 business premises will benefit, bringing the total number of premises who pay nothing at all to 100,000. That is almost half of all rateable premises.
A further 3,500 premises – with a rateable value between £15,000 and £18,000 – will benefit from a 25% discount on their bills.
That is the best package of support for small business in the UK and it is one I am proud to deliver.
Together, 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 £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 expanding the Small Business Bonus, reducing the poundage rate and restricting the scope of the Large Business Supplement, we are cutting business rates by £155m in 2017 and 2018.
Indeed, the combined impact of the measures I have put in place will result in seven out of ten business premises in Scotland paying no rates at all or receiving bills that are either the same or lower in the coming year than is the case this year.
In total, reliefs worth in excess of £3 billion will be available over the 2017 revaluation period, around £660 million for next year.
Seven out of ten premises better or no worse off – and in most cases, paying nothing at all. I believe that is a good deal for Scottish business.
However, notwithstanding all of that, I recognise that in any revaluation the 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 supports the economy, public services and employment.
Some argue that there should be Transitional Relief, which works by restricting the reduction in bills for many properties where their value has fallen, in order to support those whose values have increased.
Examination of such a scheme shows we know that the biggest beneficiaries would be the very large utility companies. For example, a scheme similar to the last applied in Scotland, would mean 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 like retail and offices to reduce the bills of the largest, richest companies in the land.
I cannot in good conscience take that route and I do not believe that anyone in this chamber, if they look beyond political point scoring, realistically wants that to happen.
However, I do want to do more to help, and in recent weeks we have been examining how best to do that.
It has become clear that there are some sectors and regions where the increase in rateable values is out of kilter with the wider picture of the revaluation.
The average rise across the hotels sector would – without action – be a 37% rise in bills, 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 – setting them apart from other sectors.
Similarly I have heard the concerns of businesses in Aberdeen City and Aberdeenshire in the office sector in light of the downturn in the North Sea economy.
And I have listened carefully to the renewable energy sector, where the cuts to subsidies by the UK government puts their continued development at risk.
I have listened and decided that we will act nationally to tackle the impact as follows.
I can confirm to the Chamber today that we will now offer a new national relief that caps increases for hotels at 12.5%.
And, because we recognise that we must maintain fairness between hotels, pubs, cafés and restaurants, this will apply across those businesses too. That will benefit around 8,500 premises and provides proportionately more support to the sector in Scotland than is available in the rest of the UK.
For Aberdeen City and Aberdeenshire, we will also lift the pressure on office premises by again applying a 12.5% cap next year, benefitting more than a further 1,000 premises.
And for the renewables sector we will offer a package of reliefs including:
rolling forward current rates relief up to 100% for qualifying community renewables projects and 'new build schemes', and lowering the eligibility threshold related to community profit share schemes from 1 MW to 0.5 MW;
capping rates bill increases at 12.5% for small-scale hydro schemes (up to 1 MW); and also
offering a new 50% relief for district heating schemes.
These support schemes must operate within EU guidelines, with the maximum support limited by the State Aid de minimis to around £170,000 per business – however that restriction will affect only the largest properties or chains.
To further support the hospitality sector, I have discussed these 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 raised by the hospitality trade and is actively engaging with the sector. This Government will consider his report carefully, and where we can act swiftly we will.
I have worked with Aberdeenshire and Aberdeen City council, as well as others, to help them in using the power we gave councils to offer rates reliefs locally. Despite Tory opposition, Aberdeenshire Council have proposed a £3 million rates relief scheme. I know Aberdeen City are set to debate proposals later this week.
Other councils who are considering local schemes now know that the Scottish Government has provided extra local government funding at stage one of the Budget Bill and we have acted on key sectors impacted by the revaluation.
We acknowledge that there will remain some hard cases, 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 support of this Government in developing its plans.
Presiding Officer, I have placed information in the Scottish Parliament Information Centre (SPICE) this afternoon which sets out these changes.
This 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:
- 100,000 small business premises – half of all in Scotland – pay no rates at all;
- around a further 3,500 premises will benefit from a 25% discount;
- 8,000 fewer large firms will pay the large business supplement;
- no restaurant, pub, hotel or café will see their bills increase by more than 12.5% on 1 April, and that additional support is injected into the North East economy to recognise the impact of the oil and gas downturn;
- our renewables sector has the full backing of this Government; and
- we will take early action on receipt of the Barclay report, to ensure the rates system is fit for the future.
Overall seven out of ten businesses in Scotland will pay the same or less next year than they currently do, with more than half paying nothing at all.
The total package of support through rates relief is worth £600 million and I commend it to the Chamber.