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Councils set to gain business rate powers

Published 16/10/2015

John Swinney says local government will be able to keep all the cash it collects in business rates
John Swinney says local government will be able to keep all the cash it collects in business rates

Scottish councils are to get new powers to cut business rates years in advance of authorities in England, John Swinney announced.

The Deputy First Minister said the move would help ensure Scotland "remains the most competitive place to do business in the United Kingdom".

The announcement comes after UK Chancellor George Osborne told the Conservative conference earlier this month that local authorities in England would be free to cut the rates as part of a "devolution revolution".

But in England the changes are only due to be in place by 2020.

Scottish Government ministers will use the Community Empowerment (Scotland) Bill, which was passed by Holyrood in June, to allow councils north of the border to reduce business rates from October 31 this year.

Authorities will also be able to tailor any rate cuts they bring in to different areas or types of business.

Mr Swinney announced the move to delegates at the SNP conference in Aberdeen, telling them: "A t the Tory conference two weeks ago George Osborne announced reform of the business rates regime for England and Wales.

"He plans to let councils keep what they raise. Well, Scotland has been doing that since 2011.

"But he also announced that councils will - by 2020 - be able to reduce business rates to promote business growth.

"This SNP Government has long believed communities should have greater local control of key policies.

"That's why we removed £2 billion of ring-fencing around council funds. That's why we passed the Community Empowerment Act earlier this year.

"And it's why I can today announce that we will use powers under that Act to allow every council in every part of Scotland to reduce business rates in their area - not from 2020 - but in two weeks' time.

"On October 31 this year, we will hand power over to Scotland's councils to help deliver business growth in their area."

He said that the SNP Government was "devolving powers to our communities and making sure Scotland remains the most competitive place to do business in the United Kingdom".

Councils welcomed the move, with Kevin Keenan, the finance spokesman for the Scottish local government body Cosla, describing it as a " positive start to the journey on increasing local flexibility of funding and taxation powers for councils".

There was a more cautious reaction from the business community, with David Martin of the Scottish Retail Consortium describing it as a " welcome acknowledgement of the need to keep costs down on retailers and other businesses".

He added: " It is, however, a missed opportunity to arrest the cost pressures and structural deficiencies in the system which undermine existing businesses and holds back new investment.

"We need a more imaginative approach to reform in Scotland, one which leads to business rates flexing with economic conditions and a more sustainable overall reduction in the tax burden for ratepayers."

Colin Borl and, of the Federation of Small Businesses in Scotland, said: " If used appropriately, these powers could give local economies a welcome boost and it will be interesting to see how many hard-pressed councils will be able to take advantage of them."

But he added: "T oday's announcement doesn't get rid of the need to modernise a business rates system that's no longer reflective of how we trade in 2015 Scotland. We need to review and reform the system, making it fairer and more transparent."

David Melhuish, director of the Scottish Property Federation, commented: "Used wisely, these new powers could, in theory, enable councils to reduce their rates in order to provide an incentive for new businesses and new investment.

"This could be a powerful tool for councils seeking to rejuvenate their town centres.

"What this announcement does not take into account is the fact that the business rates system as it stands is ripe for reform.

"Rates rising year-on-year with little reference to economic conditions or changes in the markets must be tackled if we are to avoid the current situation of many ratepayers paying annual rates based on commercial property valuations set at the top of the market in early 2008."

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