Support for Business
Good morning. The first item of business is a Liberal Democrat debate on motion S3M-7273, in the name of Jeremy Purvis, on support for business.
09:15
First, I congratulate the Cabinet Secretary for Finance and Sustainable Growth on the birth of his new child.
Members: Hear, hear.
We are glad that he is here in the Parliament today, but this is one occasion on which he could have been excused.
In November 2009, I asked the cabinet secretary why the Scottish Government had not consulted the business community in Scotland on whether there should be a transitional relief scheme to allow the big increases in the rates bills that were being forecast as a result of the revaluation to be phased in.
Mr Swinney responded that the Scottish Government did not consult because there was no statutory duty on it to do so. That was a less than convincing case in the view of business groups in Scotland, every one of which regretted the lack of consultation on possible schemes and the lack of understanding of the concerns of businesses about the looming—and very large—increases in bills.
The tourism and hospitality sector has been hit the hardest: there has been no support at all, and no transitional scheme has been put in place. Members will recall that we debated in Parliament the need for greater support for our tourism industry, because it is one of the areas that will produce growth in the Scottish economy during the coming years.
Only six months before I asked the cabinet secretary my question, things were different. In April 2009, a Scottish Government press release stated that businesses could
“spread this year’s ... increase in business rates over three years to help companies’ cash flow and provide a ‘much-needed boost’ for the Scottish economy.”
It emphasised that the Government was acting to help businesses to cope with an increase in rates bills, and stated:
“‘For those businesses that still have to pay rates, we are acting today to offer them vital breathing space in these tough economic times.”
What was the increase that was causing so much difficulty at that time that the Government decided to act? It was a 5 per cent increase. When there was a 5 per cent increase in 2009, the Government acted, but this year, with increases of 50, 100 and 150 per cent in tax bills, the Government sits on its hands.
I made no apologies then, and I do not apologise today for bringing the issue to Parliament. I make no apologies either for trying to persuade the Government and the Conservatives to explore openly the options for transitional relief and to accept the principle that such relief should exist.
I spoke to many businesses in my constituency that are facing massive increases in their bills. It is not an academic exercise for them, and there is genuine anger. They may be happy to see businesses that are in receipt of the small business bonus exempted from paying rates, but they are angry that their situation is given no regard.
The Conservatives will no doubt criticise my party in today’s debate, but I say to them in all seriousness that simply reviewing what went wrong during that period, as their amendment demands, does not—given that it was their votes that created the problem in the first place—send a convincing message to businesses.
Does Jeremy Purvis accept that the votes in question took place in March, after the bills had been issued, and that there is no mechanism for anyone other than the Government to bring forward a statutory instrument to introduce transitional relief?
The Parliament could have acted to get the Government to do what it had previously done, which was to provide an element of support after rates bills had been issued. When that happened in 2009, for increases of 5 per cent, Mr Brownlee welcomed it, but for increases of 50, 100 and 150 per cent, he seems to think that no action should be taken. That is simply not convincing.
Will the member give way?
I will give way later if I have time, but I am afraid that I do not have time at the moment.
The level of concern is such that, as information that the Lothian Valuation Joint Board has provided to us has confirmed, the number of appeals from businesses about the rates revaluation in 2010 has increased by 10 per cent. The number of businesses that are appealing this year has increased by 6,000 from the number that appealed following the previous revaluation.
I will interrogate those figures further. There are 214,000 properties on the rateable register, and if we strip out those that are exempted from paying rates altogether and those that are zero rated, we are left with a pool of 75,000 properties in Scotland that pay rates. Of those, 60,300 have appealed, which means that 80 per cent of all properties that are being taxed have appealed their valuation. That is an incredible situation for businesses in Scotland, and it is the context for anything that the cabinet secretary says today about the number of businesses that have gained.
The Government gives three main arguments for why a transitional scheme should not be implemented. The first is that Government would have to pay more, the second is that the public sector would potentially benefit and the third is that other businesses might have to pay more.
On the first point, it is interesting to note that the Government would have incurred costs from the scheme that was put in place last year to allow 60 per cent of the 5 per cent increase to be deferred. The Government recognised that, given that its press release stated:
“The additional costs which local authorities will incur as a result of this measure will be refunded to them by the Scottish Government.”
It accepted the principle then, so it cannot use that point as a principled argument now.
With regard to the argument that the public sector may benefit, a finance circular of 15 June last year stated:
“Every single business property in Scotland qualifies as long as it pays non-domestic rates, including public sector.”
That surely, therefore, cannot be a principled reason for not providing transitional support now.
The Government uses the third argument—that other businesses would pay more—at every opportunity; that is its principled argument. However, small businesses that receive support from the small business bonus scheme do so because 29,000 other businesses pay a supplementary increase in their rates to cross-subsidise the scheme. Other businesses pay in that case, so that point is not a principled argument against transitional support.
There are no principled arguments against transitional support, but there is a principled reason for it. Businesses that are now making the difficult choice not to invest in their business or to lose staff are facing difficulties. The Government and all parties in the Parliament know it, and we are asking the Government to act on that.
I move,
That the Parliament notes that there has been a stark increase in appeals to valuation boards over non-domestic rates following the 2010 revaluation, with approximately 30% of businesses appealing the new rates; believes that the increase in appeals reflects the fact that a lack of transitional relief has caused serious cash-flow problems for businesses and concerns that jobs will be lost; shares the view of the Aberdeen and Grampian Chamber of Commerce that small and medium-sized enterprises (SME) support is not a substitute for transitional relief for the hardest hit; notes that the Scottish Government’s net income from non-domestic rates has increased by £150 million following the revaluation, despite Scottish ministers’ claims that the revaluation is revenue neutral, and calls on the Scottish Government to work constructively with Scotland’s business community to agree and deliver a transitional rates relief scheme and to identify ways in which to improve the revaluation process for the future.
09:23
I thank Mr Purvis warmly for his kind remarks at the start of his speech. The past seven days following the birth of Matthew have been among the happiest of my life, and I deeply appreciate the kind wishes that members on all sides of the chamber have expressed to Elizabeth and me.
I wish I had had a conversation with Mr Purvis before I left Perthshire this morning, as his assurance that consideration would have been given if I had not been here today would have been welcome; nonetheless I am here, so we may as well plough on with the debate.
This is, as Mr Purvis said, the fourth time that the Parliament has considered motions from the Liberal Democrats arguing for transitional relief on business rates. On each occasion, it was clear that the Liberal Democrats had failed to think through their proposals and, as a result, on each occasion Parliament voted against those proposals.
It is vital that our debate here is underlined by the facts. Throughout the revaluation process, we have actively encouraged businesses to appeal if they disagree with their valuation. That is the proper course of action for any individual business to take.
The evidence suggests that the number of appeals that are lodged against any revaluation is not solely linked to the existence or otherwise of a transitional relief scheme. If that was the case, I would have expected there to have been a huge surge in the number of appeals this year, but that has not happened. If transitional relief is so important, I would have expected the number of appeals to be far greater, and certainly on a par with the earlier revaluations in 1995 and 2000. However, the number of valuation appeals that have been lodged is significantly down on both the 2000 and 1995 revaluations—in fact, it is almost 40 per cent fewer than in 1995.
Is the cabinet secretary saying that the only comparable year for comparison is 15 years ago? What about a comparison with 2005, when there was the same process for rates with regard to poundage in Scotland? Can he confirm that the information that we have been provided with by the Lothian Joint Valuation Board is correct? It indicates that there has been a 10 per cent increase in the number of appeals compared with 2005 and that the number of properties that have appealed represents 80 per cent of all properties that are receiving a tax bill.
I will put on the record the figures that I have in front of me, because I do not know the precise figures that Mr Purvis has got. In 1995, 102,500 appeals were lodged and in 2000 there were 82,200 appeals. In 2005, there were 57,800 appeals and in 2010 there were 60,400. Those are the figures on appeals that I have in front of me, from the information that the valuation authorities, which I stress are independent of the Government, gave to the Government yesterday.
Will the cabinet secretary give way?
If Ms Jamieson will forgive me, I had better cover more ground before I take more interventions.
That is the detail on valuation appeals. I stress that the number of valuation appeals is almost 40 per cent fewer than in 1995.
The second point that I will make—a factual point—is that it is wholly misleading to claim that the 2010 revaluation has provided the Scottish Government with an extra £150 million. That is not the case and it ignores the facts, which were set out clearly in my answers to parliamentary questions. The 2009-10 income estimate is deflated by a number of appeals, dating back to the 2005 revaluation, which were settled in 2009-10. The business rates income figure in 2010-11 is inflated at this point in the cycle as the actual amount collected will be reduced as funds are used to meet successful appeals over the 2010 to 2015 revaluation cycle and payments are backdated to 1 April 2010.
Indeed, the real context for the debate around business rates is that we have made available an estimated £2.4 billion-worth of relief to reduce the rates bills of Scottish businesses over the next five years. Members have heard that figure before, but let me just quantify what it means. It represents £2.4 billion that would otherwise have been paid in tax, but which businesses now have at their disposal to invest. We should not underestimate the impact that that kind of tax break will have on the Scottish economy.
Of course, central to that relief package is the small business bonus scheme, which will save small and medium-sized enterprises in Scotland an estimated £117 million in 2010-11. Mr Purvis appears to believe that the small business bonus scheme is not worth while.
Members: No.
We get harrumphing from Mr Rumbles, the chief harrumpher of the Parliament. Of course, the Liberal Democrats have never been obviously identifiable in their enthusiasm for the small business bonus scheme. When I was negotiating budget arrangements with the Conservatives to put in place and accelerate the small business bonus scheme, were the Liberal Democrats supportive of the proposition? No, they were not, but they were certainly quick to issue leaflets in the Borders claiming the benefits of the small business bonus scheme.
Mr Purvis said in his speech that businesses were not investing, but in his recent publication “Making Scotland the most innovative and entrepreneurial economy in the world”, which is an interesting read—I read it at about 2 o’clock this morning while dealing with family matters—Mr Purvis notes that many businesses
“have simply absorbed the relief into their bottom line”,
therefore enabling them to invest in the future of their business, and that is what the small business bonus scheme is designed to do.
The small business bonus scheme has now benefited 74,000 properties in Scotland. Even more businesses are benefiting from the scheme this year. Following revaluation, the figure for properties that are potentially eligible for the small business bonus scheme has risen to 114,657.
The Government has taken difficult decisions on the business rates issue and we have delivered £2.4 billion of relief to businesses in Scotland. That is why the Parliament should support my amendment.
I move amendment S3M-7273.2, to leave out from “notes” to end and insert:
“commends the vital role that small and medium-sized enterprises (SME) play in the Scottish economy and their importance in building economic recovery; recognises that the full savings due to that sector as a result of revaluation have been passed to businesses, and recognises that the general trend of the revaluation has been to reduce the tax burden for SMEs and that the total savings for the 87,500 SME properties that saw bills fall was £124 million.”
09:29
I pass on my best wishes to the cabinet secretary on his new arrival.
Of course, one arrival that we await with bated breath but which has yet to make an appearance is any suggestion from the Liberal Democrats of how much their proposals would cost, or how they would be financed. I suspect that there is a very long and unpleasant gestation for that set of proposals, which we may not see for some time. The core issue, which is mentioned in the Liberal Democrats’ motion, although Mr Purvis did not mention it in his speech, is the suggestion that the revaluation is not revenue neutral. That is an important point, because if the revaluation is not revenue neutral, that would undermine confidence not only in the Government but in the business rates system in Scotland and send a very negative message about Scotland’s competitiveness.
Various claims have been made about how the £150 million has arisen. The Scottish Chambers of Commerce has taken the same view as the Liberal Democrats that it is an additional tax hike. I think that it is better to wait until we see the outcome of the appeals. If there is a record number of appeals, as the Liberal Democrats suggest, I presume that a record number of appeals would be upheld, which would reduce the liability.
When Jim Mather came to the Ballater Business Association, we had a very interesting meeting. The other person there was Ian Hamilton Milton, the Grampian assessor. Everybody accepted that when the appeals go forward they will fail, because nobody disputes the assessor’s calculations and no other issues can be taken into account.
Obviously, appeals that are not based on a successful head will fail, but to suggest that every appeal will fail is a nonsense.
Most of them will fail.
A process has to be gone through. It is one thing for Mr Rumbles to say that most appeals will fail, but if that is his assessment, perhaps he should be determining the business rates liabilities.
Will Mr Brownlee reflect on my point that part of the reason why the income in 2009-10 from business rates is deflated is the necessity to pay successful appeals?
I do not doubt that that is the case. The key issue is that, at the end of the process, we must ensure that the revaluation itself has been revenue neutral.
Will the member take an intervention?
I am afraid that I do not have time.
It is one thing for the Government to make a policy decision to take either more or less out of business rates. That is fair enough and we can have arguments about that, but it should be done in an explicit manner and the revaluation itself must be revenue neutral.
We reiterate in our amendment that now that we are in the revaluation period, we do not think that it is appropriate to expect businesses that have expectations about one level of business rates liability to see their bills increase to subsidise the reduction of other bills. It is one thing to do that for future periods, but it is unreasonable to expect businesses that have a settled view of their liability to see it increase to pay for other businesses.
Other issues have been identified through the process. The lack of time between the liability notice for business rates being issued and the payment becoming due has caused many people to be very concerned. Unlike other areas of the tax system, an appeal against the business rates liability does not hold the liability; in most other areas, it would be held over and interest would arise. There has also been some suggestion that perhaps the revaluation has not been consistent across the country. There are issues that we need to consider and we should have a proper look at the mechanics of the system in advance of the next revaluation.
The Liberal Democrats are free, if they so wish, to make uncosted and unfunded pledges to businesses about transitional relief. However, before businesses and business groups crack open the champagne, perhaps they might want to phone the National Union of Students and ask how much weight to give to a Lib Dem manifesto promise, because the value of Liberal Democrat promises is one lesson that I think we can all agree will always be available without a tuition fee.
I move amendment S3M-7273.1, to leave out from “that there has” to end and insert:
“the level of appeals against non-domestic rating valuations following the 2010 revaluation; believes that no business should see its bill increase to fund a transitional relief scheme introduced within the revaluation period; believes that the revaluation should be revenue neutral and calls on the Scottish Government to ensure that this is the case, and calls on the Scottish Government to review the issues around the 2010 revaluation, in particular those concerning the time difference between notification of non-domestic rates liability and the liability entering into force, with a view to reforming the business rates system in Scotland.”
09:33
I add my congratulations to Mr and Mrs Swinney on the birth of baby Matthew and, in so doing, wish Mr Swinney every success for the future in dealing with the challenges ahead of him—I am familiar with those challenges.
I address the broader title of the debate, “Support for Business”. We have found out, as the Scottish electorate has found out, that during election campaigns and in opposition the SNP makes great promises about the economy. Since then we have had mind maps that could circumnavigate the world, and probably the universe, from Mr Mather, but we now find that when it comes to the SNP’s support for business, as with the rest of its manifesto, it is full of broken promises about the Scottish Futures Trust and local income tax. Of course, the SNP-Tory alliance in this Parliament has continued to ensure that those broken promises have been laid upon the doorstep of our businesses in Scotland.
If I heard Mr Swinney correctly, he said that transitional relief is not important. I will check the Official Report on that point, because if it is not important, why are so many of our businesses and chambers of commerce, including Lanarkshire Chamber of Commerce, writing to us about the importance of such a scheme? I understand that, except on this occasion, every previous change to the system has been supported by a transitional relief scheme.
The whole situation has been mishandled from the outset. For a start, businesses have faced enormous hikes in their rates with no caps on such increases. That has not been the case elsewhere, including in England, where the cap is 12 per cent. Businesses have also faced increases of more than 200 per cent and, indeed, were notified of those increases only weeks beforehand. There have been huge internal delays in the Scottish National Party with regard to making its position known and we are now suffering the same situation with the Scottish budget. The SNP delays and delays and then tries to rush through decisions that lack accountability and scrutiny.
As I have said, there is a five-year transitional scheme in England and the fact that, unlike with previous changes, a transitional relief scheme has not been introduced for this revaluation is having a real and damaging effect on our businesses. Indeed, the situation in my area of Lanarkshire is probably the worst in Scotland. According to Mr Swinney’s response to a parliamentary question lodged by Lewis Macdonald, the change in Lanarkshire has been of the order of £79 million. At a time when people in Lanarkshire are struggling to deal with the effects of the global economic crisis, have lost a number of major employers and are seeking to support small and large businesses in the area, the move is having a hugely detrimental effect on the area’s business community. That is simply unacceptable.
The cabinet secretary needs to explain, first, why the process was so delayed; secondly, why he refuses to listen to what many businesses are saying; and thirdly, why he thinks that it is acceptable to suggest that businesses should simply go off and challenge decisions through the appeals process. As I say, that is unacceptable in the current economic climate. The SNP has failed to publish the new rateable values in sufficient time and has failed to recognise the impact of the lack of a transitional relief scheme and, as our Liberal Democrat colleagues have pointed out in the debate, key growth sectors of our economy—including tourism, which is doing relatively well considering the global crisis—are being hammered by the Government’s decision not to have a transitional relief scheme and by increases in their rates burden of hundreds of per cent.
Although, as we know, there have been transitional relief schemes before and although the principles have been set out in previous changes, the Government has refused to take action on any capping or transitional relief measures. At a time of global economic crisis, it is, as ever, failing to support Scottish business.
09:38
Earlier in the debate, Mr Swinney called me a harrumpher. Well, I assure him that on this issue there is a great deal to harrumph about.
He called you the chief harrumpher.
Indeed. I think that it is a great promotion.
I look forward to seeing how it is spelt in the Official Report.
Will it have one R or two?
In my speech, I want to concentrate on local issues for me and businesses in my constituency.
In the last Liberal Democrat debate on business rates, when the Scottish Government rejected transitional relief for businesses, Jim Mather kindly accepted my invitation to meet me and the Ballater Business Association in my West Aberdeenshire and Kincardine constituency. Unfortunately Mr Mather is not in the chamber this morning, but I want to thank him for attending what was for him a really difficult meeting. He heard at first hand from businesses in Ballater their utter disbelief at the rate increases they were having to pay; he heard that, although average increases in rateable values across Grampian had been 30 per cent, the increase in Ballater was 60 per cent; he heard from one business that its rates had increased by 259 per cent; and he heard that a second-hand bookshop that had paid nothing at all last year was facing a £5,000 bill this year. He was also given the results of the Ballater Business Association’s assessment of 18 different and varied businesses, which showed that these dramatic changes were affecting them all.
The message to the minister was clear: transitional relief must be reinstated to allow businesses to deal with these changes and challenges.
Will the member give way?
I want to make a little bit of progress first.
As it stands, those massive increases are crippling small businesses in Ballater. The businesses were simply making a realistic and reasonable request for time to pay and time to adjust to the increases over several financial years. Unfortunately, although Jim Mather offered plenty of sympathy to the businesses in Ballater that are suffering from the SNP Government’s massive rates increases, he could offer no action at all and action is what the businesses in my constituency are requesting.
The Liberal Democrats believe that restoring transitional relief is the right thing to do. However, our motion to limit the increases to 12.5 per cent in any one year—itself a big increase—was defeated by a combination of SNP and Conservative MSPs. Quite why Conservative MSPs should want to harm businesses in that way is beyond all understanding. Perhaps Derek Brownlee might enlighten us.
I freely concede that Mr Rumbles knows the situation in Ballater better than I do but, after listening to the figures, I feel that there is something fundamentally wrong with the valuations. I can think of no empirical reason why the valuations in Ballater should have increased by such a scale and, as I say, it suggests that, before one even gets to a transitional relief scheme, there is a significant problem with the valuation process. Is that not an issue?
The issue in Ballater is quite clear. Ian Milton, the Grampian assessor—who, as I said earlier, came to the meeting in the town—was very helpful in that respect. Although the business association is appealing the valuations, it realises that its appeals will fail because no one is challenging the assessor’s calculations and the assessor himself made it clear that when he considers the appeals he cannot take anything else into account. As a result, all the Ballater businesses’ appeals will fail. They have been told as much. They do not disagree with the Grampian assessor’s calculations—it is the system that is wrong.
The Liberal Democrats back the campaign headed up in the north-east by the Aberdeen and Grampian Chamber of Commerce, which has calculated that although businesses in Aberdeenshire, like those in Ballater, are paying £10.4 million more this year after reliefs have been taken into account, the local authority is receiving £4.1 million less. That represents a total year-on-year hit of £15.5 million on Aberdeenshire and its businesses. Those are not my figures; they are from the Aberdeen and Grampian Chamber of Commerce.
You must close, Mr Rumbles.
Och. Right. Thank you, Presiding Officer.
The argument that the Government simply does not have the money for a transitional relief scheme simply does not wash. It has received an extra £150 million from business rates and it is using that money for other purposes. The solution is simple: transitional relief must be restored and any rates increase must be limited to 12.5 per cent in any one year. We need action, not sympathy, from the SNP Government.
When I ask members to close, that does not require more harrumphing. I do so because we are running out of time.
09:42
I, too, congratulate the cabinet secretary on Matthew’s arrival.
I welcome this Liberal Democrat debate. As other members have pointed out, by common consent the feeling among Scotland’s business community is that the Scottish Government has simply mishandled the 2010 business rates revaluation and has left many Scottish businesses facing enormous hikes in their rates bills with no cap on those increases.
It has all been quite unnecessary. First, there were unnecessary delays. In England, businesses knew what their rates bills would be six months in advance; in Scotland, the Government managed to give businesses just six weeks’ notice. As others have said, the cabinet secretary has just been too busy—and that is not just a reference to the past seven days. The rates bills, the budget and the pay policy have all been left to the last minute and the emerging pattern is that there has not been the necessary attention to detail.
We want the Government to admit that the failure to introduce a transitional relief scheme was quite simply a mistake. I fully accept that the move was probably based on official advice to ministers, but it is time to say that the advice was wrong. As a consequence, the Scottish Government has put businesses on a completely unequal footing with companies based in England.
Given the time pressures, I will make three quick points and then point to a solution.
First, the absence of a transitional relief scheme in Scotland means that one in five Scottish businesses—more than 45,000 businesses in all—are facing an increase of more than 12.5 per cent in their rates bills this year. That is four times the rate of inflation.
My second point is that one has to wonder whether the Scottish Government has seen Scottish business as a soft touch in hard times. Let me deal with the point that an extra £150 million is being taken in business rates this year. We know that businesses are going to pay that additional money this year—that is a fact. The explanation that we heard from the cabinet secretary is that it is all about the bills being artificially deflated last year. I have the figures here. Last year, for the first time ever, in cash terms, the Government collected £2 billion in rates in Scotland, which was 5.3 per cent up on the previous year. In a year in which the cabinet secretary alleges that bills were artificially deflated, the Government took 5 per cent extra from businesses, which was more than double the prevailing rate of inflation.
Who was the advocate for business in the Scottish Cabinet when the Cabinet Secretary for Finance and Sustainable Growth was planning to fill the coffers with an additional 5 per cent last year and an additional 7.5 per cent, on average, this year? That is the additional amount of money that is going to be paid this year, and it completely wipes out the benefit from the small business bonus scheme.
I give credit to the Government for expanding the previous coalition Government’s small business rates relief scheme. Many businesses greatly appreciate the small business bonus scheme, and rightly so, but I simply comment on something that is hidden in the detail of the scheme, which is partly paid for by large businesses. This year, the Government is increasing the contribution that large businesses make to the scheme by 90 per cent. Large businesses will pay 90 per cent more towards the small business bonus while the Government’s own contribution is up by less than 1 per cent. Indeed, the Government is putting in a mere £74 million extra while taking another £150 million in total from that community.
I simply conclude by saying that we do indeed live in tough times, but if the Government believes that it is right to take, on average, 7.5 per cent more from Scottish business, it should say so up front and directly. It should not hide its intentions about how much extra it intends to take from business, and crucially, it should cushion the blow to the 45,000 businesses that are being asked not for 7.5 per cent extra but for more than 12.5 per cent extra.
You must close, please.
There is, of course, an easy solution—to introduce an emergency transitional relief scheme now.
09:47
I add my warm wishes to John Swinney and his family. He should feel free to pass any baby tips my way.
If members have a sense of déjà vu this morning, they can be forgiven, because we have already debated a Lib Dem proposal for transitional relief on non-domestic rates three times this year, and the Parliament has already voted against the Lib Dem proposals three times, for good reasons. At the risk of extending that feeling of déjà vu, I repeat what I said during the second of those debates, in April:
“The first and most important thing that any of us can do to support small businesses during this recession is to be honest with them.”—[Official Report, 15 April 2010; c 23512.]
That honesty goes to the heart of the Scottish Government’s relationship with small businesses in Scotland, and that is why it has been so productive and beneficial for both sides.
The Scottish Government recognises the absolute importance of small and medium-sized enterprises to Scotland’s economy, and that is why supporting them has been a priority since day one.
Would the member say that it has been productive and beneficial to the businesses in Ballater that are facing all the rises that I mentioned?
The actions that the Government has taken with the small business bonus has certainly been beneficial to my constituents. I have evidence to prove it.
The small business bonus scheme has had a transformative effect on the sector since its introduction. There is no question but that the support from the Scottish Government has helped more of our small businesses to get through the economic downturn than would otherwise have been the case.
I have spoken in the chamber before about the survey that I conducted in 2008 of small businesses in the South of Scotland region to assess whether they were likely to benefit from the small business bonus scheme. Mike Rumbles might be interested in that. More than 90 per cent of respondents intended to apply for support and many of them took the time to comment on how welcome the scheme was.
Will the member take an intervention?
The small business bonus scheme and other initiatives, such as the reduction in the poundage rate and rural business relief, combine to form the most generous package of support that is available to small businesses anywhere in the UK. It amounts to some £2.4 billion over a five-year period. However, clearly that is not evident in the approach of the Liberal Democrats, who continue to attempt to whip up unnecessary fear and confusion among small businesses in Scotland. They appear not to have learned from our previous debates on the issue. The fact is that the majority of businesses—nearly 60 per cent—have seen their rates fall or remain the same following revaluation.
Transitional relief schemes are not free. The cost must be met from somewhere, and in the scheme that the Lib Dems propose, the businesses that would gain the most from the revaluation would be forced to give up those gains to offset the rises elsewhere. In effect, the Lib Dems’ scheme would lead to small and medium-sized businesses throughout Scotland subsidising public sector rate payers and larger businesses. Alternatively, the costs could be met from the Scottish Government’s budget, but they could be some £195 million this year alone. I do not see any mention in the Liberal Democrats’ motion of how they would fund their proposal. Do they want the smallest businesses, which have benefited from the revaluation, to lose out, or do they propose further cuts to public spending from elsewhere in the devolved budget?
Support for business does not simply have to come in the shape of rates relief, and the Scottish Government has taken many other practical steps since 2007 to provide assistance to our small business sector. Jim Mather also visited Biggar, in my region, and hosted an interactive session with representatives from small business communities in the South of Scotland region. Many of the participants spoke afterwards of how encouraged and enthused they felt, not least by the minister’s self-evident commitment to helping them to work together to grow the local economy. I have continued to keep in touch with those businesses and to help them in various ways, whether by ensuring that they have the right contacts at the local business gateway or by trying to solve seemingly small but important issues such as ensuring that loading bays are properly enforced so that deliveries can arrive on time.
There is no doubt that the economic downturn has made things difficult for small businesses, and the savage cuts to public expenditure will not help matters. If we want Scotland and its small businesses to flourish, we need far greater powers for the Parliament and the ability to manage the economy. The Scottish Government is, has been and always will be right behind our small businesses. The vast majority of Scotland’s small businesses know that. They will see through the Lib Dems’ bluster and scaremongering and they will continue to benefit from the Scottish Government’s policies.
09:52
I have had the joy of interacting with rating revaluations over more years than I care to remember. I was once a regional council finance convener when councils set both business and domestic rates. I was the convener of a valuation committee for a period of time and I even sat on the Scottish Valuation Advisory Council, for my sins, which was one of the high points of my 30 years in public life. Indeed, I was also involved in the matter as a minister.
Revaluations are always complex matters. The principles of business valuations are very complex indeed. There are winners, from whom we hear little, and there are losers, from whom we usually hear a great deal, understandably. This year, there are a substantial number of losers, many of whom are losing significantly.
As Derek Brownlee said, the principle of a revaluation is that it is revenue neutral. The yield remains the same but the distribution between the sectors will vary and shift. In the context of local government finance or public finance generally, coping with significant redistribution effects is a common thing. It is not at all unusual. The issues at present are clearly significant for those who are involved.
The principle of transitional relief to dampen the full effects of implementation is well established in public finance—in rating matters and in grant distribution matters more generally. The principle is simple. There is no detriment to the final outcome. The losers still lose but the full effects are mitigated, which gives them time to plan, to manage and to adjust for the change that is necessary.
The key question for a minister in any given year when the matter pops on to their desk—it is not terribly welcome when that happens—is whether the scale of the changes is sufficient to warrant a transitional relief scheme or whether the impact is so small as to warrant moving away from the well-established principle of having a transitional scheme, as Andy Kerr said. It is clear that some businesses are facing very large changes at present. In that context, it is not clear to me why the minister would reject a transitional scheme.
If the minister thought that the scale of the changes was not sufficient to warrant a scheme, that judgment is flawed, because it is clear that the scale is very significant indeed. As members have said, businesses in my region face increases of up to 200 per cent. The interaction with the wider small business scheme is a complicating factor, but there are still major issues for businesses in my region to contend with. Jeremy Purvis talked about the tourism and hospitality sector, which is a sector in which competition with businesses south of the border is important. However, south of the border, the same types of businesses are getting a transitional relief scheme. That is a significant issue.
A wider point raised in the motion and in the Conservative amendment is about reviewing the principles behind the valuation scheme. I caution substantially against rushing into that. It is a simple fact of life that no system, however we construct it, will suit everyone. I caution against the belief that a review would lead to a fairer system. That is why the principle of appeals in the system is important, but it is also why the principle of a transitional relief scheme is important. Such a scheme allows the smoothing out of the inevitable fluctuations that occur in revaluations. It helps preserve a broad consensus in our society that a difficult and turbulent system that has peaks and troughs in its effect on people can be managed fairly in the interests of all those who are involved. That is why the minister should think again about the matter—to help restore belief in the system.
The minister told me that yesterday he had the joys of changing nappies. I suspect that changing nappies might seem less messy than fiddling about with an emergency transitional relief scheme, but I encourage him to tackle both those issues with equal gusto in the coming days.
09:57
I, too, congratulate John and Elizabeth on the birth of Matthew. I am sure that they have many happy years ahead of them and that, in the next month or so, the changing of nappies and looking after Matthew will provide a welcome distraction from the budget.
This is the fourth time that the issue has come before the Parliament. All credit is due to the Lib Dems for their perseverance, but I have heard nothing new to indicate that the result of the vote at decision time at 5 pm will be any different from that on the previous three occasions.
Every MSP will know of businesses in their electoral area that have benefited from the SNP Government’s welcome actions. Many small business owners to whom I have spoken in recent years have benefited from the introduction of the small business bonus scheme. They were delighted that the SNP introduced the scheme, particularly given the timing. It has helped them through the recession and, in some instances, has helped their businesses to survive. Furthermore, even the Liberal Democrats should welcome the extension of the small business bonus scheme this year, which involves abolishing business rates for some businesses, halving them for others and reducing them by a quarter for others.
However, in this Parliament, the Lib Dems have not been in the business of working together—well, not with the SNP Government, anyway. They are good at coalitions, right enough, either with Labour up here or with the Tories down in Westminster. Mr Kerr spoke earlier about alliances in the Parliament, but he obviously forgot about the five Labour-Conservative local authority alliances in Scotland, including two in the West of Scotland region, in Inverclyde Council and East Dunbartonshire Council.
The motion highlights the Lib Dems’ concerns about the business rates revaluation. In a perfect world, everyone would be a winner, but we do not live in a perfect world. The Lib Dems and their Tory masters in London proved that last week by introducing savage cuts to Scotland and the rest of the United Kingdom. The Con-Dem cuts of last week will force just under half a million public sector workers on to the dole, with the private sector expected to pick up the pieces. The small business sector is the backbone of the Scottish economy, but how many small businesses here will be able to take on additional staff?
I do not know the answer to that, but I know that if the small business bonus scheme and the extension had not happened and if the rates revaluation did not benefit the small business sector, there would be fewer small businesses in Scotland. As a consequence, fewer small businesses would have the opportunity to take people on to help with the recovery from the wreckage of the tougher and deeper cuts of Mr Purvis’s party and his Tory colleagues in Westminster.
I am interested in the member’s line of argument, but I cannot quite understand how it squares with the fact that a hotel in my constituency had its rates bill increased by £10,000, which means that it either had to increase turnover by £200,000 to meet that or make a member of staff redundant. Which one does the member think is likely to have happened?
As I said, we will all suffer because of the savage cuts that were announced last week and that are coming to Scotland and the rest of the UK. That is why the small business sector in Scotland, which is the backbone of the economy, is vital.
I am conscious of time, Presiding Officer, so I will conclude. The SNP Government has an excellent record on helping businesses. It has the most generous rates relief package in the UK, with the small business bonus scheme, renewables rates relief and rural rates relief, and it has equalised the poundage rates with those in England. I would rather go to the electorate with a record of trying to help businesses in Scotland than with that of the Tory lackeys, who have introduced savage cuts in last week’s comprehensive spending review and in the emergency budget in the summer. I hope that the electorate will recognise the true Lib Dem agenda of continuing to restrict Scotland’s ambition instead of helping to choose a better way for Scotland by giving the Parliament the full powers of a normal independent nation.
10:01
A couple of SNP members have said that this is the fourth time that the issue has been debated in Parliament. The reason for that is that it is still a huge issue for people in our local communities and our small businesses.
Only this week, I heard from the owner of a petrol station in South Ayrshire whose rateable value has gone up from £10,000 to £31,000, which means an uplift in rates from £5,000 to £12,000. He is appealing that, but the problem is the uncertainty while he awaits the outcome of the appeal. It is difficult for him to plan for the future and he has to think about what will happen if the appeal is unsuccessful. That is not an isolated case. I have heard from other small independent garages in Muirkirk, Mauchline and Coylton. Those are local traders who at the best of times have to compete against the larger supermarkets. They are the only ones who provide filling stations in those rural communities, which, incidentally, are not deemed rural enough to qualify for some other relief schemes.
I turn to the question that I wanted to raise with the cabinet secretary earlier when he was not able to take my intervention. He mentioned the number of appeals that are under way, but does he have figures for the number of appeals that have been concluded and the number of those that have been successful? Perhaps he could give us that information in his winding-up speech. If the information is available, I would like to know how many small businesses are now no longer eligible for small business rates relief because the revaluations have taken them out of that particular block, and how many have to pay more because of the revaluation.
We have heard suggestions that transitional rates relief is not the way forward. Aileen Campbell talked about a survey that she undertook in the South of Scotland region. The last time that I looked, my constituency of Carrick, Cumnock and Doon Valley, which takes in East Ayrshire Council and South Ayrshire Council—both of which, incidentally, are run by SNP-Tory coalitions—is in the South of Scotland. I do not know whether she consulted any businesses in my area, but the Ayrshire Chamber of Commerce and Industry has done so, and it wrote to me recently about the issue. It makes the point that the one thing that would most help businesses in Ayrshire would be the introduction of
“Transitional Relief to soften the blow of this year’s rates revaluation for those businesses hardest hit”.
Will the member take an intervention?
Aileen Campbell would not take an intervention from me, so I will not take one now. She has had her opportunity to speak.
The Ayrshire Chamber of Commerce and Industry also says that it wants
“An urgent review of the rating appeals process to ensure that businesses have the best possible opportunity to challenge unrealistic rating valuations.”
Two things need to be done as a way forward. Obviously, something has happened in this year’s process that has not taken account of the wider economic circumstances or the particular circumstances that businesses in some communities face. Equally, something needs to be done now to help the businesses that are struggling the most.
I first raised the issue with Mr Swinney back in March. He was good enough to respond to me quickly but, unfortunately, the response did not offer any hope other than the small business bonus and rural rates relief, which, as I outlined, does not affect some of the businesses that I am talking about. I appeal to the cabinet secretary to listen again to the people who are suffering the most. He should listen to the voice of businesses and consider introducing a transitional scheme before we have to come back to debate the issue on a fifth occasion, by which time no doubt some of the businesses that we are concerned about will no longer be in existence.
10:05
I also congratulate Mr Swinney and his wife on the birth of their son and wish them all the very best in the months and years ahead.
As many speakers have said, this is the fourth time that we have discussed this important issue. Although it has been raised and analysed, what is still lacking—for the fourth time—is a credible way of funding what both the Liberal Democrats and the Labour Party are asking for. I point out to Cathy Jamieson, who made an argument about the small petrol stations in her constituency that are trying to compete with the big supermarkets, the slight irony that if there were to be a transitional relief scheme, some of the biggest winners would be those who pay the most in rates—the big supermarkets with which those small petrol stations compete.
The difficulty is that we still have no proposal. A transitional scheme is wanted, but we have heard of no way in which it could be paid for. The first time that the matter was brought to Parliament, the Liberal Democrats wanted the money for the scheme to be clawed back from the smallest businesses that were the transitional relief scheme winners.
Will Mr Brown give way?
Mr Purvis did not take my intervention, but I will not hold it against him. I am happy to take his intervention.
On that basis, I am doubly grateful to Mr Brown for being so gracious.
It is interesting to note that when the Conservatives asked for a town centre regeneration fund of £60 million they did not offer an explanation of where the funding would come from. However, I will put that aside.
Is my understanding correct that, in principle, Mr Brown believes that there should have been a transitional relief scheme if the funding had been sorted?
That is interesting. Mr Purvis talked about the town centre regeneration fund. The Liberal Democrats voted against it, but they were the first on the streets handing out leaflets about how they had won the policy.
Answer the question!
Unlike Mr Rumbles, I will answer the question. Of course there is nothing wrong with a transitional relief scheme in principle, but as a responsible party—[Interruption.] I ask Mr Purvis to let me answer the question; he has had his chance. The reason why we voted against the Liberal Democrat proposal the first time was that it was unfunded. Although there is nothing wrong with having such a scheme in principle, I wonder whether the Liberal Democrats are serious about having one or whether it is just a way of trying to gain more than the 7 per cent share of the vote that they currently have in Scotland.
Will the member give way?
Sorry, not at this time.
If the Liberal Democrats are serious about having such a scheme, they have to bring to the chamber a credible, funded proposal. The second time that they brought the proposal to the chamber, they decided that they would fund it from Barnett consequentials. However, the problem was that just the day before that debate, the Government announced that Barnett consequentials of £70 million would be spent on affordable housing, and every single Liberal Democrat and Labour Party member stood up and welcomed the fact that the entire £70 million was going to be spent on affordable housing. One cannot spend money twice, so we face the same issue again.
There is nothing wrong in principle with a transitional relief scheme, but if it is to be funded, we need to have a proposal for how that will happen. Where is the money going to come from and how on earth will the scheme be put into practice? When we have a sensible proposal, perhaps we can look at it, but it is not credible simply to demand a scheme with no funding behind it.
10:09
This is just another case of the SNP finance and business team thinking that it knows best and refusing to listen. In his speech, Mr McMillan said that he had heard nothing new. Certainly, I have heard nothing new from the SNP speeches this morning, whether from the front bench or the back bench.
As others have said, people knew for months that there would be a business rates revaluation. Businesses in England knew as far back as October 2009 what their new rates levels would be. I recall the occasion in this chamber when Mr Swinney was asked directly when he would let Scottish business know what was happening and, more important, whether he intended to introduce a transitional relief scheme. As ever, he told us that we would have to wait and see—a familiar refrain from the cabinet secretary. Then the rates revaluation was introduced and, as we know, there was no relief scheme. That meant that large businesses across Scotland that did not qualify for the small business bonus all found themselves facing large increases in their rates burden with literally no time to ease the position.
Let me compare that with the situation south of the border, where companies had similar increases. As Mr Kerr said, those increases were capped at 12.5 per cent a year, allowing businesses to plan ahead. When we raised the matter again in the chamber, Mr Swinney’s excuse—perhaps he would prefer the word “explanation”—was that 60 per cent of small businesses were paying either no rates bill or a reduced rates bill and only 40 per cent were paying more. The rhetoric was that it was better to give assistance to small and medium-sized enterprises, with a challenge to everyone else to defy that logic. That is the line that Mr Swinney is sticking to, as we heard again this morning.
Answers to parliamentary questions put by my Labour colleagues and others reveal another story. The fact is that the SNP Government has taken in an extra £150 million or so in business rates as a result of having no transitional relief scheme. Instead of 60 per cent, or a majority, of companies being better off, which was the main reason for having no relief scheme, only 44 per cent of businesses can make that claim. The majority—56 per cent—are facing increases or, in some cases, no change. When that was raised with him, the earlier response of Mr Swinney and his colleagues was that anyone who was unhappy could use the appeals process. As Mr Purvis pointed out today, it is little wonder that the appeals process has been swamped. As we have heard, in some cases increases are running at 100, 150 and even 200 per cent.
Scottish companies are like others throughout the United Kingdom; they want to be able to plan ahead to know what their outgoings will be. The rates bill is a big part of that. Instead of having eight months or so to plan like businesses south of the border, Scottish companies had only weeks of knowing what was about to hit them with the double SNP whammy of no relief scheme to ease some of their pain.
Will the member take an intervention?
Sorry, I have only four minutes for my speech so I cannot.
The SNP has tried to make a virtue out of saying that the minority of companies facing an increase are paying for the majority who gain under the small business bonus scheme, which the Tories—supposedly the friends of business—are keen to support. Let us look at the numbers—they are not my numbers but come from the Scottish Parliament information centre. On the basis of the available figures, the yield from non-domestic rates income is £151.4 million higher this year than it was last year—an estimated 7.5 per cent, as Wendy Alexander said. The pay-out for the small business bonus is estimated at £84 million, which means that Mr Swinney has raided Scottish business coffers of an additional £67.4 million at just the time when business needs the most help. It is little wonder that assessors offices the length and breadth of Scotland are swamped with appeals.
We all want to be able to help Scottish business at this critical time, but the SNP’s handling of the business rates increase was a botched job and an object lesson in how not to do it. It should think again about how, even at this late stage, it could do something to help.
10:13
Once again, I thank members for their great kindness this morning.
As always, Peter Peacock made a thoughtful contribution about some of the challenges that come from revaluation processes. He asked what the motivation was behind the Government’s stance. I cite two particular reasons why the Government decided not to have a transitional relief scheme. The first was that as a consequence of the revaluation—which was, I stress, carried out independently of Government—it was found that 60 per cent of rate payers in Scotland would be better or no worse off. That is before appeals and reliefs would reduce bills further. The majority of rate payers had the potential to be better off and, if we decided to have a transitional relief scheme, those who stood to gain from an independent revaluation process would not appreciate the benefits and would have to pay to support a transitional relief scheme for others.
Will the cabinet secretary give way?
I will do so in a moment, after I have dealt with my two points.
The second issue that weighed heavily in my considerations was the Government’s decision to equal the poundage rate in England, which is another manifesto commitment that we have delivered. The rate for 2010-11 is set at 40.7p in the pound, which is 15 per cent lower than the rate for 2009-10. The calculation of the business rate poundage at that level generates a saving of £200 million for business in Scotland. Those were the key considerations in our decision not to opt for transitional relief.
The cabinet secretary will be aware that, some months ago, I undertook a business survey on a range of business issues. The rates revaluation was one of them. Even people who had benefited from it were in favour of transitional relief, for the sake of fairness. It is not just about what happens to individual businesses, as they are affected if other businesses around them on the high street have to shed jobs and so on.
The member has made an interesting, if lengthy, observation. It comes back to the point that Peter Peacock fairly made, which was that we tend to hear much more from people who lose out in such situations than we hear from people who gain.
Cathy Jamieson asked me how many businesses were eligible for the small business bonus scheme pre-revaluation and post-revaluation. Pre-revaluation, 102,000 properties were potentially eligible for the scheme. Post-revaluation, the figure was 114,000—an increase of 11.8 per cent, which is particularly beneficial.
Wendy Alexander raised the issue of the business rates income rise in 2009-10. I gently point out to her that between 1999-2000 and 2006-07, under the Administration that she notionally supported at the time, the business rates income that was collected rose by 29 per cent.
Peter Peacock made the fair point that there are no simple answers. Many of the sectors about which members have expressed concern today could and would have lost out under a transitional relief scheme. I appreciate that hotels face some significant increases, but they would have faced such increases under a transitional relief scheme. There are no simple answers; anyone who pretends that there are is misleading Parliament.
Cathy Jamieson made a point about petrol stations. Currently, the bills of 52 per cent of petrol stations in Scotland are falling, before appeals and reliefs; 60 per cent are in receipt of reliefs; and 73 per cent would be worse or no better off with transitional relief. Members must follow the data before making points about the way in which the issue could be handled.
I acknowledge the business community’s concerns. The Government has taken a set of decisions that are designed to reduce the cost to businesses by ensuring that we match the poundage south of the border—which was one of our manifesto commitments—and that those who benefit from the rates revaluation, which was an independent process, are able to use that benefit to invest in the future of the Scottish economy. For that reason, I hope that Parliament will support the Government’s amendment.
10:18
My colleague Jeremy Purvis set out the case well. Liberal Democrats believe that business should be treated fairly and that the transitional scheme on which everyone relied should be reinstated. It was not fair to take it away, and it is not too late to do something about that.
No one is quibbling about the rates revaluation—everyone knows that that comes around every five years. However, businesses are rightly angry about the fact that a safety net has been whipped away without so much as a by-your-leave. The SNP’s handling of the revaluation has been botched. Instead of phasing in big rate hikes in the co-operative and consensual manner of the past, it has set companies against one another, favouring some and cold-shouldering the rest. As Wendy Alexander noted, companies were given just six weeks’ notice of the increases.
The principles of transitional relief are well established and well understood; businesses in England are benefiting from it as we speak. Previous Governments have protected companies from big rises in a year. This time there has been no protection, and many companies are struggling to cope with really crippling increases.
Obviously, there are winners and losers in any revaluation. However, in the past there has been a transition to soften the blow; businesses did not suffer the full force of rate rises in one go. This time it is different, because we have an SNP Government. Businesses across Scotland find themselves left alone to deal with huge increases in their tax bills at the very time when, having managed to weather the recession so far, they might have expected to be able to look for support from their Government. Tens of thousands of businesses are worse off as a result of the revaluation. Some have faced a 200 per cent increase in their bills. As Jeremy Purvis pointed out, 80 per cent of them have appealed.
A number of firms in the retail, hospitality, energy, mining, whisky and agricultural sectors have told the Confederation of British Industry of their deep disquiet about the Scottish Government’s decision not to place a cap on and not to phase in the bumper increases in rates bills. Many of those firms are already struggling to emerge from the recession. Aberdeen and Grampian Chamber of Commerce says that the increases are already costing jobs. We have already heard that rates in Aberdeen city and shire have gone up by £30 million.
Sadly, across my region examples abound of massive hikes in rates. There are too many to mention them all, but I will give a few examples. Inverurie’s Thainstone mart has seen its business rates soar by 71 per cent. Meldrum House hotel faces an increase of 161 per cent and Meldrum Motors faces one of 94 per cent. The hotel and hospitality sector has been particularly hard hit this time because its businesses were revalued by the Government based on their 2008 turnover, not profit. For many businesses, that was the peak year before the recession. As we have noted, to add insult to injury, many of the hotels that the Scottish Cabinet used on its summer tour of Scotland are among the worst hit.
It is not just the Liberal Democrats who are calling for the problem to be fixed. The Federation of Small Businesses, the British Hospitality Association Scotland, the CBI and the Scottish Chambers of Commerce have all criticised the lack of a transitional rates relief scheme. I know how valuable SMEs are, but that is not the whole picture. Bob Collier of the Aberdeen and Grampian Chamber of Commerce said:
“SME support is not a substitute for transitional relief for the hardest hit.”
Government—and the Tories—insult business by continually refusing to recognise the real damage that has been caused by the sudden withdrawal of transitional relief and by the endless repetition of their refrain that it is okay because businesses should appeal if there are problems. As Mike Rumbles said, that is disingenuous. The appeals system is there for a different purpose. In addition, as John Swinney indicated today, it takes up to five years for appeals to be heard and resolved.
It is utterly complacent of the Government to argue that many businesses are better off and to turn a deaf ear to those who are worst affected. For a Government that likes to talk, it has been remarkably reluctant to have a conversation about this issue.
A number of members mentioned the extra £150 million in tax take that the Government will draw down. I heard Mr Swinney’s arguments, but several excuses are always less convincing than one. I agree more with Liz Cameron, who says that a transitional scheme needs to be introduced and can be afforded.
As Cathy Jamieson said, we have returned to the issue because it is still a problem. Liberal Democrats do not apologise for that. Unlike some members, we are willing to stand up for the whole business community. I say to Gavin Brown that we have repeatedly called on the Government to work with businesses to develop an affordable relief scheme. I urge the Government to listen to the community and to think again—it is not too late.