Full text of my speech
Although I do not agree with the framing of the Conservative motion, I thank the Conservatives for raising an important issue. This debate is about ensuring that Scottish businesses have a business taxation regime that supports their sustainability and growth as much as possible.
I will set out some unfortunate omissions from the motion that is before us. We talk about pressure on businesses. Rising business rates are a relevant factor, but the motion does not mention the impact of the UK Government’s national insurance increase, which is estimated to take £2 billion out of the Scottish economy next year. That is surely a significant omission, although I note that Murdo Fraser partly mentioned it during his speech. Likewise, staff shortages and high energy prices will be of particular concern to the hospitality sector. Those concerns are omitted from the motion. Absolutely, let us discuss the pressures on our businesses, but it is important to do so in a well-rounded fashion. The motion does not allow us to do that.
I note that the motion suggests that, since 2022-23, a cumulative £700 million in Barnett consequentials deriving from business rates relief in England has not been passed on to businesses in Scotland. I will not get drawn on the numbers that have been cited, but I note that the minister said that, in this year alone, there was £730 million in business rates relief to support businesses. When we cite such numbers more generally, we should compare apples with apples.
There is a more important point, which is that Barnett consequentials are deliberately not ring fenced. If Barnett ring fencing was how the Scottish budgetary process worked, I doubt that we would have found the resource to abolish prescription charges or tuition fees, or the nearly £500 million that is now spent annually on tackling child poverty in Scotland through the Scottish child payment, which is a core reason why child poverty continues to fall in Scotland while it increases to worryingly record levels in England.
However, let me make a wider point. There is a case to be made for further support for Scottish businesses—of course there is—and I acknowledge the case to be made for the hospitality, leisure and self-catering sectors. Whatever that support will be, it has to be costed and budgeted for. The imminent budget process in the Parliament is the appropriate time to do just that. I hope—this is a sincere plea—that the Conservatives will have a constructive dialogue with the Scottish Government, which is something that has not really happened in recent years.
Some 92 per cent of hospitality premises benefit from non-domestic rates relief of 40 per cent and are supported by the Scottish Government, but I appreciate that many would like to see the Scottish Government go further. As with any rates revaluation, there will be winners and losers. I am not surprised to hear suggestions for transitional protections and I am sympathetic to those suggestions. However, at the heart of this debate there is an opportunity to get agreement for broad support for businesses, if not a consensus on the specifics. I suspect that the Government will be constrained in providing detail about what will be in its budget next week.
I will make some suggestions, to float some ideas. I was very interested in Rachael Hamilton’s comment about rates focusing on rents. That is a reasonable point, but I would also point out that a blanket approach to rates relief simply means that very profitable businesses get rates relief that they just do not need. There is a wider debate about targeting rates relief to those need it the most and applying broad rates relief across the board. We have to take that into account.
Finally, there is the process itself. Initial draft rates proposals were made last November, and valuation officers are being consulted until February this year. However, people cannot appeal their rates revaluation until April, which will be after they have started paying the new rate. We must look at that and front load an appeals process so that people can make lodge a proposal—that is, start an appeal—before they start paying that higher amount.
Those are just some suggestions, and I look forward to learning the details of the Scottish Government’s support for business in next week’s budget.