Business leaders have hailed the decision to extend rates relief for the whole of the next financial year and said it could be the lifeline that helps struggling north east firms survive the coronavirus crisis.
Retail, tourism, hospitality and aviation businesses will pay no rates next year under new proposals unveiled by finance secretary Kate Forbes on Tuesday after a further £1.1 billion of consequential funding was passed on to the Scottish Government.
The funds, which were made available following UK Government spending on the Covid-19 pandemic, will allow ministers in Scotland to build on the three-month rates relief extension already announced in the Scottish Budget.
Newspapers will also continue to benefit from 100% relief for a further 12 months, while charitable rates relief will not be removed from mainstream independent schools until April 2022.
Non-domestic rates are based on valuations completed in 2015, before the oil and gas downturn, and are no longer representative of trading circumstances in the north east but MSPs voted in December to delay revaluations by at least another year.
The region has been dealt a further blow as the out-of-date figures have left many businesses with rateable values that lock them out of accessing financial support.
Business leaders warned last month that the three months’ rates relief already announced would barely scratch the surface of the support needed to keep many north east firms afloat and would only provide a “stay of execution”.
Ms Forbes previously told MSPs she is “very keen” to extend the relief further but this would be subject to an equivalent policy in England freeing up extra cash because it would otherwise be “unaffordable” under the Scottish Government’s current budget.
‘I can now deliver on that promise’
Announcing plans for an extension on Tuesday, the finance secretary said: “When I presented our budget last month, I guaranteed to extend non-domestic rates relief further if I was given the necessary resources.
“I can now deliver on that promise, providing the UK Budget in March delivers the funding we require.
“The other measures I am proposing today, including further support for hospitals, schools and local government and measures to tackle climate change, build on our priorities to ensure a robust recovery for our economy and public services.
“This welcome additional consequential funding was confirmed to us yesterday and I wanted give early notice to parliament and provide clarity to businesses.
“We are still in the throes of a national emergency and it is important Parliament works together to respond. I will continue to work with all parties to help deliver a budget for the nation fit for these times.”
Other extra spending in 2021-22 arising from the latest consequentials includes:
- £120 million for mental health.
- £120 million for affordable housing.
- £100 million to support people on low incomes.
- £60 million for schools to help pupils catch up on missed education.
- £60 million for NHS recovery.
- £45 million for heat decarbonisation, energy efficiency and fuel poverty.
- £21.5 million for Scottish Enterprise.
Separately, local authorities will receive an extra £275 million in the current financial year to address Covid-19 pressures, while a further £40 million is being made available to support the safe reopening of schools.
Russell Borthwick, chief executive of Aberdeen and Grampian Chamber of Commerce, welcomed Ms Forbes’ announcement.
He said: “Extending out the vital business rates relief for retail, aviation, hospitality and leisure for the next financial year in full was an overwhelming ask of Chamber members and will be an important step to ensuring that these sectors can power our post-Covid recovery.
“We still believe that more should be done to mitigate the disproportionate rates burden felt by firms in other sectors across the north east of Scotland.”
Andrew McRae, Scotland policy chairman for the Federation of Small Businesses, said extending rates relief for the next financial year will “allow many more smaller firms to make it through to the end of this crisis and help them get back on their feet when the economy reopens”.
Emma McClarkin, CEO of the Scottish Beer and Pub Association, said the industry is “teetering on the precipice” but the announcement would give relief to thousands of pub businesses who remain unclear when they will be able to open again.
Ministers have long faced calls from opposition parties to extend rates relief, with Scottish Conservative leader Douglas Ross first proposing the move in December, to give businesses certainty while they recover from the pandemic.
The Scottish Government was also defeated in Parliament last week after opposition MSPs united to back calls for further rates relief to be given to local newspapers.
‘An important lesson’
North East MSP Liam Kerr said: “Common sense has finally prevailed despite the SNP’s stubbornness to help north east businesses that are on the brink.
“Yet again, businesses at their greatest time of need have been treated abysmally by the Scottish Government through this process.
“However, the Scottish Conservatives have repeatedly demanded this extension and we are pleased the SNP have finally given in and are to support the retail, leisure, hospitality, aviation and newspaper sectors.
“This is an important lesson on why businesses across Scotland should be treated equally and fairly.
“Aberdeen has been a cash cow to the central belt for far too long now and going forward, past the pandemic, this has to change.”
Scottish Labour also welcomed the extension but claimed the budget still does not deliver for Scotland’s councils or provide sufficient funding for mental health.
Speaking after Ms Forbes’ statement to Parliament, Scottish Labour interim leader Jackie Baillie said: “Today’s announcements are welcome, but the budget as it stands still falls far short of what the country needs.
“Scottish Labour will continue to call for investment in the economy, greater funding for the NHS and mental health services, and for a £15 an hour rate for all social care workers.”
Scottish Greens co-leader Patrick Harvie MSP warned ministers that more needs to be done to tackle poverty in communities across the country.
He said the Scottish Government also needs to increase its ambition on investment in green jobs to sow the seeds of a green economic recovery.