A fair degree of concern was whipped up in the run-up to the New Year by the vote in the Scottish Parliament to give local councils the ability to set non-domestic, i.e. business rates. This is not yet confirmed as further stages of the Bill are required. This issue arose as something of a surprise being a Green amendment to a government bill that was then supported by Labour and Tories.  I’ve no interest in the political rationale for who proposed and supported what and why, but the broader arguments are worthy of airing.

One problem noted to date seems to be the potential loss of the Small Business Bonus Scheme – or rates relief for smaller businesses including retailers.  This has been noted as a drafting error by Andy Wightman and could yet be put right. But the fact this has been a key dimension of discussion is interesting. For small retailers this relief is important, both in itself arguably symbolically.

The other key dimension of concern has been from various sector bodies about the likely ensuing patchwork of rates across Scotland and the potential problems this will pose.  It would be a more complicated position for sure and this is a concern for national, though not necessarily local, operators.  Linked to this is the related, and more widely shared concern, that the freedom to set rates locally means only one thing; higher bills.  The example of Northern Ireland is used to support this argument (a claim of 19% higher rates than in Scotland) and in cash strapped times the opportunity for councils to tax businesses to raise revenue might be irresistible.  For those arguing against this localisation, the current plight of physical businesses, high streets, retail and leisure etc show the potential further damage that could be done to a fragile situation.  Hence a major coalition of organisations trying to stop this move has arisen. Proponents of the local approach argue that this re-establishes a stronger link to localism and local democracy, and allows local decisions about what is important locally.

There are a few things in this though that puzzle me.  We have had a relatively recent major review of the rates system in Scotland (The Barclay Review previously covered in this blog) but much of this seems to have been forgotten now.  Rates themselves are a tax from the distant past and can not function as a major source of revenue in our more modern economy.  We also seem to have got away from being clear and consistent about using taxation as a way of supporting behaviours and activities we want to promote.  If we want local places and businesses and not faceless online behemoths then we need to work out what their relative cost structures are and tax accordingly.  And that’s before we consider our climate and carbon goals and thus the need to rethink much of our activities (for example there will in due course have to be a real consideration of the carbon efficiency of online deliveries and the travel and out of town parking our decentralised activities generate)

Local government finance is a major problem and there is a requirement to fix that and make it more local and locally responsive.  But we need to recognise that rates is not the right tool any more for this and that we need a rethink of the balance of taxation gernerally and on businesses.  If we value local economies and shops then we need to act accordingly and not in a piecemeal fashion.  For me, the current debate is rather missing the point; the system is broken in so many ways and tinkering will not resolve this.

As it is the start of the New Year, I will reiterate that all posts in this blog represent personal views unless stated otherwise.