Glaring disparity needs to be rectified, says Colin Valentine
When domestic rates were abolished in Scotland in 1989, to be replaced with the poll tax and, subsequently, the council tax, business rates remained and have been a bone of contention with the licensed trade since.
However, last year, the Scottish Government launched “Supporting Business – Promoting Growth Business Rates Consultation” with a view to reviewing and amending the current business rates that affect businesses large and small in Scotland. This was an ideal opportunity to correct the anomaly whereby every other business in Scotland’s rateable value is based on their square footage, but for pubs and hotels it is based on their turnover – not profit, but turnover. It used to be the case that business rates for petrol stations were also based on turnover, but now even that is no longer the case.
Unfortunately, the Scottish Government’s published response paper to the consultation appears to have ignored the concerns that were flagged up by representatives of individual publicans and hoteliers. In the document’s outcomes and action plan it states that “the current property-based tax system will be retained”. This suggests that there is no proposal to end the commercial rating system which penalises Scotland’s licensed on-trade sector.
To give you an indication of the glaring disparity between licensed premises and every other business in the country, the rates burden on hotels and pubs is in the region of 9 per cent of turnover, but for other businesses, such as supermarkets, whose below cost selling of a controlled product – alcohol – is primarily responsible for the closure of so many pubs the length and breadth of the country, it is about 2 per cent of turnover.
As I have said many times in previous Friends of the Scotsman articles, closed pubs do no-one any good except, of course, supermarkets, and an empty pub does not generate any income for councils in the way of business rates.
There are also further knock-on effects of this, albeit unintentional, discriminatory regime whereby publicans and hoteliers have to pay more for licensing application fees, water charges and, shockingly, satellite television charges.
It is a little-known fact that, while you and I pay our satellite TV subscription, if we have one, based on which particular channels we want and takes no account of any other factors, publicans and hoteliers pay for their satellite TV channels, almost exclusively sports, based on their rateable value.
It is surely none of their business what the turnover of a pub is. Under the current regime, it is. This is a clear example of how the unfair burden set by our unnatural system of valuation can be further exacerbated by additional charges which are also set at a false and inflated level, based on the burden set by Government.
The current scheme leads to unacceptably high valuations, an unfair rates burden being imposed on owners of exclusively small businesses, which then goes on to penalise them further by virtually excluding them from the small business rates relief scheme in stark comparison to many other small businesses with a similar or higher profitability factor – less than 0.5 per cent of the money distributed through small business rates relief in 2011-12 was directed at publicans and hoteliers, while many clubs which operate bars in the same way as pubs and hotels do qualify.
Any right-thinking person would surely agree with me that, in these financially-straitened times, in fairness to an industry that has been battered from all sides more than most in the last ten years, the Scottish Government must introduce a commercial ratings system whereby all business sectors are treated the same way.
Why should publicans and hoteliers be penalised because of the historic inequality of the burden imposed on rating a whole industry on sales with no account taken of the profitability, or otherwise, of businesses in that industry.
The current scheme also takes no formal account of the valued role many of our pubs play in their immediate area. It is time that the Scottish Government woke up to the fact that, whatever problems this country may have in relation to alcohol consumption, well run community pubs are part of the solution and cheap supermarket hooch is almost the entire problem and ensures that the current commercial rating system is replaced with one where rates calculations are equally applied to all businesses.
Don’t give our hard-working publicans and hoteliers favours – give them fairness.
• Colin Valentine is national chairman, Camra (Campaign for Real Ale) www.camra.org.uk