Business rates freeze plea to defy Chancellor

The challenge comes amid growing pressure on George Osborne to clamp down on business rates. Picture: Getty

The British Chambers of Commerce (BCC) is calling for a two-year hiatus and complete overhaul of the business rates system. It says the rates system has led to “spiralling” bills and wants a “more responsive and transparent system” in place by 2015.

The Scottish Chambers of Commerce (SCC) now says that if the Treasury does not act then it wants the Scottish Government to take independent action and impose its own freeze.

Setting business rates is a devolved power but the Scottish Government has mirrored rates in England since 2007. Before that, the Scottish poundage was about 11 per cent higher than elsewhere in the UK.

Garry Clark, head of policy at the SCC, said that lowering Scottish rates to less than those in England would prove there is conviction to bolster the country’s economy.

“If they are serious about making Scotland a better place, they have it in their power to do that,” Clark said.

“What is the point of having devolution if we don’t do something different?”

The challenge comes amid growing pressure on George Osborne to clamp down on business rates, which have been rising in line with inflation even while council taxes are frozen.

Based on the “snapshot” of September’s retail price index (RPI), rates are due to rise by 3.2 per cent in April, even though inflation has since fallen back to 2.6 per cent.

Publishing its submission to the Chancellor yesterday, the CBI called for increases to be capped at 2 per cent while a “full reform” of the system is carried out.

Scottish firms will pay about £2.4 billion in business rates this financial year, up from £2bn in 2010-11. With further upratings automatically built in, that figure will continue rising to an estimated £2.9bn in 2015-16.

The Scottish Government’s Small Business Bonus Scheme reduced the amount paid by 92,000 Scottish firms this past year by a combined £154 million. Holyrood has also eased the so-called “supermarket tax” by some £25m annually, and made concessions on empty property rate relief at a cost of about £4m.

However, Clark said this was still a “drop in the bucket” compared with the 40 per cent increase in rates through five years of sluggish economic conditions.

“Business is paying a very hefty price at a delicate time for the economy,” he said. “It is an awful lot of money that business can ill afford.”

In its submission to the Chancellor, the BCC argues that in its current form it is an “iniquitous tax” which aggravates the uncertainties of business cashflows and rising costs.

The group adds that the system is at odds with the UK government’s pro-business rhetoric, with rates receipts set to overtake council tax receipts by 2015-16.

A Scottish Government spokeswoman said: “We already give Scottish business a competitive advantage by providing the most generous package of business rate reliefs in the UK, which will reduce the tax paid as business rates for Scottish firms by £570m this year alone.

“We have committed to match the English business rate poundage for the lifetime of the current parliament.”