How Scottish Tories lost plot over core principle of Conservative philosophy – Bill Jamieson

MSPs came alarmingly close to ripping up the uniform business rate without a proper analysis of the effects, writes Bill Jamieson.
Public Finance Minister Kate Forbes was scathing about the idea of devolving business rates to councils (Picture: Jane Barlow/PA Wire)Public Finance Minister Kate Forbes was scathing about the idea of devolving business rates to councils (Picture: Jane Barlow/PA Wire)
Public Finance Minister Kate Forbes was scathing about the idea of devolving business rates to councils (Picture: Jane Barlow/PA Wire)

Low taxation, ease of regulation, support for business: these have long been core principles of Conservative philosophy. But after the slapstick performance of Scottish Conservatives over proposals to change how business rates are levied, they seem to have taken the dictum of Groucho Marx to heart: “Those are my principles, and if you don’t like them... well, I have others.”

Earlier this week the Scottish Parliament voted to retain the Uniform Business Rate and against a plan led by Green MSP Andy Wightman to fragment the rates system by handing control to each of the 32 different local authorities.

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For reasons difficult to fathom, Scottish Conservative MSPs initially lined up in favour of the Wightman amendment – one that not only threatened to fragment the business rates system and give town halls the power to jack up rates but also put at risk sizeable and much-needed reliefs for small businesses.

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With business rates already at a 20-year high and our denuded high streets and shopping centres facing more closures by the week, how did the Scottish Tories come to lose sight of core principles?

Arguably more important, how was such a far-reaching proposal able to advance as far as it did with barely a scintilla of evidence presented in support and with little independent assessment of its likely effects? Where were those watchdogs so often quick to bark, such as the Chartered Institute for Taxation or the Institute of Chartered Accountants of Scotland (ICAS)? They seemed fast asleep in their kennels.

Small business rate relief at risk

Instead, it took a bold and dogged campaign by the Scottish Retail Consortium to rouse the Scottish Government and 26 other trade associations to alert MSPs to the full implications of the change.

The argument for Wightman’s amendment was that it would boost localism and enable local authorities to determine business rates in their areas – power they once enjoyed. As such, it got the backing of the Convention of Scottish Local Authorities (Cosla), never slow to expand the writ – and budget – of town halls.

But alluring though this sounded, the amendment would have spelt the end of the Uniform Business Rate, left businesses having to cope with different levies in different areas and, as initially drafted, imperilled the system of small business rate relief.

Earlier this year every Scottish local authority set inflation-busting rises in council tax, with many as high as 4.8 per cent. If a similar figure had been applied to business rates then the increase across all types of ratepayers would have been £134 million, rather than the actual £58.6 million. In Northern Ireland where local authorities set a poundage rate, rates bills there are on average 19 per cent higher than in Scotland, ranging from 12 per cent to 29 per cent. Applying this 19 per cent uplift to Scotland, and taking one local authority area by way of an example, it would see firms in South Lanarkshire paying an extra £61 million in business rates.

‘Businesses watching Tories carefully’

Public Finance Minister Kate Forbes, who wrote to MSPs calling on them to vote against the Wightman amendment, was particularly scathing over the contortions displayed by the Scottish Tories. They claim, she said, “to be a government in waiting and that they are ready to take up the mantle of government, but they cannot even figure out their position on the uniform business rate, worth £2 billion to the Scottish budget. Businesses will be watching the Tories carefully. They can see their ridiculous position of claiming to be pro-business, while voting to introduce uncertainty; of demanding tax cuts in tomorrow’s budget debate, while having voted to make it impossible for Government to provide relief; and of having been forced to think again only after a concerted campaign by 27 business organisations.”

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Quite why the party got itself into such a fix is unclear. But whatever the reason, tens of thousands of businesses were faced with a legislative change that had the potential to harm them at a most vulnerable time. As Kate Forbes pointed out, some parties – Tories, Labour and Greens – might ideologically believe that it is right to potentially introduce 32 different rates across Scotland. “But to do it in one vote, without scrutiny, consultation or thought as to what it means, is no way to set changes in motion.”

SRC director David Lonsdale was even more blunt. “Businesses”, he pointed out this week, “have consistently called for an evidence-based approach to reform of the rates system, not one based on ideological whim. It is profoundly troubling that a tax change of this magnitude has reached this critical point with negligible consideration for the implications or for those affected, with all the uncertainty that brings.

“It is startling and bewildering that MSPs could be asked to vote to rip up the Uniform Business Rate without so much as a proper consultation, economic analysis, or a business and regulatory impact assessment. It’s a huge deficiency and raises serious questions about whether the parliamentary mechanisms for making taxation changes of this magnitude are fit for purpose.”

While the vote against the amendment is warmly welcome, everyone involved in policy-making in Scotland would do well to reflect on this cardinal point.