Scottish Budget: Struggling retailers need level playing field with England – David Lonsdale

Facing the toughest conditions in a decade, Scotland’s retailers need help as they struggle to reinvent themselves for the future, writes David Lonsdale.

There is no denying that in previous years retailers were more than a little apprehensive about Scottish Government Budgets.

In the last Parliament, our industry had to contend with the ratcheting up of the business rate and ad hoc levies such as the large retailer levy and the doubling of the large business rate supplement.

Budget decision-making has thankfully improved of late. Two years ago, the Finance Secretary capped the uplift in the business rate in line with the CPI measure of inflation, rather than RPI.

Last year’s Budget saw a below-inflation rise in the business rate, the scrapping of the proposed levy on out-of-town premises, and funding to rejuvenate town centres.

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While additional measures introduced to secure the support of Green Party MSPs diluted the focus on economic growth, overall, firms breathed a sigh of relief that a Budget accord had been reached at a time when there was more than enough political and economic volatility.

Weak demand, flatlining sales growth

A new Scottish Budget will be unveiled next week. The Finance Secretary is to be commended for cracking on with holding it, rather than waiting until after UK ministers unveil their own tax and spending plans in mid-March.

These are unsettling times for retailers, with conditions the toughest in a decade.

Demand is weak and shopping habits are shifting. Retail sales growth has flatlined over the past three years, and in 2019 it nudged up a measly 0.3 per cent.

The only fixed point in a world of flux for the industry seems to be rising costs, which divert cash away from growing the business and which are increasingly difficult to absorb without passing on to shoppers.

Given that backdrop, certainty, competitiveness and confidence should be the watchwords of this Budget.

Getting a grip on government-imposed costs is essential. Positive headway is being made on rates reform, however the burden remains onerous and the poundage rate is at a 20-year high.

This is an acute issue for retail which accounts for 22 per cent of rates. The uplift pencilled in for April is six times faster than that of the growth in retail sales, and will add £11 million to retailers’ bills. There should be a freeze in the poundage rate, a first step towards a timetabled plan for reducing the rates burden.

Household finances under pressure

Next week, MSPs will vote on plans to scrap the Uniform Business Rate and hand control over this £2.8 billion tax to local authorities. This alarming move must be firmly knocked on the head.

The Budget must finally deliver on the Barclay Review’s recommendation and scrap the Scotland-only rates surcharge on medium-sized and larger commercial premises.

This large firms’ supplement affects 22,000 premises, including 5,000 shops, and sees them charged an extra £65 million annually over and above that faced by competitors or counterparts down south.

It raises the hurdle for commercial investment, which is why the likes of the CBI and Scotch Whisky Association also want to see the level playing field with England restored.

Eradicating this discrepancy would ensure every firm benefits from the most competitive rates regime in the UK.

Household finances continue to be under strain. Ministers should bolster disposable incomes and consumer confidence by ruling out increases in income tax rates.

Continuing to protect those on modest and low incomes is the right approach, especially with further increases in council tax expected.

With retail under enormous pressure, this Budget is an opportunity for ministers – and MSPs as a whole – to take tangible steps to help retailers as they reinvent themselves for the future with confidence. MSPs must work collegiately and seize the moment.

David Lonsdale is director of the Scottish Retail Consortium