SNP Budget was better for retailers, but there was a glaring omission

After last year’s guddle of a Scottish Budget, many retailers would have been hiding behind the sofa ahead of the Finance Secretary’s statement. This Budget was, therefore, a test of how seriously the Scottish Government was about resetting the relationship with business.

There can be no doubt of the need for a change. Retailers are still reeling from the Chancellor’s fiscal statement and, specifically, the colossal hike in employer’s National Insurance contributions. This will cost Scottish retailers an extra £190 million each year. It’s a staggering sum especially when retail sales have flatlined for the past year.

So this was the backdrop to Shona Robison’s Budget. Thankfully, she seems to have largely got the message.

Medium and large grocers shops have avoided a damaging business rate surtax, but still face paying the highest rates since devolution (Picture: Jeff J Mitchell) | Getty Images

Rates bills

The Scottish Retail Consortium was in the vanguard of the campaign to secure a freeze to the basic property rate and it’s encouraging to see ministers deliver this for a second year. Retailers occupying medium-sized and larger premises weren’t so lucky and will face an inflation-linked 1.7 per cent uplift in their rates bills, taking them to the highest since devolution. A number of these stores will be grocery retailers.

Thankfully, the Scottish Government has seen the light and turned away from the damaging and retrograde idea – contained in last year’s Budget – of introducing a business rate surtax on grocers. This ill-considered measure would have unfairly penalised food and drink stores, making them the highest taxed in the entire UK. Removing this surtax lifts a damaging cloud from the horizon and allows grocers to invest with more confidence. Scottish ministers deserve praise for clearly listening to our representations.

Other positives in the Scottish Budget include extra money for Police Scotland to tackle rising levels of crime against retailers, particularly shoplifting which has risen by a quarter over the past year. Despite significant investment in crime prevention by retailers, this problem has become a scourge of communities across Scotland and soaring levels of shoplifting is the main factor behind abuse and threats towards shop workers.

Worries for future

However, as retailers digest the full implications of the Budget, we’re already detecting disquiet amongst smaller shopkeepers over the omission of any temporary rates relief comparable to that which their counterparts in England are entitled to for the coming year. This is especially so as Barnett consequentials were forthcoming from UK Government to help fund this.

There are still worries for the future. The simultaneous publication of a new tax strategy contains a proposal to explore with councils the creation of more revenue-generating powers, which sounds ominous. Councils have already been handed control over a raft of new taxes including workplace parking levies.

A kaleidoscope of differing local taxes may plug gaps in councils’ finances, but can add complexity and cost to the running of a retail business and impinge on customers’ disposable incomes. Furthermore, another party will need to back this Budget, leaving fear that further taxes could yet be added.

What’s missing in all this talk of tax is a debate about controlling government’s running costs. Getting on top of spending would help militate against the need for tax rises which stymie recovery and are leading to Scotland’s underwhelming economic growth forecasts. Perhaps that is something ministers can look to before devising new taxes.

David Lonsdale is director of the Scottish Retail Consortium