Debbie Taylor: Tourist industry will pay a high price for business rates change

BUDGET time for governments is always difficult, with cuts and deals left, right and centre, trying to balance the budget and stimulate the economy.

However, there will always be one group of people who will be worse off than another – it's a fact of life.

This year's Scottish Budget was bitter-sweet for the hospitality sector. In February, the Scottish Government announced that the transitional relief scheme, which phases in increases to business rates, is being removed with effect from April. With less than two months to prepare, many businesses were left dismayed by this decision.

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Although many smaller businesses may benefit from the enhanced qualifying criteria for small business rates relief, others will suffer due to the unexpected burden of paying their business rates in full from the start. The removal of this vital lifeline during this turbulent economic climate has come as a major blow to many hoteliers and restaurants.

The total rateable value of all properties described as hotels (4,466) rose from 133,952,795 under the 2005 list (as amended by appeals) to 174,087,354 under the 2010 list, a rise of almost 30 per cent.

Tourism is one of Scotland's most important industries, contributing 4.2 billion to the economy every year, but is being put at an unfair disadvantage to its English counterparts, for whom the scheme still operates. By not including transitional relief, almost 40 per cent of Scotland's hotels (including 264 larger ones) are now worse off than their English equivalents.

What's more surprising is that the rates, based on property valuation not profitability, were calculated in 2008 just before the true impact of the recession was about to be realised. Since then, hoteliers and restaurateurs have suffered from loss of revenue, greater competition for a reduced market and higher prices of goods.

Legal appeals for a reassessment, which will not be heard until 2011 at the earliest, will come too late for many businesses, which will have to pay the increased rates until they win their case and receive their money back. For some, the huge increase to their rates will be the straw which broke the camel's back after clinging on through the worst recession for decades.

The tourism industry has such a wide-ranging impact across numerous sectors. Tourists need somewhere to stay, somewhere to eat, places to shop, activities to take part in and transport to move around the country, thus spreading the economic benefits. The money generated can be reinvested into communities, improving the services and infrastructure for residents and creating jobs. It should be a win-win situation.

With the prospect of huge business rates bills, some businesses will have to cut costs: jobs will be lost and investment cut. The effect of business cutbacks is deep and wide-ranging.

Over the past few years, the Scottish Government has been supportive of the tourism industry in Scotland, particularly through the Homecoming Scotland programme. It therefore seems absurd that the same government would put the success of one of their major industries at such an unfair disadvantage.

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If the Scottish tourism industry is to remain a strong brand that attracts hundreds of thousands of visitors to this country every year, Scottish businesses must be put on an equal footing to their English counterparts and be given a fighting chance to come out of the recession intact and competitive.

• Debbie Taylor chairs the British Hospitality Association's Scotland committee and is managing director of the Old Course Hotel, St Andrews.