Call for business rates reform as Scots face cost of living crunch

Scottish political leaders have called for an overhaul to business rates as one company warned it would have to cut staff to cope with a near six fold increase.

Wunderbar in Glasgow told BBC Scotland News it would have to lay off staff to offset a more than £500,000 rise in the tax.

First Minister John Swinney said his government was providing more than £900m transitional relief for businesses.

On the campaign trail ahead of next month's election, party leaders also set out plans to help Scots with the cost of living on the day that council tax, phone and other bills rose for many.

Why are business rates rising?

The Scottish government sets its own business rates, called non-domestic rates.

The tax is based on the rental value of a shop, office, factory or warehouse.

As of 1 April, new rateable values have been introduced for all 260,000 rated non-domestic properties in Scotland, leading to a tax hike for many firms.

Concerns have also been raised about a spike in fuel prices and energy bills due to the crisis in the Middle East.

Gavin Boyle is operations manager at Wunderbar, a live-music bar which has two venues in Glasgow and employs 130 staff.

He told BBC Scotland News that the company's business rates were increasing from £111,000 a year to £645,000, and said the only way to make cuts was to let staff go.

"It's insane," Boyle said. "It's just completely untenable.

"You can't keep putting that on the customer otherwise you'll have no customers left."

Boyle highlighted that Wunderbar already pays for street cleaning and lighting outside its venues, questioning what it got in return for the high taxes.

The operations manager said the hike coincided with increasing energy costs, fuel duty and and a rise in the minimum wage.

He added: "If this continues across the Scottish hospitality industry it's going to be a loss of tens of thousands of jobs."

In the Budget, the Scottish government announced that all three bands of business rates – the basic, intermediate and higher property rates – would be cut from 1 April, which would cushion the effect of revaluations.

Other transitional reliefs are also being brought in to ease the move to the new system, including an extension of the Small Business Bonus Scheme, which allows some firms to get up to 100% tax relief.

Rates relief of up to 40% is available for some retail, hospitality and leisure businesses with properties that have a rateable value of up to £100,000.

Hospitality businesses on islands or in specific remote locations can also get 100% rates relief, capped at £110,000 per year.

While smaller business in Scotland can benefit from more generous rates relief than in England, larger companies south of the border pay lower rates.

First Minister John Swinney, campaigning in North Lanarkshire, said his government introduced more than £900m transitional relief on business tax, telling BBC Scotland News that many businesses would see reductions.

Questioned what companies like Wunderbar - which is not entitled to relief - should do, Swinney said that rateable valuations were determined by independent assessors and that the government provides support "where we are able to do so".

He warned that Scotland was facing "very significant" financial pressures and that he was "absolutely focused" on that issue.

Swinney told BBC Scotland News: "The real acceleration of those issues is going to come from the conflict in Iran and I think the UK government is just sleep-walking into another cost-of living crisis.

"The UK government needs to deliver help to people right now, not at some vague point in the future."

The chancellor has signalled that help with energy bills - to be targeted at "those who need it most" - will not arrive until the autumn.

Scottish Conservative leader Russell Findlay said business rates increases would force some companies to close.

"We need to give them all the help we can get," he said.

His party is pledging to scrap parking charges in town centres in a bid to revive high streets.

Speaking in Paisley, Findlay argued that providing free parking for two hours would help business and get people back into town centres.

He added that any government underspend in its end of year accounts should be returned to taxpayers as a dividend.

Scottish Labour leader Anas Sarwar accused the SNP of presiding over a "broken system" where businesses "are being asked to pay more and more for less and less".

He said he would "fix this mess" by appointing a chief assessor to ensure greater stability.

Sarwar added that he would reform the system so it is no longer "rigged" against hospitality to favour online giants.

Speaking in Glasgow, the Labour leader said he would reduce household costs by freezing income tax in the next parliament and reforming council tax.

In Edinburgh, Scottish Green co-leader backed an overhaul of the business rates system, which he said was "rigged" in favour of bigger companies.

He also called for the Royal Family to start paying Land and Buildings Transaction Tax on property purchases.

"They need to start paying their fair share so that we can fund Green proposals, like free bus travel for everyone, helping save money during the cost-of-living crisis, he told BBC Scotland News.

Maclolm Offord, Reform UK's leader in Scotland, said his party would reverse business rate increases and phase them out over time.

He told a news conference in Glasgow that the change was "unfair and dramatic" for businesses and that his party would take action on day one if it was in government after the Holyrood election.

Offord also called on the UK government to immediately cut VAT on energy bills.

Alex Cole-Hamilton, leader of the Scottish Liberal Democrat leader, said his party also wanted to reform the business rates system.

He said there should be greater transparency about increases and said his party had secured £178m of business rates relief in this year's Budget negotiations.

Cole-Hamilton described that as a "downpayment" on his party's plans after the election, adding that he wanted to base the rates on the value of land so that "people can refurbish their businesses without facing exorbitant rises".

The LibDems also want to double the Retail Crime Taskforce budget and improve transport to encourage shoppers back into town centres, while introducing a cap on heating oil to bring down the cost of household bills.

If your living costs are rising and your wages or other sources of income are not keeping pace, you may well be feeling the squeeze.

The Scottish government has some tax and welfare powers that it can use to help ease the burden but the UK government has far greater financial clout.

That is to say that it is for both Holyrood and Westminster to respond to these issues but having paid for furlough during the Covid pandemic and subsidised energy bills when the Ukraine war began, the public finances are stretched.

Politicians in the UK have limited influence on President Trump, Iran and other parties in the Middle East conflict which is driving current price rises. As with so much in domestic politics, the origins are international.