New Deal for Business Non-Domestic Rates Sub-group minutes: 3 October 2023

Attendees and apologies

• Pete Cheema, Scottish Grocers’ Federation
• Martin Clarkson, Gerald Eve
• Marc Crothall, Scottish Tourism Alliance
• Stacey Dingwall, Federation of Small Businesses Scotland
• Jim Doig, Scottish Assessors Association
• Heather Honeyman, Scottish Assessors Association
• David Lonsdale, Scottish Retail Consortium
• David Melhuish, Scottish Property Federation
• Stephen Montgomery, Scottish Hospitality Group
• Alan Puckrin, Local Authority Directors of Finance
• Les Robertson, Institute of Revenues, Rating and Valuation
• Brian Rogan, CBRE
• Jonathan Sharma, Convention of Scottish Local Authorities (COSLA)
• Leon Thompson, UK Hospitality Scotland
• Paul Togneri, Scottish Beer and Pub Association
• Pete Wildman, Scottish Assessors Association
• Colin Wilkinson, Scottish Licensed Trade Association

Scottish Government

• Tom Arthur, Minister for Community Wealth and Public Finance (Chair)
• Ellen Leaver, Deputy Director, Local Government and Analytical Services Division
• Scottish Government officials 

Apologies

• Liz Cameron, Scottish Chambers of Commerce

Items and actions

Welcome and update

The Minister welcomed members to the meeting and noted the apologies received.

The minutes of the previous meeting on 13 September were agreed.

Budget 2024-25

The Minister noted that decisions on rates and reliefs for the next financial year will be set out in the Scottish Budget 2024-25, which has been confirmed for 19 December 2023. He thanked members who had submitted budget proposals in advance of the meeting and invited further comments from the sub-group.

Stephen Montgomery noted that the Scottish Hospitality Group had submitted their proposals which had two main asks – a targeted relief for hospitality, and for a partnership approach through an Industry Working Group to explore how the sector can be supported to improve working conditions within a wellbeing economy framework.

David Lonsdale highlighted positive actions on non-domestic rates (NDR) in recent years including retaining a Uniform Business Rate, moving to a three-year revaluation cycle with a one-year tone date and freezing the poundage. He stated the Scottish Retail Consortium’s (SRC) asks for the 2024-25 budget include a poundage freeze, an accelerated timetable for reducing the Higher Property Rate, matching the UK Government’s offer on relief for the Retail, Hospitality and Leisure (RHL) sectors, and not introducing conditionality into reliefs. Pete Cheema noted that the Scottish Grocers’ Federation’s calls were aligned with those of the SRC.

The Minister noted that conditionality in reliefs had been raised in a previous meeting of the sub-group, and in a recent parliamentary question. He advised that given the many types of property within the NDR system, and given some properties may have no employees, or may be operated by individuals rather than businesses which may not align with conditionality requirements, detailed analysis is required before considering introducing any conditionality in NDR.

Paul Togneri advised that the joint submission from the Scottish Beer and Pub Association and Scottish Licensed Trade Association sets out the trading challenges facing the hospitality sector including inflation, labour shortages and the recovery from covid. Their budget asks include a 35p poundage for the hospitality sector and a 75% RHL relief.

David Melhuish supported calls for reducing the Higher Property Rate and also noted the Scottish Property Federation’s view that the 3 yearly lease review for Land and Buildings Transation Tax caused an unnecessary administrative burden for businesses in the context of a one-off transaction tax.

Alan Puckrin noted that 25% of local government funding was from NDR and local authorities would expect increased General Revenue Grant to compensate for any reduction in NDR income, recognising the funding pressures on local and Scottish Government. This was supported by Jonathan Sharma from COSLA.

Stacey Dingwall noted that the Federation of Small Businesses Scotland backed replication of any RHL relief from the UK Government, and asked that there be no increase in rates for small businesses (e.g. through conditionality in reliefs, or other changes to the Small Business Bonus Scheme).

Colin Wilkinson noted that the Scottish Licensed Trade Association (STLA) would ask for a hospitality-specific relief. He noted that SLTA had released the results of their summer survey that morning which outlined the challenges the hospitality sector is facing.

Leon Thompson noted the minimum that UK Hospitality Scotland (UKH) would look for was a poundage freeze. He noted UKH are calling on the UK Government to keep 75% RHL relief, and if there were consequentials from this policy then UKH would be keen to discuss how the consequentials could best be used. This was supported by the Scottish Tourism Alliance. He further advised that conditionality is a key issue for their members and that the Fraser of Allander Institute and The Poverty Alliance’s Report called for a real living wage, but acknowledged the pressure on hospitality. He also noted the ongoing inquiry on hospitality from the Fair Work Convention.

Brian Rogan noted the Scottish Chambers of Commerce had outlined their budget asks in a submission ahead of the New Deal for Business Group’s (NDBG) progress report, including restoring parity with the UK Government on the Higher Property Rate, calling for RHL relief and also incentivising redevelopments.

Martin Clarkson advised he would support calls for a 35p poundage for hospitality. He also noted that any support applied automatically would remove the need for ‘cumbersome’ applications.

David Lonsdale stated that the Programme for Government noted that the Scottish Government and local government would look at revenue-raising options. He advised that any additional tax powers could have the potential to alter the balance of local government funding, reducing NDR. 

David Lonsdale also asked if discretionary relief powers are included in the ongoing review of the Community Empowerment Act. The Minister noted the joint programme of work with local government looking at the process for any new fiscal powers for local authorities. He also noted the work of the Joint Working Group on Sources of Local Government Funding and Council Tax Reform which included the two recent consultations on Council Tax, the responses to which are currently under consideration. He advised that the Community Empowerment Act review is expected to be completed early next year, and while discretionary NDR relief powers are part of the review, the focus has mostly been on other areas such as participation requests and community asset transfers.

Les Robertson noted that Community Empowerment Act relief powers were seldom used as it would require funding from local government. He also noted more generally that automatic application of reliefs could ease administration.

Tax Advisory Group: update

Anouk Berthier provided an update on the recent Tax Advisory Group, noting that there was further discussion on the group’s Terms of Reference (ToR), including an ask to include businesses and competitiveness in the ToR. She also advised that consultants presented the results of some qualitative research on the public’s understanding of Income Tax, and there was also discussion on the levers available to address child poverty.

David Lonsdale asked if the group’s remit includes looking at new or additional taxes. Anouk advised the group’s focus was on the strategic approach to tax as a whole.

Work plan

The Minister noted that the workplan had been updated to reflect the nominations received for the Task Teams and advised that officials would be setting up the dates for the initial meetings of the Task Teams shortly. He also noted that it would be important at those initial meetings to agree a lead who will report back to the sub-group.

Regarding Task 1 on the extension of the proposal-lodging deadline, Pete Wildman advised the group that while numbers were yet to be finalised, around 5,800 proposals had been lodged by 17 July. In excess of 20,000 proposals were lodged by 31 August, of which 11% were by unrepresented ratepayers. This compared to 7% of appeals lodged by unrepresented ratepayers at the 2017 revaluation cycle. The Minister advised that a survey would be issued seeking views on the extension to the proposal-lodging deadline.

Under Task 4, the sub-group agreed that assessors engagement with specific sectors on valuation methodologies be an agenda item at each sub-group meeting. Pete Wildman advised that the Chair of the Scottish Assessors Association’s Commercial Committee along with other assessors had a constructive meeting with the hospitality sector on 19 September. He noted that engagement would continue regularly to encourage the exchange of information and to discuss valuation methodologies. Stephen Montgomery welcomed this engagement.

Pete further noted that scheduling of proposals for determination had been discussed with the Scottish Ratepayers Forum and Scottish Rating Surveyors Forum on 22 September, and would be discussed with the Scottish Business Rates Group in October. He also advised that assessors were planning ahead for the 2026 revaluation, and are considering a consultation on the valuation of hotels and licensed premises ahead of the next revaluation.

In relation to Task 6, the sub-group agreed to include an update on the 2026 revaluation on the agenda at future sub-group meetings.

On Task 7, the Minister advised that the Local Government Digital Office is undertaking a landscaping review of councils’ NDR systems which they will report to COSLA and the Scottish Government once their work is finished at the end of this year. The sub-group agreed that Task Team 5.3 which will consider the promotion of existing reliefs will also consider users’ asks around any NDR digital improvements.

The Minister invited further comments on the workplan or the timescales noted. Jonathan Sharma noted that early 2024 may be too early for a review of Empty Property Relief as only a couple of councils will have made changes to their policies at this point and therefore there would be limited impact. David Melhuish and Les Robertson noted that some councils have published their plans on Empty Property Relief for 2024-25 and the associated analysis which may provide a landscape of policies. The Minister noted there was a balance to strike on the timing of this review, and that the workplan would be updated and recirculated.

Next steps

The Minister noted the next meeting of the NDBG is scheduled for 5 October where they will agree the NDBG Recommendations Delivery Plan and that the final version of the NDR sub-group delivery plan content was shared with the sub-group last week.

The group agreed that with the task teams being set up, the sub-group should continue to meet on a quarterly basis, with the next meeting to be arranged for early January 2024. This would be confirmed with the sub-group’s business lead.

Any other business

David Lonsdale asked if there would be other opportunities to discuss broader budget issues. The Minister advised he expects the normal rounds of budget engagement to take place and asked officials to update members on the details of this engagement.