Business: New Deal for Business Non-Domestic Rates subgroup minutes - January 2024

Attendees and apologies

• Tom Arthur, Minister for Community Wealth and Public Finance (chair)
• Liz Cameron, Scottish Chambers of Commerce (in person)
• Stephen Montgomery, Scottish Hospitality Group (in person)
• Stacey Dingwall, Federation of Small Businesses (in person)
• Colin Borland, Federation of Small Businesses (in person)
• Graham Howarth, Gerald Eve (virtual)
• Pete Cheema, Scottish Grocers’ Federation (virtual)
• Peter Wildman, Scottish Assessors Association (virtual)
• Robert Nicol, Scottish Assessors Association (virtual)
• Heather Honeyman, Scottish Assessors Association (virtual)
• Marc Crothall, Scottish Tourism Association (virtual)
• Leon Thompson, UK Hospitality (virtual)
• David Lonsdale, Scottish Retail Consortium (virtual)
• David Melhuish, Scottish Property Federation (virtual)
• Gavin Stevenson, Night Time Industries Association (virtual)
• Mike Grieve, Night Time Industries Association (virtual)
• Paul Togneri, Scottish Beer and Pub Association (virtual)
• Alan Puckrin, Local Authority Directors of Finance (virtual)
• Les Robertson, Institute of Revenues, Rating and Valuation  (virtual) 
• Jonathan Sharma, Convention of Scottish Local Authorities (virtual)
• Scottish Government Officials

Apologies

• Fiona Campbell, Association of Scotland’s Self-Caterers
• Ellen Leaver, Scottish Government

Items and actions

Welcome and update

The Minister welcomed members to the meeting, both in person and online, and noted the apologies received.

The minutes of the previous meeting on 24 November 2023 were agreed.

Budget 2024-25

The Minister noted Budget 2024-25 was the most challenging Budget since devolution, and that Deputy First Minister (DFM) had set out the rationale for the decisions namely providing funding to frontline public services. He acknowledged sub-group members’ disappointment at the absence of the Retail, Hospitality and Leisure (RHL) relief available in England and reiterated that this would have meant Scottish Government could not provide the funding frontline services require. He set out the Budget announcements on non-domestic rates (NDR) including a package of reliefs worth a forecast £685m in 2024-25. He noted the budget commitment to explore the reintroduction of the Public Health Supplement (PHS) and explained that the DFM, the Cabinet Secretary for Wellbeing Economy, Fair Work and Energy and himself had met with the Scottish Retail Consortium to discuss this commitment, and that further engagement with the sector was planned. He also welcomed the hospitality sector’s engagement with the DFM, the Cabinet Secretary for Wellbeing Economy, Fair Work and Energy and himself at a meeting on 25 January, and noted that this engagement would continue. 

Liz Cameron stated that while understanding the challenges facing this government, the Scottish Chambers of Commerce (SCC) were ‘exceptionally disappointed’ by the Budget and the impact of the Budget decisions would be felt by business for a long time. She asked whether any economic impact assessments were completed for the measures announced, and whether it was necessary for these to be carried out, noting she believed it was. 

David Lonsdale also expressed ‘exceptional’ disappointment with the Budget, including the increases to the Intermediate and Higher Property Rates, the lack of RHL relief, and the announcement on the PHS which was a ‘step backwards’. He stated there is a perception that Ministers view NDR as a revenue generator rather than an economic development tool to support business. This was disappointing as in recent years there had been positive measures e.g. three yearly revaluations. 

David Melhuish noted his support for the comments made by others. He pointed to 22,000 Intermediate Property Rate ratepayers who will see a CPI increase, and noted that a small share of properties were shouldering an increasing share of the rates burden. He welcomed the Basic Property Rate freeze. Noting that the Budget Statement alluded to the valuation methodology of the hospitality sector, he queried what this meant for the Task Team looking at valuation information flows.

Stephen Montgomery thanked the Minister for attending the recent hospitality meeting with the DFM and the Cabinet Secretary for Wellbeing Economy, Fair Work and Energy, and welcomed that engagement. He expressed his disappointment at RHL relief in England not being passed on, and pointed to the higher rate of pub closures in Scotland than England. He stated that additional costs will have to be passed on to customers and suggested that complete reform of NDR was now needed.

The Minister stated he was grateful for the recent engagement. He explained that he had also met with Scottish Assessors recently and noted the independence of Assessors. He stated he hoped this group facilitated dialogue and a shared understanding,  acknowledged the disappointment expressed on PHS, and noted the engagement in exploratory discussions. The Minister also explained that the economic and fiscal consequences of Budget are forecast and published by the Scottish Fiscal Commission .  

Marc Crothall stated that Budget had not landed well with Scottish Tourism Alliance members, and that the measures would cause a lot of difficulty. He pointed to the findings of the Scottish Licensed Trade Association’s (SLTA) survey, published on 30 January, which included that 75% of outlets anticipate they will need government support. He noted that the hospitality sector had welcomed the islands relief, but that with ferry disruptions in the past year, this was seen as a token gesture. He added his fear that a lot of businesses will be lost and agreed that things may be moving backwards.

Gavin Stevenson noted his members’ bewilderment at the lack of support in Scotland. He stated that the sector has never had a more difficult time, with closures at twice the rate in Scotland as in England, and called for short-term mitigation due to the fragility of businesses.

Pete Cheema stated he also echoed others’ views. He explained that the sector had had four years of being disadvantaged compared to English counterparts, pointing to the reduction in the Small Business Bonus Scheme (SBBS), and the highest rate of tax in the UK. He queried whether Ministers were listening to business, and called for action to support the sector. 

Stacey Dingwall noted the freeze to the Basic Property Rate and maintaining SBBS had been received well by the Federation of Small Businesses’ (FSB) members. However, noting that Wales was offering 40% RHL relief in 2024-24, she stated that FSB members do not understand Scottish Ministers’ choices.

Stephen Montgomery asked how many businesses had been caught by the reduction in the SBBS rateable value threshold from £15,000 to £12,000. Anouk Berthier noted that official statistics would be published in February, having been delayed due to data collection challenges caused by IT software updates after Budget 2023-24. 

Liz Cameron stressed the importance of seeing statistics, and the need for demonstrable progress. She stated that in the absence of any movement, SCC would have to think carefully about how they can influence government. She acknowledged the Minister’s efforts but stated that all those involved in making decisions need to be listening. 

Colin Borland stated it was difficult to have discussions if the debate was about decimating public services or supporting business, adding there are other things that can be looked at. 

The Minister stated that he understood members’ view. He referred to the consequentials received following the Autumn Statement, but acknowledged that putting core services against business support was perceived by businesses as unhelpful to the discussion. He also pointed to the fact the UK Government’s RHL relief for 2024-25 could not be counted on as being a permanent relief. He hoped members could build on the positive progress that had been made last year. The existence of reliefs showed that there was an issue with the 170-year old system and he called for the sub-group to work towards consensus on what meaningful and effective change would look like.

Tax Advisory Group (TAG): update

Scottish Government officials provided an update on the TAG meeting of 11 January (Liz Cameron having explained she was unable to attend due to a change of date). Anouk Berthier noted that terms of reference and the strategic approach to tax were discussed at the meeting. It had been suggested that TAG could help prioritise areas of work within the tax strategy to focus on in the short-term whilst identifying areas for the longer-term, and that the strategy may wish to focus on existing taxes which are significant revenue raisers: income tax, council tax and NDR.

David Lonsdale queried what input TAG had into the Budget, whether the sub-group would have an opportunity to feed into the Scottish Government Tax Strategy, and the process around that. The Minister noted that the Scottish Government is committed to producing an updated Tax Strategy alongside the Medium Term Financial Strategy in 2024, and that TAG would have the opportunity to input to that. Liz Cameron stated that TAG had no input regarding the Budget, but that DFM and FM had been clear that TAG would be strategic and long-term. She had highlighted at the last TAG she attended that short-term action was needed, and suggested it would be helpful for the NDR sub-group to understand what TAG was setting out to do. She called for international comparisons and for Scotland to develop a tax system that is competitive. The Minister stated he would discuss with officials what options there are around ensuring that TAG and the NDR sub-group are joined up. 

Stephen Montgomery stated that 23,000 pubs had shut in the last three years in the UK, and these closures impact on taxes paid to fund public services. Liz Cameron pointed to the recent change in the income tax bands and that it would be helpful to see the impact of the changes, adding that business and sectoral organisations have information they can share to assist Ministers in assessing impact. The Minister that that actual outturn would only be known in the longer term. Liz Cameron stated rates are an important part of making Scotland competitive, and that businesses perception of Scotland was not good, and that this was impacting on investment.  

Scottish Assessors Association update

The Minister invited an update from Scottish Assessors, noting their independence. Pete Wildman stated the Scottish Assessors Association (SAA) had met with the Scottish Football Association in December 2023, and a further meeting to discuss football grounds was scheduled for March. He noted the SAA Commercial Properties Committee lead had met with the hospitality sector on 18 December 2023, and that this was a long-term exercise offering the hospitality sector the opportunity to discuss their issues with Assessors. 

Pete Wildman also reported engagement with the Association of Scottish Self-Caterers around the information provision for self-catering properties, and that SAA was in the process of developing an online form to enable that information to be provided more easily. In the context of proposals and appeals, he referred to ongoing dialogue, and that there would be a further meeting with agents to discuss Proposal Disposal Dates. With reference to the 2026 revaluation, he noted that Assessors were reviewing information forms, and working on a timetable for issuing information notices to the hospitality sector whilst also thinking about how best to communicate that these returns had to be provided in order to avoid a civil penalty. Liz Cameron welcomed this progress and queried how success would be measured. 

Leon Thomson stated the meetings with the SAA were incredibly helpful, and that information notices are now landing with some of their members. He added that members were however querying how this would change the outcome in 2026 as many had seen values increase at the 2023 revaluation, and stated that turnover is currently very high because of price inflation, but profits are low.

Leon Thomson also asked whether any civil penalties had been imposed. Pete Wildman responded he was not aware of any, but also noted that the return rate to information requests seemed low and that Assessors may have to use their civil penalty powers next year. He explained that rateable value is based on Assessors’ assessment of rental value in the sector, and that turnover is simply a way to get to rental values. He pointed to rateable values falling in the retail sector at the 2023 revaluation as a result of rents decreasing, and noted the importance of hospitality businesses fully understanding the relationship between rents and rates when rents are agreed. Leon Thomson noted that some of his members were seeing rents rise, and stated they would continue to engage with Assessors. 

Updates from task teams

The Minister invited summaries from the Task Team meetings.  Scottish Government officials provided an update for three of the Task Teams:

• Task Team 1 on valuation information flows had welcomed the increased transparency, noted the importance of engagement and communication, and had some specific discussion around football stadiums. Actions included considering what additional information could be provided on valuation forms. 
• Task Team 2 on reliefs and property investment had also raised the issue of awareness and communication, with a suggestion that a short document on NDR reliefs would be helpful as well as greater clarity on what was and wasn’t eligible for the Business Growth Accelerator (BGA) relief. It had also been noted that small businesses may have less capacity to invest, and may not be aware of all reliefs available.
• Task Team 4 on the impact of reliefs also discussed communication, which was considered to be problematic, especially when there were changes at Budget, and there was a call for consistency of messaging across local authorities. Actions from the meeting included looking at the how the impact of business support measures is assessed across other areas of government, and a further meeting after the relief statistics are published. 

Stephen Montgomery provided an update on Task Team 3 on the promotion of reliefs. There had been agreement that communication needed to improve, noting that councils have different approaches across their websites, and that there was a need for consistent messaging. Suggestions had included QR codes to provide links to information on reliefs, greater clarity around BGA relief, sectoral relief links, and automatic application of relief. Noting that the Small Business Transitional Relief had 6 different names across Scotland, there had been calls for standardisation, and a suggested to better join-up different websites with NDR information. 

Regarding Task Team 5 on the devolution of Empty Property Relief (EPR), Les Robertson explained he was collating a lists of council EPR policies for 2024-25. He currently had 14 responses but as some council decisions were still being made he was awaiting the others. 

Next steps

Liz Cameron queried whether the agreed timelines were still appropriate, and if they were not, they should be updated as business would lose interest if things weren’t moving fast enough. She also asked whether the group was adding value and suggested that members should stop and take stock to consider, amongst other things, the frequency of meetings, whether the Task Teams were delivering what was wanted, and how success would be measured. 

The Minister noted David Lonsdale’s suggestion that the NDR sub-group meet in advance of the Tax Strategy being published alongside Medium-Term Financial Stragegy, in order to provide an opportunity to feed in. This was agreed. 

Any other business

The Minister invited any other business and queried whether members were content with hybrid meetings. There was no disagreement, and the Minister suggested the group meet again in late March.