As Scotland undertakes to reform its business rates system, the Barclay Review offers key insight into how that reform may take shape. David Lonsdale considers the Review and what it may mean for Scotland’s local retailers.
So, what exactly is the Barclay Review?
The Scottish Government established an independent review of Scotland’s £2.7bn business rates system two years ago. Former RBS boss Ken Barclay was appointed by the First Minister in Spring 2016 to examine rates and make recommendations that seek to enhance and reform the business rates system to better support business growth and long-term investment, and reflect changing marketplaces. Evidence was gathered from ratepayers and the SRC while others provided oral and written evidence, with Mr Barclay also meeting with the SRC Board.
Has it published its recommendations?
The Barclay Review was published on August 22. It contains a lot that will interest Scotland’s local retailing community including 30 specific recommendations.
What are your first impressions?
Barclay has identified a path towards a better rates system, with a number of recommendations which – if implemented by Scottish Ministers – will ensure rates better reflect economic and trading conditions. It would also begin to deliver on Ministerial promises of a more competitive rates regime. However, we remain concerned that the burden of business rates will remain high despite the changes. Also, some of the ideas proposed for widening the tax base could prove politically tricky for Ministers.
Which key content caught your eye?
Critically, the Review recommends far more frequent revaluations and reducing from two years to one the period between the valuation and implementation of the new valuation roll. This is what we have been calling for and is encouraging. Up until the start of this year independent retailers and others were paying bills based on valuations undertaken in 2008. If Barclay is implemented valuations will be more up to date and fairer. While it’s less relevant to a lot of Scotland’s smaller retailers, reform of the Large Business Rates Supplement as recommended in the Review would be very welcome for the wider retailing community, benefiting every premises with a rateable value over £51,000.
How about the more creative suggestions mooted to reform the system?
Barclay is right to have knocked on the head suggestions about allowing councils to control business rates in their entirety, and notions about replacing business rates in whole or part with local sales or turnover taxes. However the idea mooted in the report of allowing councils to levy rates supplements on ‘out of town’ or ‘online’ businesses as a means of helping town centres is simply wrong-headed, and could even open the door to other barmy new taxes. Conjuring up a new online-only or out-of-town-only levy isn’t the answer to the exorbitant cost of business rates faced by shopkeepers located on our high streets. Government policy itself is directly contributing to the rising cost of maintaining stores, and in turn is making online investment more attractive as the cost and capability of technology improves and as customers’ shopping habits evolve.
So, all in all, a cautious thumbs-up?
Yes, very cautious, especially as we remain concerned that rates will remain high and onerous. Barclay struck a somewhat sceptical tone on small firms’ rates relief, so that it worth watching. That said, Barclay has put forward several welcome improvements and we now look to Scottish Ministers for early action on implementation.
If implemented, would the Barclay Review’s many suggestions be the solution retailers seek?
Not entirely, no. We remain concerned about the overall rates burden, at a time when Scotland’s retailers are already having to grapple with a growing cumulative burden of government-imposed costs including the new apprenticeship levy, the national living wage and higher statutory employer pension contributions.