Non-Domestic Rates (Levying) (Scotland) (No 3) Regulations 2010

– in the Scottish Parliament on 2nd February 2011.

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Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

The next item of business is a debate on Parliamentary Bureau motion S3M-7841, in the name of Mike Rumbles, on the Non-Domestic Rates (Levying) (Scotland) (No 3) Regulations 2010.

Motion moved,

That the Parliament agrees that nothing further be done under the Non-Domestic Rates (Levying) (Scotland) (No.3) Regulations 2010 (SSI 2010/441).—[Mike Rumbles.]

Before I call members to speak, I point out that time is limited, so we had better stick to the speaking time limits. I call Jeremy Purvis, who has seven minutes.

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

This is the third time that we have brought to Parliament concerns about the rates that businesses in Scotland pay. In advance of today, we have consistently raised concerns about the lack of transitional relief for businesses that saw a massive increase in their rates bills as a result of the revaluation last year. Some hotels and by no means large businesses in my constituency and throughout Scotland saw increases in their bills of up to 200 per cent and received no transitional relief, but their English counterparts did. In some instances, that has led to businesses that have had difficulty over the past year not recruiting and not investing in their businesses. It has also led to nearly 80 per cent of all businesses that pay rates appealing their rates bills, which is unprecedented. That is the context in which we bring this debate.

On previous occasions, we were unable to secure Conservative party support for our campaign for fairness for those businesses, but I am hopeful that today the Conservatives and Labour will back our moves to strike down an arbitrary tax on one particular sector in the Scottish economy—a sector that is vital to the economy, as Jim Mather indicated today in his press release on behalf of the Government.

The tax on jobs was not consulted on, nor was it considered as part of a wider policy objective. It was arbitrary and it became apparent very fast that, although it was spun that it would impact only on out-of-town centres, it would hit Princes Street, Union Street and Sauchiehall Street—streets in cities across Scotland. The Scottish National Party changed tack quite quickly to take an anti-supermarket stance in particular.

When it comes to criticising others, it is hard to beat SNP member after SNP member laying into what they considered to be their newly established enemy—the large retailers in Scotland—in last week’s budget debate. The largest of those retailers is, of course, Tesco. We were told that Tesco is so huge, its turnover is so colossal and its profits are so large that it should pay more in Scotland. Joe FitzPatrick said:

“That needs to be considered in the context of the £3.4 billion pre-tax profits declared by the company last year; it does not seem unreasonable that Tesco should contribute a little bit more.”—[Official Report, 26 January 2011; c 32602.]

Why cut the business rates that Tesco Bank pays and increase the rates that Tesco stores pay? Why tax the Tesco in Galashiels more but cut the tax that Tesco Metro stores in Edinburgh pay? How does that help small retailers and how does it mean that Tesco will pay more?

If the shoulders of such companies are so broad, I am surprised by how much the SNP has given Tesco in regional selective assistance grants in the past three years. In October 2010, it was given £1.7 million for Tesco Bank.

Members: Jobs.

I hear SNP members shouting “Jobs, jobs.” I will come back to jobs in a moment. Perhaps those members are referring to the 8,000 jobs that the Scottish Retail Consortium has said could be under threat from the measure.

Alex Salmond opened the headquarters of Tesco Bank—I am talking about a company with profits of £3.4 billion—and it received a £5 million RSA grant. I could also mention Asda or Sainsbury’s, which Linda Fabiani mentioned last week. I am curious as to why the SNP’s policy is to cut the corporation tax that all those companies would pay. Why reduce that tax from 28 per cent to 20 per cent for companies with the broadest shoulders? The SNP has said that those companies have the broadest shoulders.

SNP members said that the large retail levy would rebalance employment between large and small businesses, but John Swinney said in the Local Government and Communities Committee meeting last week that it would not. He said that it would make no impact on investment choices, but SNP MSPs said that it would. Who is right? SNP members said that the levy would stem the growth of supermarkets, but John Swinney said that it would not; he said that there would be continued growth. Who is right? SNP members said that it would fund the council tax freeze and social workers. Alex Salmond said that it would fund 1,000 nurses, the small business bonus scheme and town centre measures, but John Swinney clearly said that it could not and would not. Is he right, or is the SNP website right? Both cannot be.

Let me say this about large-scale developments to all the SNP MSPs who have said that the large retailers should pay more:

“It could be argued that these will be significant developments which can contribute to economic growth and there may be a case for not imposing a financial burden on these developments, particularly at a time of economic downturn.”

Those are not my words; they were in the SNP Government’s consultation on planning fees, which John Swinney introduced in July 2010. When the SNP came to office, the maximum planning fee for the largest-scale commercial developments in Scotland, including large retail and out-of-town developments, was £14,500. In England, the maximum fee was £50,000. That increased to £250,000 in England in 2008 to reflect the costs borne by councils in dealing with planning approvals for the largest developments. The SNP Government made no changes, other than to increase by 10 per cent the fee maximum for the companies with the broadest shoulders.

That means that, in Scotland, the maximum fee for the largest-scale development—the type of development that the SNP Government is now saying puts town centres at risk—is now £15,950. In England, it is £250,000. Even now, the SNP Government believes that the fees should not be increased to be near the English levels. If those companies have the broadest of broad shoulders, why can they be charged up to £250,000 by English councils for very large planning applications, but the maximum that has been set by the SNP in Scotland is £15,950? I thought that those businesses had the broadest shoulders. Can they not spare the pennies, as Linda Fabiani might put it? Of course they cannot, because, as John Swinney might put it, that might affect the financial burden for those developments. That is simply a further inconsistency that is born of a lack of discussion and the arrogance of a Government that has not listened to concerns since it announced in November that it would introduce the measure.

That is not the last inconsistency, because we know from a recent e-mail from the First Minister that the SNP is considering reducing the poundage by 10 per cent compared to that in England and Wales. The very companies that the SNP wishes to tax would get a tax cut as a result. How would that £200 million black hole be filled?

The Parliament should make no further movement on the proposal because it would be an arbitrary tax on growth and would set back Scottish businesses. It should go no further in the Parliament.

I move,

That the Parliament agrees that nothing further be done under the Non-Domestic Rates (Levying) (Scotland) (No.3) Regulations 2010 (SSI 2010/441).

Photo of Gavin Brown Gavin Brown Conservative

The Scottish Government’s proposals are nothing more than an ill-judged raid on retail at a time when it least needs it. At the beginning of the process, back at the end of November, I was at a loss to understand why retail had been selected and picked out for special treatment by the Scottish Government. I therefore submitted this question to the Government in December:

“To ask the Scottish Executive for what reasons it has chosen the retail sector for its proposed increase in business rates.”

That was lodged as a written question on 23 December. I got a response on 31 January from Mr Swinney, which goes as follows:

“I shall reply to the member as soon as possible.”

That is the reason why retail was selected for this tax by the Scottish Government.

We know that poor Mr Mather, who has been dragooned into sitting down at the front of the chamber next to Mr Swinney, thinks that the idea is a dog with fleas and that he does not believe in it whatever. He was desperate to sit at the back.

The SNP’s arguments have been riddled with holes. First, the impression was given that the tax would apply only to out-of-town retail parks and the largest of supermarkets, but that turned out not to be correct. It is a tax on any retail premises above a certain threshold and would hit some of our town centres badly. As a member for the Lothians, I have a particular concern for Princes Street, where at least a dozen flagship stores would be hit by the tax.

On 23 December, I asked how many of the stores that would be hit would be out of town and how many would be in town, and I got the same response on 31 January:

“I shall reply to the member as soon as possible.”

The Government clearly did not know how many would be in town and how many would be out of town.

Photo of Margo MacDonald Margo MacDonald Independent

As another Lothians member, I am intrigued as to how much it is estimated the 12 stores in Princes Street will lose. Does the member have those figures to hand?

Photo of Gavin Brown Gavin Brown Conservative

From the most accurate figures that I have seen, which involved adding up the stores that we knew about—in which we were assisted by the Edinburgh Chamber of Commerce—it appeared that just those 12 stores in Princes Street would pay more than £1 million.

Photo of Gavin Brown Gavin Brown Conservative

That is the total for Princes Street. It might be slightly more or less, but that is the ballpark figure. That is additional taxation, on top of the rates that those stores already pay, to the tune of more than £1 million.

The tax would create a competitive disadvantage for Scottish retailers compared to the rest of the UK. The SNP narrative used to be that it wanted to make Scotland more competitive. It argued that, if only it had more powers, it would do everything that it could to make Scotland more competitive than the rest of the UK. Well, its credibility on that narrative is shot to pieces by the proposed measure. One supermarket said, candidly:

“We will continue with our immediate plans in the usual way, but will review all future projects to which we are not yet committed”.

I wonder how many other retailers take exactly the same view.

One of the bigger criticisms from the business community is that there was no dialogue whatever in advance of the measure. Even though business groups were meeting with the Scottish Government days before the announcement, there was no mention of the issue to any of them. If Mr Mather wants to contradict that, I am happy to take an intervention from him at any point to tell me when the issue was raised with the business community in advance of the announcement.

Photo of Jim Mather Jim Mather Scottish National Party

To what extent does the UK Government consult on rises in VAT and other changes that it makes?

Photo of Gavin Brown Gavin Brown Conservative

I took that intervention for a specific reason and the minister was unable to tell us what dialogue took place. There was nothing—not even a bit of brainstorming or a mind map. That sends out a confusing signal to the business community and investors. It shows that the Scottish Government is unpredictable and content to single out one sector for a clumsy raid.

To add pain, we did not even have a business and regulatory impact assessment. Despite there being a £30 million hit on the sector, there was no assessment at all. We have heard concerns that thousands of jobs would be lost under the measure. It could be more than has been predicted.

Photo of Gavin Brown Gavin Brown Conservative

We hear the loyal SNP back benchers, but the point is that, because the Government could not be bothered to do a business and regulatory impact assessment, we do not know the accurate figures.

The Government said that it was not proportionate to do a business and regulatory impact assessment and that a £30 million tax on one sector did not merit one. That is interesting, because it is worth looking at when it is proportionate to do a BRIA and what regulations merit one.

Sitting at the front of the Scottish Parliament information centre last week were the National Health Service (Pharmaceutical Services) (Scotland) Amendment Regulations 2011. Those regulations have minimal impact on business but were deemed worthy of a full BRIA. However, it was deemed not proportionate to have an impact assessment for something that would cost the business community £30 million.

If that is the case, what is the point in having any regulatory impact assessment? Mr Swinney set up the regulatory review group in the first place. It has done sterling work. Why on earth were the regulations not subject to a business and regulatory impact assessment?

The regulations deserve to fail because they fail the SNP’s own test: they will not ensure

“that Scotland is the most attractive place for doing business in Europe”.

They hit town centres, penalise investment and job creation and put Scotland at a competitive disadvantage. For all those reasons, they deserve to fail.

Photo of Andy Kerr Andy Kerr Labour

In last week’s debate on the budget, I said that rising unemployment was the signal failure of nearly four years of SNP Government. When John Swinney delivered his first budget, Scotland had the lowest rate of unemployment; now it has the highest.

It is worth reflecting on the fact that, in only the past few days, we have heard that the closure of coastguard stations on the Clyde and the Forth could lead to 250 job losses. Staff at James Watt College in Greenock have been told that up to 75 full-time teaching posts could go, as well as 24 support workers. The Scottish Refugee Council has announced that 44 of its 59 staff could lose their jobs. Nearly 70 jobs are under threat at Robert Wiseman Dairies. The list goes on.

Nearly 225,000 people in Scotland are unemployed. Families are struggling to cope on benefits and wondering how they will make ends meet. That is why the budget should have been about jobs, jobs and jobs. However, the proposed tax is anti-jobs—8,000 jobs.

The debate epitomises the conduct of the SNP Government. As ever, it starts with the traditional broken manifesto promise. The SNP manifesto said that the party would

“deliver a more competitive tax environment for Scottish business.”

SNP ministers even told us:

“the poundage in Scotland will not rise above the equivalent English rate”.

Like the first-time home buyers who are still waiting for their grants, the students who are waiting for their debt to be cancelled and the children who are waiting for their class sizes to fall, the business community now understands the lesson that the SNP cannot be trusted.

The broken promise is compounded by the shoddy treatment of our business community, to which other members have referred. Again, many of us should not be surprised by those actions. Whether in the shambles of revaluation and the lack of transitional relief, the cancellation of the Glasgow airport rail link or any other measure that the Government has taken, the SNP’s disregard for the economy and jobs is clear to see.

In proposing the levy, the Scottish Government is also guilty of misleading Scottish business. The tax has been and continues to be called an out-of-town tax—the First Minister was at it just last week. It is not an out-of-town tax, as members have said: it will tax businesses in many vulnerable high streets and town centres in our country, as the business community on Glasgow’s style mile and Edinburgh’s Princes Street has made clear. In my constituency, East Kilbride, which is heavily reliant on retail, jobs will be put at risk. The supermarket tax is an example of town centre regeneration in reverse.

Photo of Stuart McMillan Stuart McMillan Scottish National Party

The member mentioned Princes Street. Has he seen Princes Street in Port Glasgow, which has been decimated by the huge Tesco at the bottom of the street?

Photo of Andy Kerr Andy Kerr Labour

I am not sure about that part of the country, but I know that the new Sainsbury’s in Strathaven has enhanced the retail offer and the shops are surviving and doing well. Is the member suggesting that we use a tax measure to change completely the planning structure and our approach to business in Scotland? The argument does not stack up.

The Government’s proposal came completely out of the blue. The Government did not have the courage to discuss the measure with the business community or to carry out the impact assessment that was required if the Parliament and business were to understand the proposal. The Government should and will pay the price of its incompetence. It has dug a £30 million black hole in its budget and it is responsible for filling it. If we are to believe leaked memos from the First Minister’s office, the Government is digging further and creating a £200 million black hole in our budget.

The proposal shows complete ignorance of an important sector of Scottish business. One employee in nine works in the retail sector, which accounts for a quarter of the business rates that are paid in Scotland. The retail sector is a property-intensive and property-dependent business, which is creating jobs in Scotland, despite the Government’s best efforts.

The retail sector will drive our economy forward and create thousands of new jobs, but it will not do so under the conditions that are being set by the Government. The levy, as set, is too high and will affect retailers’ decisions on whether to open new stores or to expand floor space in or refurbish existing stores. That will create difficulties for job creation opportunities in Scotland.

The Government’s ignorance of business is plain to see. It talks about mass profits but fails to understand the industry’s profit margins and how they operate. Perhaps Mr Mather can tell us which business school would advocate the measures that the Government is proposing. Stores operate on high turnover and low margins. Individual stores are separate cost centres within the business, and investment decisions are taken at global, European and UK levels.

If the SNP thinks that sending such a signal will not inhibit investment in Scotland, it is plainly wrong. Our businesses in Scotland will suffer. Decisions on opening, expanding and refurbishing stores will be affected by the proposal. The average number of jobs that a large supermarket creates is more than 600. In East Kilbride, applications are outstanding and we stand to lose thousands of job opportunities as a result of the proposal.

SNP members should look in the mirror and ask themselves some questions. Does the measure address the primary purpose of the so-called Government? Will it build our economy? Will it create jobs in Scotland? The answer to all those questions is a resounding no.

Joe FitzPatrick (Dundee West) (SNP) rose—

Labour is not in a position to support this unacceptable policy, which was created by an SNP Government in crisis. As we have seen from leaked documents from the First Minister’s office, people were given 24 hours to come up with business ideas, because the SNP has an election to fight. The Government is running out of energy and ideas and it shows little or no understanding of the interests of Scottish business or Scottish workers.

I quote John Hannett, the general secretary of the Union of Shop, Distributive and Allied Workers. I agree with every word he said—[Interruption.]

Photo of Andy Kerr Andy Kerr Labour

John Hannett is the leader of the workers on whom the SNP’s tax will have the greatest impact. He said:

“The proposed levy is at such a high rate that it is likely to impact retailers’ decisions on whether to open new stores or expand existing ones, both of which could mean Scotland losing out on major job creation and regeneration opportunities.”

This is one fine mess, which has been created by the SNP Government, not by Labour or any of the other parties in the Parliament. Labour members will vote against the tax. We will vote in favour of our economy and in favour of jobs and opportunities for our young people. We need investment and we need it desperately. John Swinney’s message to retailers and business is, “We don’t want you here.” That is not our message.

Photo of Patrick Harvie Patrick Harvie Green

Greens can support two policy objectives that might be addressed in small part: revenue raising to offset the worst of the Tory cuts in Scotland, of which I have spoken before; and the need to rebalance the retail sector away from a situation in which four massive companies dominate the food chain. The proposed measure might be a baby step towards each of those objectives, but baby steps should be encouraged instead of knocked back. Could we do better than the proposal? Yes, probably. However, none of the three political parties that oppose the measure has offered a solution.

I have a concern about transparency and accountability. We have just heard speeches from members of the three political parties that oppose the measure, which will have a direct financial bearing on large retailers. Each of those three political parties has benefited from the largesse of those same large retailers. Since 2003, the Labour Party has received more than £10 million from Lord Sainsbury, £99,000 from Tesco, £28,000 from Asda and £10,000 from Selfridges. In the same period, the Liberal Democrats have received £35,000 from Tesco and the Conservatives have received £30,000 from Selfridges and £6,000 from Asda.

When a member has a financial interest that must be declared with the Parliament’s authorities, they are required to make an oral declaration when they speak on a matter that relates to that interest. Presiding Officer, will you begin a discussion with the Standards, Procedures and Public Appointments Committee on whether a similar oral declaration should be required of financial interests that must be declared with the Electoral Commission rather than simply our parliamentary authorities?

Photo of John Swinney John Swinney Scottish National Party

As I explained to Parliament when I set out the rationale for the draft budget for 2011-12, we have had to face tough decisions. The United Kingdom Government cut the Scottish budget for 2011-12 by an unprecedented £1.3 billion. It has also increased VAT to its highest ever level, which will cost Scotland an estimated additional £1 billion in 2011-12.

Mr Gavin Brown said that unpredictability underlies the Scottish Government’s decision. I will read him a quote:

“We have absolutely no plans to raise VAT.”

David Cameron said that before the election, but after the election VAT was set at its highest ever level, so the Conservative party should not give me lessons about unpredictability.

While we are at it, Nick Clegg said in April 2010:

“We will not have to raise VAT to deliver our promises.”

What a lot of absolute rubbish.

We have had to face acutely difficult issues in the budget. I have made choices to support family and household budgets as far as possible, despite the reduced resources that are available to me. For example, freezing the council tax for the fourth year in a row—which is unpopular with Labour members—was a key priority that will help families across Scotland.

Small and medium-sized enterprises are Scotland’s life-blood and will help to deliver sustainable economic growth. They account for more than 99 per cent of all enterprises in Scotland and for 53 per cent of all employment. That is why, when economic recovery remains fragile, I considered it a priority to continue to provide a lifeline to our small and medium-sized businesses by maintaining reliefs such as the small business bonus scheme and rural rates relief.

Photo of Duncan McNeil Duncan McNeil Labour

How much of the £30 million tax take will go to small businesses?

Photo of John Swinney John Swinney Scottish National Party

Mr McNeil fails to understand the nature of the budget process. [Interruption.]

Photo of John Swinney John Swinney Scottish National Party

If we want to provide a balanced budget to the Parliament, we must be able to afford all the priorities in it. The budget contains support for the small business bonus scheme and £30 million from the proposed tax, so the two issues are directly related in funding the Government’s priorities.

At a time when demand is being suppressed and access to finance remains reduced, we have reaffirmed a package of business rates relief that is worth £2.4 billion over five years. We must work within the spending limits that are available to us and produce a balanced budget. The option that I settled on was the business rates that are paid by some of our largest retail stores. Much has been made of the impact that that may have on employment in Scotland. What has not been said is this: although large retailers do create jobs, there is often a displacement effect on other parts of the economy.

Photo of Gavin Brown Gavin Brown Conservative

Why was a business and regulatory impact assessment not undertaken? Did the cabinet secretary intervene personally to block that?

Photo of John Swinney John Swinney Scottish National Party

I made it clear that there was no need for such an impact assessment because the proposal will affect 0.1 per cent of the business property base in Scotland, or some 225 properties out of 220,000.

There has been a great deal of scaremongering about this being a town centre tax. I accept that a small number of city centre properties will be included, but more than 90 per cent of the £30 million will come from the largest supermarket stores and out-of-town retail parks, with £23 million coming from the largest supermarket chains.

Photo of Margo MacDonald Margo MacDonald Independent

The cabinet secretary has just given a great deal of information on the impact of the proposal. Is that why he did not have an impact assessment? Would it have cost more than it cost to put together those figures?

Photo of John Swinney John Swinney Scottish National Party

The point in my response to Mr Brown was that the proposal will have an effect on 0.1 per cent of the business property base. My judgment was that it was disproportionate to carry out a business and regulatory impact assessment.

Photo of John Swinney John Swinney Scottish National Party

I have to make progress.

A lot has been made about the competitive position of Scotland, in particular by the Liberal Democrats and the Labour Party. I remind Parliament that from 2000-01 until 2007-08, Scotland paid a higher business rate poundage than was paid in England. It was higher in each of those years and only levelled when this Government came into office. Mr Kerr is shaking his head, but the numbers speak for themselves. People in Scotland paid a higher business rate poundage than did people in England. They were at a competitive disadvantage.

Photo of Andy Kerr Andy Kerr Labour

Would the cabinet secretary care to inform the chamber that the valuation systems north and south of the border were out of kilter? Valuations down south were different from those in Scotland.

Photo of John Swinney John Swinney Scottish National Party

Oh well, they were certainly different. The poundage rate was different as well. People paid more in Scotland for their business rates under the Administration of which Mr Kerr was a part.

Mr Purvis utilised quotes in his speech. I, too, will put a quote on the record:

“More support for local retailers struggling against the big supermarkets”.

Members may think that I said that or perhaps that one of my back benchers whom Mr Purvis addressed in his speech said it, but it was not us. The quote is, in fact, one of Mr Purvis’s priorities on his constituency website. Here we have him levelling the charge—[Interruption.]

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

When the cabinet secretary said in his consultation paper in July—[Interruption.]

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

What did he mean when he said:

“It could be argued that these will be significant developments which can contribute to economic growth and there may be a case for not imposing a financial burden on these developments, particularly at a time of economic downturn”?

Photo of John Swinney John Swinney Scottish National Party

There is a simpler question. What did Mr Purvis mean when he said:

“More support for local retailers struggling against the big supermarkets”?

He cannot answer that in Parliament today. [Applause.]

Photo of John Swinney John Swinney Scottish National Party

Let me say something while we are on the subject of attitudes towards supermarkets. I have been accused of being the person who wants to discourage supermarkets. I am nothing of the sort. Members of Mr Purvis’s party, however, were out with their placards in Stockbridge trying to keep Sainsbury’s out of Stockbridge. Not only was Kevin Lang—their unsuccessful parliamentary candidate for Edinburgh North and Leith—there, but Mr Scott was there, too. He was wheeled out to say, “No to Sainsbury’s in Stockbridge.” The pièce de résistance, however, was when Vince Cable was wheeled up from London to stand in the way of Sainsbury’s. The Liberal Democrats actually referred to him as the ever-popular Vince Cable. They do not do that any more.

This debate has been riddled with hypocrisy from start to finish. When I stand for election in a few weeks’ time, I look forward to telling the people of north Perthshire that the Conservative party turned its back on the small shopkeepers and backed the supermarkets.