Scotland’s independent think tank
Scotland’s independent think tank

Let councils take control over local business rates

This article by Alison Payne first appeared in The Times on 15 January 2020.

With memory of the general election fading, debate has again turned to the constitution and where power resides. Predictably, that has focused only on the relationship between Westminster and Holyrood. In the past 20 years we have seen power devolved from Westminster to Holyrood only to be stockpiled in Edinburgh. Legislation before the Scottish parliament could begin to shift that imbalance.

The Non-Domestic Rates Bill offers an opportunity to repatriate business rates, which were once a local tax, back to local control. Councils across Scotland face huge divergence, not just in terms of geography and demographics, but in economic growth. If we genuinely want to grow our national economy we have to first recognise that there is no such thing as a single Scottish economy, but rather a set of regional ones.

Circumstances in Edinburgh or Aberdeen are very different to those in Dundee or Dumfries. This is why we need councils to be able to directly address their differing priorities and circumstances. One size doesn’t fit all.

The Barclay Review into business rates argued that efficiency, convenience for larger-rate payers, and ensuring differing rates do not affect investment needed consistency of rates and administration. But that would mean keeping all tax rates and schemes centralised at Westminster and not taking regional differences into account.

Reform Scotland believes that business rates should be returned to councils in full, enabling them to vary how and to whom the tax applies, based on their own circumstances. This doesn’t mean a “race to the bottom” but allows councils to make genuinely local decisions.

More local financial autonomy is likely to give councils an incentive to design business taxation policies and economic strategies to support the growth of local businesses, encourage start-ups and attract investment, since this will benefit the council directly by increasing income from business taxes.

The Scottish government has claimed that its policies of devolving powers over a tourism tax and workplace parking levy will help local empowerment. However, if ministers truly believe in localism they need to take the opportunity presented with this legislation and back proposals to return business rates to local control.