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Cash dispute causes Government business rates reward scheme to fail

A scheme designed to give Scottish councils an incentive to promote business growth appears to have run into the sand, after it emerged that the Scottish Government has failed to provide the figures necessary to operate the scheme for two years in a row.

The Business Rates Incentivisation Scheme (BRIS) was unveiled in January 2012 and hailed by business leaders, including CBI Scotland, as positive step towards encouraging business-friendly environments in Scotland's local authority areas.

The scheme allowed councils to keep 50% of business rates cash brought in over official targets specified by Scottish Government ministers. But so far, it appears that the scheme has delivered no cash benefits to councils, despite discussions on the subject between the Scottish Government and local authority umbrella group, Cosla.

In the first year, the promised funds were not paid back to councils on the grounds that a condition relating to appeals over rates revaluation meant that local authorities were suffering less pressure on their cash reserves than had been anticipated.

The move was criticised at the time by opposition councillors, who said that by "moving the goalposts" the Scottish Government had deprived councils of millions of pounds of anticipated benefits.

In the second year, the Scottish Government failed to set targets, even retrospectively, despite an earlier hint by Finance Secretary John Swinney that they would be published in February. This meant that no calculations were made, and therefore no rebates were possible.

For the third, and current, year, no targets have been set, meaning that councils have no "incentive", as the scheme's title suggests, to attract new businesses.

Gavin Brown MSP, finance spokesman for the Scottish Conservatives, said: "Here is yet another Scottish Government policy that has turned into a failure. It was launched several years ago but has not delivered on the ground for business, councils or anyone else. In the first year Scottish ministers moved the goalposts and in the second year they did not even bother to set targets. They need to get a grip on this as soon as possible."

A Scottish Government spokeswoman told the Sunday Herald: "The Finance Secretary has made clear that future targets will only be considered once discussions on 2012-13 targets have concluded. Discussions with Cosla on this are ongoing."

She did not respond to detailed questions about the cause of the missing targets, or the long-term future of the scheme.

According to a background document from Cosla, BRIS was to start from 2012-13 with the intention of giving councils a financial incentive to grow their business rates income. The Scottish Government set a national target for business rates, and local authorities which exceeded their share of the national target could retain 50% of the additional income generated. Councils which did not reach their target would be compensated by the Scottish Government.

Built into the scheme was the recognition that a "significant event" such as a major business closure could skew the national targets. Under such circumstances, there would be the option to review the levels of reward.

In early 2013, the Scottish Government declared that a "significant event" had occurred, and that the national target should therefore be revised upwards, depriving councils of expected rewards for achieving the previously proposed target.

The so-called "event" was in fact an over-estimate by the Scottish Government of the amount of business rates appeals which were likely to succeed in payouts after the highly controversial 2010 rates revaluation.

Cosla refused to accept this as cause for a change in the target without seeing fully audited figures, which were then requested from the Scottish Government. It is unclear whether or not Cosla was provided with these.

Speaking to the Sunday Herald in January 2012, David Lonsdale, then assistant director of CBI Scotland, praised the Scottish Government's "tentative first steps towards incentivisation" but said the CBI wanted the inducement to be "ring-fenced for economic development, not to be added to the council's overall budget".

A spokesman for Cosla said: "Cosla has written to Mr Swinney with the concerns raised by councils in relation to the BRIS scheme and a dialogue is currently on going around resolving these concerns."

Contextual targeting label: 
Local government

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