THOUSANDS of jobs could be at risk because of a business tax bombshell hidden in the small print of the Scottish Government's spending plans, it has been claimed.
Business and political leaders warned investment would be hit and companies put under pressure after an analysis of Finance Secretary John Swinney’s draft Budget and spending review, carried out by economics experts at Glasgow University, revealed the cumulative rise in business rates by 2015 would be £850 million.
They spoke out as public-sector unions warned of a winter of discontent and “significant industrial action”, and college leaders said compulsory redundancies were likely because of the savage cuts to their budget.
The rates hike identified by the university’s Centre for Public Policy for Regions (CPPR) would bring the total Government take from business rates to around £2.67 billion by 2015, from the current figure of around £2.18bn – a rise of 22.6%.
However, the CPPR has calculated the total cost to business over the three-year period would be £849m as it would cost £92m in the first year, then £264m and finally a further £493m by 2014-15.
The Government disputed the figure, claiming its plans had been interpreted inaccurately.
John McLaren, of the CPPR, said the increase in non-domestic rates would arise because of Mr Swinney’s plans for annual rises of 4.2%, 7.6% and 9.4% in cash terms.
He also warned there was “scant” evidence the “Plan MacB” for economic growth advanced by Mr Swinney and First Minister Alex Salmond would enhance prospects.
Tory finance spokesman Gavin Brown claimed the Government was “either planning to choke the recovery by treating business like a cash cow, or is extravagant in its use of projections”.
He added: “Either the SNP has hidden a business tax bombshell in the small print, or the Finance Secretary is using wildly optimistic assumptions to make his sums add up.”
Party leader Annabel Goldie added: “As the Scottish Government pointed out just a few months ago, help on business rates creates thousands of jobs – the reverse must also be true. Putting up business rates threatens thousands of jobs.”
Jo Stafford, of the CPPR, said medium-sized companies were the most likely to become “non-sustainable businesses” because of the rates rises as relief is available to small business while big companies can absorb the increases.
Labour spokesman Richard Baker also warned the burden would fall on medium-sized companies. He said the CPPR had shot down Government claims that “Plan MacB”, which supports a policy of short-term capital investment, had resulted in greater economic performance than the rest of the UK, because the study showed the overall capital spend in Scotland had actually fallen, or was planned to fall, by more than the UK level both last year and this year.
CBI Scotland’s assistant director, David Lonsdale, said ministers were being very optimistic if they expected a “hefty jump” in income from business rates, given the state of the economy and concerns about growth.
He added: “It suggests ministers plan to generate a lot of revenue from new taxes, on top of the levy on larger retailers and on firms with empty commercial or industrial properties that have both already been announced.
“The risk is that by taxing business too much they may deter investment and the creation of new jobs which are desperately needed to aid the recovery.”
Colin Borland, of the Federation of Small Businesses, said: “There is no business property revaluation due until 2015, so is the balance of this projected increase attributed to the expected rise in the poundage rate or is it predicated on an anticipated increase in economic activity?”
LibDem leader Willie Rennie said the CPPR report “comprehensively demolished” Government claims about boosting the economy.
He said: “Businesses across Scotland will be very concerned that the SNP seems determined to hike their business rates.”
The Scottish business rate is currently pegged to the English rate and Mr Swinney has said that will continue. He also hopes to make Scotland more attractive to business by gaining control of corporation tax.
A Government spokesman said the figure of almost £850m identified by the CPPR was “completely wrong because of double and treble counting, and should be £493m in terms of a cumulative figure”.
He added: “Aside from the normal inflationary rises, the income from non-domestic rates will be impacted by a range of factors in the next three years. This includes economic assumptions, such as buoyancy and appeals losses, and an additional £110m in income from the public health supplement and savings of £36m from reform of empty property relief.”
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