SCOTTISH business groups today issue a grave warning about the future of the high street amid mounting concern over plans to hand local councils control of £2.8 billion of property tax.

As retailers come under growing pressure from rising costs, stalling consumer confidence and the shift to online shopping, industry figures say the move to allow councils to set business rates will harm their ability to invest, create jobs and combat increasingly competitive market conditions.

The controversial step has arisen from an amendment to the Non-Domestic Rates (Scotland) Bill, introduced by Scottish Green Party MSP Andy Wightman and supported by the Scottish Conservative and Labour parties, at stage two of the legislation’s progress through the Scottish Parliament.

No fewer than 27 business organisations in Scotland have come together to oppose the move, and recently wrote to MSPs to outline their concerns. Scottish ministers responded yesterday with their own amendment, reinforcing their commitment to retaining the UBR and setting rates reliefs centrally.

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David Lonsdale, director of the Scottish Retail Consortium (SRC), said: “The Non-Domestic Rates Bill aims to fix some of the problems with the rates system and ensure it better flexes with economic conditions, which is why the SRC has got behind it. Instead, this Green Party inspired attempt to end the Uniform Business Rate would shatter the progress being made, drive up costs to firms, and exacerbate the challenges already being faced by property intensive sectors like retail.

“Retail pays a fifth of business rates, which are often the second or third largest outgoing for retailers. Retail conditions are at their most challenging in a decade and sales growth has been negligible. Moving from a nationally-set tax rate to 32 locally-determined tax rates would introduce fresh complexity and unpredictability into retailers’ budgeting.”

The UBR, which has been in effect for 25 years, is a figure set centrally which is multiplied by the rateable value of a commercial property to calculate how much it pays for local government services. It is currently set at 49p.

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The Wightman amendment, which was passed after the bill had been scrutinised by the Local Government and Communities Committee, would mean control of setting that rate would be devolved to local authorities.

It would also give councils the opportunity to decide whether to continuing providing relief from rates, including the Small Business Rates Bonus Scheme, raising the prospect of thousands of small firms being brought into the rating system or being faced with significantly higher bills. According to the Federation of Small Businesses (FSB) in Scotland, some smaller firms could face a business rates hike of more than £7,000 if the bonus scheme is abolished.

John Lee, head of public affairs at the Scottish Grocers’ Federation, which represents independent outlets, said the combination of scrapping UBR and reliefs for small firms amounts to a “double whammy” on its members.

He said: “There were two things in this one amendment which were hugely concerning for us and that is why it has caused such anxiety. That’s why we have been so keen to work with the Scottish Retail Consortium, the Federation of Small Businesses and everyone in trying to get this stopped.”

Mr Lee added: “Obviously, the bigger retailers are really concerned about UBR, and probably a bit less about the Small Business Bonus. For us, we were getting two hits for the price of one.

“We think there is a debate to be had about moving towards more locally-orientated business rates, but this is not the way to do it.”

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A poll carried out by the FSB found that three-quarters of Scottish firms believe giving councils additional powers over non-domestic rates would be bad for business.

Stuart Mackinnon, external affairs manager, said the prospect of councils controlling the Small Business Bonus Scheme would have “huge significance” for tens of thousands of firms in Scotland.

Mr Mackinnon hopes politicians “will recognise that, even if you were minded to pass new tax powers to councils, this is not the way you would do it.”

He said: “For any change of this magnitude you need significant modelling. You need to work hand in hand with rate payers and councils. This is not the way this particular measure has come about.

“There is a large and complicated debate about the future of local government finance.

“This coalition of [27] business groups [which has] come forward [is saying]: don’t make radical changes to property taxes in this particular manner.”

The Scottish Government now has to count on the support of at least one opposition party to ensure its amendment is passed when the Bill is debated in the Scottish Parliament at stage three on Tuesday (February 4).

The Non-Domestic Rates (Scotland) Bill was introduced in March last year following recommendations made by the Barclay review of the rating system in Scotland. The review, led by former Royal Bank of Scotland chairman Ken Barclay, was initiated after the most recent revaluation in 2017 led to significant bill increases for many businesses.

Parts of the bill have been welcomed by the business community in Scotland, most notably the change which would see non-domestic properties revalued more regularly. Revaluations would take place every three years instead of every five.