FUNDING for vital town-centre regeneration work across Scotland risks being choked off if local councils are given the opportunity to set business rates, it has been warned.

As highlighted in a special series in The Herald this week, lobby groups representing a broad range of sectors are deeply concerned that a controversial measure to scrap the Uniform Business Rate (UBR) and relief for small businesses will result in higher property taxes for under-pressure retailers.

The measures were added into the Non-Domestic Rates (Scotland) Bill as the legislation was scrutinised at stage two in Holyrood before Christmas, following an amendment tabled by Scottish Green MSP Andy Wightman.

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They will come into law unless a counter-amendment, lodged earlier this week by the Scottish Government, is supported when the Bill goes before the Scottish Parliament for the final time on Tuesday.

And business groups warn the prospect of councils using the new powers to levy higher business rates will jeopardise funding for Business Improvement Districts (BIDs), which are leading efforts to revive town centres blighted in recent years by the downturn of the retail sector.

There are currently 39 BIDs in operation across Scotland, with a further 30 at varying stages of development, according to Scotland’s Towns Partnership.

Levies are set by local steering groups, which use either a straight percentage of non-domestic rates (1%-1.5% on average) or a banding system to arrive at the fee. The average annual levy is about £200.

David Lonsdale, director of the Scottish Retail Consortium, said:

“I have certainly had members say to me they would probably take a more robust line when it comes to voting on future Business Improvement Districts [if rate-setting is devolved].

“If you are paying a lot more in business rates and you are represented in many council areas with your premises… the BID levy can actually be quite a sum when you tot it up.”

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Colin Borland, head of devolved nations at the Federation of Small Businesses, echoed that view, stating that funding for BIDs could be “vulnerable”.

He said: “Already there are certain BIDs where they are battling against the perception they are providing something the council should provide anyway.

“If there was yet another local supplement, and if they (business rates) went up, then that money has got to come from somewhere. Bluntly, if your rates bill goes up, would you be as wiling to make a contribution to a Business Improvement District?

“Some people who are doing very well will be thinking it won’t affect them. But there will be a lot of people who are really at the margins of profitability and sustainability who would think very hard, who would look at where else they can cut their outgoings.”

Responding to a written question this week from SNP MSP Kenneth Gibson, who asked what the impact on BIDs would be from abolishing the UBR, Minister for Public Finance and Digital Economy Kate Forbes said: “Section 8C of the Non-Domestic Rates (Scotland) Bill, which devolves the power to set rates to local authorities, is technically flawed and would introduce complexity, risks and potential unpredictability into the rates system.

“Business Improvement Districts are funded by a levy on businesses in addition to their non-domestic rates bill and they can only exist if they get support from a clear majority of local businesses in a ballot.

“A number of high-profile retailer representatives have highlighted circumstances in which the devolution of rates to local authorities may undermine support at future ballots.”

But Phil Prentice of Scotland’s Towns Partnership, who this week called for a review of the business rates relief system, does not believe there is a threat to BIDs funding. Mr Prentice, whose organisation supports the development of the

BIDs network, said he does “not see a risk” from the move to scrap the UBR. He said BIDs levies would continue to be affordable.

A special series running in The Herald this week has highlighted the concerns in the business community from the Wightman amendment.

Business groups warned on Wednesday that the prospect of local councils increasing rates has come as retailers face their most challenging conditions in a decade. With high streets already reeling from the shift to online retailing, rising costs and fragile consumer confidence, they said higher rates could undermine their ability to invest and create jobs.

Yesterday Mr Prentice said ministers had missed a golden opportunity to transform Scottish high streets because of the limited nature of moves to reform the business rates system.

Dismissing the rate-setting controversy as a “sideshow”, he called for an examination of the current system of rates relief, stating that all businesses must make a contribution to the cost of providing local services.

However, the idea of scrapping relief was dismissed by Mr Borland of the FSB.