COSLA, the umbrella body for Scottish local authorities, has revealed that it does not endorse a move to devolve control of £2.8 billion of property tax to local councils within the next 12 months.
In a briefing note circulated to MSPs on Friday, the organisation said it supports the principle of giving councils powers to set non-domestic property rates but it does not believe the measure should be pushed through within one year.
The move to hand setting of business rates to councils is part of the Non-Domestic Rates (Scotland) Bill, which MSPs will vote on at stage three in the Scottish Parliament tomorrow. It follows a successful amendment tabled by the Scottish Green MSP Andy Wightman before Christmas that won the support of the Scottish Labour and Conservative parties.
Under the amendment, the Uniform Business Rate used to centrally calculate non-domestic property tax would be scrapped in favour of councils setting rates locally. It also raises the prospect of abolishing rates relief, which is currently available to thousands of small businesses.
Business groups say the move will burden firms with higher rates bills, with retailers stating that the added cost would undermine their ability to invest, create jobs and help them combat the most difficult trading conditions in a decade.
A briefing note sent to MSPs, issued after a meeting of all 32 council leaders, states: “The principle of amendment 9 to the Non-Domestic Rates (Scotland) Bill creates a welcome opportunity to progress towards greater fiscal empowerment. COSLA must emphasise that before any move is taken to devolve Non-Domestic Rates, preparatory work must be undertaken to understand the full implications of such a move and importantly how it fits with the wider funding system for Local Government. COSLA would welcome support of all parties and Government for this work to be undertaken at pace.
“We recognise that there is not time to do a full analysis of implications (opportunities and risks) before Stage 3 and COSLA would therefore urge the Scottish Government and Parliament to identify how this can be addressed, recognising the legislative process.
“Careful consideration is required to ensure the essential services Scotland’s communities depend on will be protected through the overall resources for Local Government. It is therefore vital that this work is allowed to be undertaken.”
The note adds: “Leaders have agreed that, on the basis that Scottish Government provides a written commitment to COSLA that joint work on devolution of Non-Domestic Rates takes place at pace and during this Parliamentary term, then COSLA does not support Amendment 23, whilst also repealing section 8C.
“Leaders very much welcome, however, that Amendment 23 has highlighted the issue of Local Government powers over Non-Domestic Rates and welcome its intent for further fiscal empowerment to Local Government.”
David Lonsdale, director of the Scottish Retail Consortium, said the COSLA intervention was "significant" ahead of tomorrow's vote on the business rates bill in the Scottish Parliament.
He said: “Whilst we and COSLA have completely differing views over retention of the Uniform Business Rate, we clearly share a profound unease that a tax change of this magnitude is being progressed in this way.
"The discussion and vote to end UBR at committee stage had negligible consideration for the implications or for those affected, in stark contrast to the rigour and approach pursued through the Barclay Rates Review and subsequent Non-Domestic Rates Bill itself.
"It is startling and frankly utterly bewildering that we are on the cusp of MSPs voting for such a significant tax change without a proper consultation, economic analysis, or a Business and Regulatory Impact Assessment. It’s a huge deficiency and raises serious doubts about the wisdom of making taxation changes of this magnitude in this way.”
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