As polling day approaches business is closely following the Holyrood election.
The verdict of the country’s spending watchdog on the reality or otherwise of the political parties’ tax and spending plans has certainly caught the eye. The IFS has taken the parties to task over the affordability of their manifestos, which are replete with huge spending commitments but apparently with little sense as to how they might be paid for.
This has implications for business, especially if it eventually leads to higher taxes on them or on their customers. With the economic legacy of Covid likely to cast a long shadow over the next five-year parliamentary term, tax rises could hamper recovery. That makes it even more vital to get the economy motoring quickly and lift the private sector’s growth rate. Even prior to the pandemic Scotland’s economic growth could be described as unspectacular at best.
So, what of the parties’ plans for business and to support consumer spending, the mainstay of our economy?
Many retailers have been forcibly closed for at least 220 days since the onset of the pandemic, and the industry has lost out on £4.1 billion of revenues. New SRC-LDC data out today shows the shop vacancy rate has spiked to a six-year high. Shops resumed trading this week, but there is a big difference between reopening and doing so profitably and on a sustainable basis.
Thankfully, the main parties are promising not to increase income tax – this should support consumers. Encouragingly, one party has floated a shopper stimulus scheme as a means of reigniting spending and transactions. Jersey and Malta have deployed this to pep up their economies, and Northern Ireland is introducing it too. The next administration should consider this to entice people back to our retail destinations. Other welcome initiatives can be seen in plans for house building, funding the transition to new jobs, pausing new non-Covid red tape, and cutting the cost of doing business.
There is a positive pledge to finally scrap the rates surcharge on medium-sized and larger commercial premises, and restore rates parity with England. This would benefit 3,000 retail premises. Welcome, too, is the suggestion from another party that rates relief continues to some degree into the next financial year – sensible if the bounce-back isn’t strong and sustainable for some sectors. It would avoid business rates reverting back to their previous 20-year-high watermark.
Encouragingly, much of this chimes with SRC’s own retail manifesto.
Then again, it wouldn’t be an election without a few potentially challenging and concerning proposals affecting retail.
Plans for a digital sales tax – presumably levied on top of VAT – could push up prices for shoppers. A proposed Scotland-only rates levy on retail warehouses would add extra complexity and cost into an already opaque rates system, and sits oddly with the revaluation coming into effect in early 2023. Fresh levies on the retailing of alcohol, a rekindling of interest in ending the uniform business rate, and a promised consultation on banning shops from trading on New Year’s Day are added worries.
A proposed windfall tax on business profits put forward by one party is frankly alarming, as is their desire to press ahead with workplace parking levies – despite firms already paying business rates on these exact same parking places. Hopefully both ideas get short shrift from the next administration.
Whoever forms the Holyrood government will grapple with massive challenges, especially repairing an economy battered by Covid. The need for realism from ministers and from MSPs will be crucial. Scotland’s retail industry – the country’s largest private sector employer – stands ready to engage constructively.
David Lonsdale is director of the Scottish Retail Consortium
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