Scotland's employers are facing a 25 per cent hike in the total business rates burden in just three years, according to official forecasts.

The scale of the increase emerged on the eve of today’s final Holyrood vote on the Scottish budget for 2020/21.

The Scottish Government’s budget watchdog, the Scottish Fiscal Commission, forecast business rates income would be £2.75 billion this year, but rise to £3.4bn in 2023/24.

The £674m difference is 25% higher than the overall rates bill for the coming year.

Government officials said the change was partly due to the business rates appeals cycle, with companies starting to pay more as their appeals are settled and rejected following the controversial 2017 revaluation. 

Ministers also insisted Scotland had the fairest business rate system in the UK.
Scottish Conservative shadow finance secretary Donald Cameron said: “Clearly the SNP Government thinks it can balance its own books on the backs of hard-working businesses. Firms big, medium and small are already paying through the nose when it comes to various taxes and rates.

“This document shows the nationalists want to shake them down for even more cash.

“It’s no wonder the business community feels neglected by the SNP Government.

“Since coming to power in 2007, the SNP has made it perfectly clear it is an anti-business government.

“This raid will only drive away growth and help Scotland’s closest competitors.”

David Lonsdale, director of the Scottish Retail Consortium, said the overall burden of business rates remains onerous. 

He said: “The business rate poundage is already at a 20-year-high, and these figures show the burden is set to increase further.”

He called for a “concerted plan to lower the poundage rate to a more sustainable level”.

Finance Secretary Kate Forbes was quizzed on the £674m figure at Holyrood’s Finance Committee by Tory MSP Murdo Fraser.

He said: “According to my calculation that is a 25% increase in non-domestic rates income over the next three years. 

“That seems to me an astonishing uplift in business taxation over a three-year period, well above the rate of inflation. How do you arrive at those figures?”
Ms Forbes said they were based on “the most accurate forecasts that we have, led by the evidence”.

Graham Owenson, head of local government finance at the Scottish Government, said: “These are Scottish Fiscal Commission estimates based on CPI inflation.You also need to take into account where we are in the appeals cycle, when appeals are being settled.

“In the earlier years, when we’re getting a lot of appeals settled, income will be low.

“In the later years, when the appeals have been settled, income will be higher. It’s to do with where you are in the appeals cycle.”

Mr Fraser said the rise is “bound to have an impact on the competitiveness of Scottish business”. 

But Ms Forbes said Scottish firms will be paying a lower headline poundage than the rest of the UK and 95% of properties will be paying less than they would elsewhere in the UK.

She said: “We still continue to have the most generous rates relief anywhere in the UK. So I think in terms of what businesses will see, they will see the positive impact of the most recent non-domestic rates bill in terms of the changes that have been made to the appeals system, and they will also be paying a lower headline poundage than they would anywhere else in the UK.

“So I think we can continue to say Scotland provides the most competitive rates regime to business anywhere in the UK.”

Business rates are collected and spent by Scotland’s 32 councils, but are based on the rental, or rateable, value of a property multiplied by an annual poundage rate set by central government. 

The Herald previously led a campaign highlighting the huge increases in rates bills following the last revaluation in 2017.

The latest row came as MSPs last night passed the Scottish Rate Resolution setting the rates and thresholds for income tax north of the border in 2020/21.

The vote entrenched a £1500 gap between the higher income tax paid by high earners in Scotland and their counterparts in England and Wales. 

The budget is expected to pass today after a deal between the SNP and Scottish Greens following the Government finding last-minute funding of £173m.

This includes £95m for councils and £15m for free bus travel for under-19s from January 2021, provided further research finds the concessionary travel scheme is workable.

Green co-leader Patrick Harvie said: “I’m proud that the Scottish Greens have secured the transformative move to free bus travel, which will provide opportunities for our young people, alleviate family poverty and tackle the climate emergency. Our free bus travel proposal has been welcomed by the Commissioner for Children and Young People, the Poverty Alliance, Transform Scotland and Friends of the Earth. 

“It will be very disappointing if Labour and the Conservatives retreat to tribalism today and vote against the plans, but that wouldn’t be enough to prevent our young people getting free bus travel next year.”

Ms Forbes told the committee the Government had no plans to revise its income tax rates in light of the UK budget on March 11.

However, the Chartered Institute of Taxation (CIOT) last night warned MSPs could not rule out making further changes before the start of the new tax year on April 6. 

It said there remained a possibility that unanticipated tax changes in next week’s UK Budget could prompt Scottish ministers to revisit their plans.

Alexander Garden, chair of the CIOT’s Scottish Technical Committee, said: “In any other year, today’s vote would mark the point that rates and bands of Scottish income tax are settled for the coming year. But because we are still waiting on the UK Budget, we cannot definitively rule out the possibility that changes to UK income tax policy – such as cutting tax rates or raising tax thresholds – could create a situation where ministers feel that they have to revisit Scotland’s income tax policy with just days to go before the start of the new tax year.”

The Scottish Government’s plans will see the lower income tax bands rise in line with inflation, while the top rates would be frozen. 

Analysis by the Scottish Fiscal Commission found the rates will bring in a total of £12 billion in revenue to the public purse next year.