The new test to business credibility of Humza Yousaf

It was always going to be a tall order for the Scottish Government to come up with a viable plan for the nation’s finances, one that balanced investment in essential services with helping those in of need support in these difficult economic times, particularly given reports of an estimated £1.5 billion deficit in the coffers. Moreover, it is hard to imagine any government drawing up a Budget that could keep everyone in society happy. That is an impossible task.

But now the Budget has been dissected, it is clear that the plan drawn up by Ms Robison and co has left groups representing some major industries in Scotland somewhat disappointed.

Much of the initial reaction to the Budget focused on the decision to not provide 75% relief from business rates for the retail, hospitality, and leisure sectors, as has been granted by the UK Government to firms in those industries south of the Border. That had been the focal point of an intense lobbying effort mounted by industry bodies in the weeks leading up to the Scottish Budget, a campaign which ultimately fell short of its stated goal.

READ MORE: Darkness falls on hospitality after high-profile closures

Ms Robison did take some welcome action on business rates, though, maintaining the hugely important small business bonus scheme, freezing the basic property rate poundage, and introducing 100% relief from rates for hospitality businesses on the Scottish islands.

Those are certainly not measures to be sniffed at, but for the hard-pressed hospitality sector, which remains mired in a severe cost crisis, it was not quite enough. Now, following a spate of high-profile restaurant closures south of the Border, the lobbying focus of that industry has turned to calls for a reduction in value-added tax (VAT) ahead of the UK Government Budget in March.

While the hospitality industry is adept at garnering media attention for its situation, it is the retail sector that has been commanding headlines this week, as further details have emerged from analysis of the Scottish Budget.

As revealed in The Herald this week, the move by the Scottish Government to increase the intermediate and higher property rates, which are respectively used to calculate rates for premises valued between £51,001 and £100,000, and for those valued above £100,000, is set to cause a severe headache for the industry.

While the basic property rate has been frozen, the intermediate and higher property rates will increase in line with inflation from the start of the new financial year in April, and that will mean steep rises in business rates for thousands of shops in Scotland.

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In response to written questions from the Scottish Conservative and Unionist MSP for Mid Scotland and Fife Liz Smith, minister for community wealth and public finance Tom Arthur provided figures that showed around 4,500 shops would be subject to the intermediate and higher property rates from April. The figures showed 2,140 stores will be liable to pay the intermediate rate, which will increase to 54.5p from 51.1p in April, while 2,410 shops will pay the higher rate, which is going up to 55.9p from 52.4p.

The poundage rates are multiplied by the rateable value of a non-domestic or business property in order to calculate its annual rates bill.

The Scottish Retail Consortium, rightly, warned that the changes come at a time when trading conditions remain challenging on the high street and store owners are continuing to struggle under the weight of the high cost of doing business.

Consumer confidence is still weak as inflation remains well above the Bank of England’s 2% target (official figures published yesterday showed UK annual consumer prices index inflation had increased unexpectedly to 4% in December, from 3.9% in November) and there are problems on the horizon arising from attacks by Houthi rebels on commercial shipping in the Red Sea, which may push up the price of certain goods further still.

Against this difficult backdrop, the retailers affected by the changes at the Scottish Budget will see their business rates rise to a 25-year high. Moreover, some 2,500 stores will continue to pay a higher business rate than their counterparts south of the Border, where the higher property rate is set at 54.6p.

“This increases the cost of maintaining a store estate and serves to make things even trickier,” said SRC director David Lonsdale. “We need to see a faster pace towards restoring the level playing field with England on the higher property rate.”

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But the dissatisfaction of the retail industry does not end there. The SRC found in Budget documents published by the Scottish Government a proposal to reintroduce a public health supplement, or surtax, on large grocers, which sparked an even sharper response from the organisation.

Mr Lonsdale has previously said Mr Yousaf’s New Deal for Business had got off to an encouraging start. But he said the surtax proposal had taken the industry by surprise and as such had shown “flagrant disregard for the New Deal for Business introduced by the First Minister only last year”.

He told The Herald: “We were shocked to see in the Budget that active consideration is being given to an arbitrary surtax on grocers. Introducing such a tax would be a brazen disregard for the New Deal For Business, introduced just months ago by the First Minister, and utterly at odds with promises of less complexity and a more supportive and competitive approach to business rates. The sooner ministers shelve this surtax the better.”

There is no doubt that Mr Yousaf and his colleagues face a tough task in managing the country’s finances in these turbulent economic times. But when it comes to nurturing trust and goodwill with business, they have to do better than this.