Experts find 'no evidence' that £2.8bn SNP business scheme actually works

Despite the huge sums of public money involved, the experts said it had been “exceptionally difficult to reach any definitive conclusions” about its impact.

A lack of useful data and other problems made it “almost impossible for any systematic assessment” to be done into how it affected jobs, investment or business growth.

The official evalution report said that, although businesses felt there were benefits to the SBBS, the experts could “find no empirical evidence that identifies the SBBS as supporting enhanced business outcomes".

It added: "The limitations we faced mean this should be interpreted as being that there is no evidence of an effect rather than there being evidence of the SBBS having no effect."

It said the Government “may wish to reflect upon the aims and objectives of the scheme and how well-targeted to achieving these it has become over the years”. 

It said: “We faced numerous data-related challenges during this evaluation, which has limited our ability to draw robust conclusions”, a problem also facing the Government.

It urged a “step change” in Government policy design and data collection to allow SBBS to be compared to other business support schemes to identify the most effective. 

Launched by SNP ministers in 2008/09 to help cut business rate bills for small firms, SBBS initially cost £93million a year but by 2020 had risen to £279m in today’s prices.

The most significant relief available to private firms in Scotland, it is based on the idea that small businesses might need help paying their rates to launch, operate and grow.

It currently offers 100% relief from business rates on properties with a rateable value up to £15,000, and 25% relief on each property with a rateable value of £18,000 or less if a firm’s total properties are rated between £15,000 and £35,000.

In 2020/21, it cut the rates for 117,000 premises, with businesses saving up to £7,470.

Special business rate reliefs were introduced during the pandemic and end this April.

However the report found that firms eligible for the same relief varied “hugely” in size and therefore in their need for support because the scheme was based on the rateable value of their premises - a “poor measure by which to classify businesses as small”.

It said: “Our evaluation has found that businesses with large turnovers but operating from low rateable value properties are eligible for SBBS relief.

“It is not clear that this is the objective of the policy in supporting ‘small businesses’.”

The report was commissioned by the Scottish Government in response to a recommendation of the 2017 Barclay Review into non-domestic rates.

The work set out to understand who received the relief, its impact on receipts, wider costs and benefits, and to consider possible improvements.

Besides querying whether the scheme was actually doing what it set out to achieve, the authors made a series of recommendations.

These include the Government using better data and evaluation “on all aspects of its business support policy agenda from the outset”, rather than repeat the blanks of SBBS. 

The authors also recommended creating a digital registry of all businesses in Scotland and a database of business outcomes to help “evaluate the efficacy of the SBBS”.

It said if the Government were better informed, it could then “undertake regular and comprehensive assessments of the SBBS” and other business support policies. 

It could then develop "explicit policy objectives", which would in turn allow for targets "against which the policy’s efficacy can be assessed".

Tory MSP Liz Smith said the report had exposed "serious failings" in the delivery of the SBBS and "also the fact the business tax system is both unfair and outdated".

She said: “As a result, the small business bonus can be awarded to high profit companies who don’t need it whilst other businesses who do need it lose out. 

“Small businesses are the backbone of Scotland’s economy, and we must do all we can to support them to recover from the past two years of hardships.

"This report is yet another wake-up call for the SNP that businesses do not feel their needs are being properly addressed.”

Scottish Green MSP Ross Greer said: “Small businesses are at the heart of their communities and are increasingly squeezed by big corporations, particularly online retailers.

"This report shows the need to re-evaluate the support we give them and to target it far better. The current scheme costs hundreds of millions of pounds per year but it isn’t producing clear value for money.

“Many small businesses aren't getting nearly enough support to survive while other, often much larger, companies are receiving bonuses they simply do not need.

"Public money should go to those who require it and any new scheme should prioritise those who pay their staff a decent wage and who help meet Scotland's climate targets.”

The Federation of Small Businesses in Scotland urged Ministers to retain rates relief for small businesses while modernising Scotland’s business rates system.

Policy chair Andrew McRae said: “Trading conditions have changed dramatically since this review was commissioned in 2019. Scottish local and independent businesses - loaded with debt from the covid crisis - now face huge supply-chain disruption and spiralling energy bills.

“There’s no doubt that the small business bonus has been a lifeline for many firms. “Scrapping this relief would lead to the average small business in Scotland paying an additional £2,000 more in tax and some paying more than £7,000. 

“This would undermine struggling high streets and make it more difficult for firms to survive cash flow difficulties. That’s why Ministers should stick by their manifesto commitment and keep this relief, the cornerstone of their small business support policies.

“However, we would accept the need to adapt the small business bonus and the wider Scottish rates system. We’d love to see more independent and local firms benefit from the help, especially if we could do so by excluding people who aren’t the intended recipients for the property tax break. And we’ve long made the case for a more modern and user-friendly rates system.

“There’s cross-party support to support our small business community get back on its feet after the covid crisis. MSPs must back ongoing rates help for small firms.” 

Former Green MSP Andy Wightman tweeted: "Glad to see this report finally published.

"It confirms my long-held belief that the SBBS never had any robust economic case not least because savings would be capitalised into rent & thus landlords benefit in long run."

The Scottish Government has been asked for comment.