Learning lessons from raising rates on empty property

LIZ CAMERON BUSINESS rates continue to be a major issue for many businesses, particularly at a time when we are preparing for the first revaluation in seven years and when the Scottish Government has commissioned a review of the entire system. Much of the focus is therefore on the future, but what lessons can be learned from the present?

In April this year, the Scottish Government dramatically increased the cost of business rates on empty and unoccupied premises. April’s changes came as a particular blow to the industrial sector, which had hitherto enjoyed full relief on business rates. A few months in and the potential impacts of this change are beginning to become apparent: businesses have been hit with large and unexpected bills and the construction sector is reluctant to build speculatively. These developments should be a matter of concern to the Scottish Government for three reasons.

Firstly, business investment is urgently needed to get the Scottish economy growing again. Scotland’s economy failed to grow in the first three months of this year and is falling far behind the UK’s overall rate of growth. If properties are subject to large and unplanned bills, it reduces the ability and confidence of businesses to invest.

Secondly, we are seeing evidence that Scotland’s construction sector is beginning to experience a degree of contraction after a number of years of growth. We have detected the first fall in housebuilding since 2013, and the last thing the industry needs is a government policy that will disincentivise commercial building.

Finally, the cuts in empty property relief will do nothing in the longer term to raise more business rates revenues for government. To increase revenues, the volume of rateable property must increase, which means that more new commercial and industrial properties need to be built.

Since cutting empty property relief is having the opposite effect, this policy is restricting the Scottish Government’s ability to raise more revenues from rates.

Scotland’s politicians must learn this lesson quickly in the new era of devolved taxes.

If you want to raise more money from taxes, then increasing the rate of tax is unlikely to achieve that goal.

Raising taxes will only make Scotland uncompetitive and drive down investment.

Only by growing the cake will the public purse reap the rewards, and that is why government must prioritise supporting businesses to grow our economy. Liz Cameron is chief executive of Scottish Chambers of Commerce.