Small firms granted one-year rates ‘holiday’
Street before heading to the House of Commons to deliver his first Budget yesterday
Small companies south of the Border in the leisure and retail sector will be granted business rates relief for the next year under new measures introduced by Chancellor Rishi Sunak.
The Budget revealed a rates “holiday” for businesses such as shops, cinemas, restaurants and music venues with a rateable value under £51,000.
Sunakreferredtothescheme as an “exceptional step”, which wouldtotalaround£1billionin rates relief, as part of attempts to mitigate the impact of the coronavirus outbreak on Britain’s businesses.
The UK government had previously announced that these businesses were due to receive a 50 per cent discount for the year, raised from an earlier discount of 33 per cent. In his Budget speech the Chancellor announced the scope of the rates break would be extended to include leisure, retail and hospitality businesses which were previously ineligible, such as museums, art galleries, theatres, gym, small hotels, night clubs and guest houses.
Although the measures do not apply to companies in Scotland, as business rates is an issue devolved to Holyrood, they will likely add pressure to the Scottish Government to match such concessions.
Sunak said: “That is a tax cut worth over £1bn, saving each business up to £25,000.
“And it means, over the next 12 months, nearly half of all business properties in England will not pay a penny of business rates.”
He also told ministers that it would increase the current discount to pubs with a rateable value below £100,000, from £1,000 to £5,000, while £2.1bn would be made available for grants of £3,000 for any business which qualifies for small business rates relief.
David Lonsdale, Scottish Retail Consortium director, said: “Inevitably this Budget was dominated by the shadow of coronavirus.
“Alongside the moral duty to help hard-pressed households, retailers will also hope these measures will help to maintain consumer confidence during the current crisis.
“However, many of the measures to support businesses will only affect English businesses. We hope to see a swift announcement from the Scottish Government on how they will allocate a portion of the very significant Barnett Consequential revenues to support businesses facing a very difficult few months.
“Scottish ministers have taken a number of steps to limit business rate rises in Scotland – today’s Budget provides an opportunity to go even further.”
The Chancellor also announced the introduction of a “plastics packaging tax” charging manufactures and importers £200 per tonne on packaging made of less than 30 per cent of recycled plastic from 2022.
James Nierinck, lawyer in the environment and safety practice at legal firm Ashurst, said: “The plastic packaging tax is a big step forward in the circular economy for plastic. As an innovative tax it should encourage the use of recycled plastics within plastic packaging.
“However, this is in effect ‘recycled’ news as it formed part of the 2018 Budget and as such is not a new announcement.”
If seeking context by which to gauge the speed of recent events, when delivering her first Budget to the Scottish Parliament just five weeks ago, Kate Forbes made no mention of Covid-19.
At that time, the potential scale of the disease and its domestic impact had yet to come into focus, its international reach was limited to a small number of cases, and it had yet to even be afforded a name.
Fast-forward little over one month, and the context in which Forbes’ Westminster counterpart Rishi Sunak delivered his own maiden Budget could hardly have been more different.
Two days after the largest crash in global markets since the financial crisis, just 30 minutes after Sunak sat down from the dispatch box, the UK recorded its largest single-day increase in coronavirus cases.
The speed at which our policy-makers must process and respond to unfolding events is dizzying. So too is the challenge for businesses.
In this context, pausing to consider the detail of Sunak’s announcement may be difficult for many. As ever, though, there is much in the fine print of yesterday’s Budget which will impact business and close consideration is advised. Sunak’s Budget might best be read as a two-part play, packaged together and billed by the Chancellor as the “biggest programme of public investment ever”.
Act 1 comprises a suite of hastily-drafted, but nonetheless extensive and ambitious measures to combat the coronavirus crisis – both directly in fighting the disease and its health impacts, and indirectly in supporting individuals and businesses to weather the severe economic headwinds its storm is bringing.
Act 2 is the “peacetime” Budget which Sunak and former boss Sajid Javid had largely drafted earlier in the year – a sizeable increase in public spending, centred around infrastructure investment, in a bid to bring to life election manifesto commitments to “level-up” across the country.
For businesses now working to assess the impact that Sunak’s Budget – across both of these categories – may have on their operations, the picture will be incomplete until the response of the Scottish Government is made clear. The Scottish Government will receive an additional £640 million (before adjustments) into the public coffers in Barnett consequentials. Across devolved competencies (for example, business rates) Edinburgh is not obliged to replicate Sunak’s commitments though, and may choose different paths on a caseby-case basis.
What is clear is that public spending in Scotland will receive a significant increase in light of the Chancellor’s Budget. Much of this will be channelled into the country’s response to Covid-19, which remains at this time in lockstep with the UK government and other devolved administrations.
However, the Scottish Government enjoys significant latitude in how to deploy the additional funds which Sunak’s twoact budget has landed at its door. While businesses should expect Edinburgh to continue to tack closely to the rest of the UK in its response to the coronavirus, it has the potential to diverge significantly in other areas.
Already tested by stepping up to deliver her first budget at short notice, Scottish businesses will now be looking to Kate Forbes as the finance secretary navigates a far greater challenge.
● Andrew Henderson is director of public policy at legal firm Pinsent Masons