Non-domestic rates reform: analysis of responses to consultation on Barclay implementation

Analysis of responses to our consultation on accepted recommendations requiring legislation that came out of the Barclay Review of non-domestic rates. The consultation ran from 25 June until 17 September 2018.

6. Barclay Review Recommendation 5b – Pilot scheme to increase rates out-of-town

6.1 Questions Three and Four relate to Recommendation 5b "A new power to enable Councils to impose an additional levy on rates in certain circumstances.". The Barclay Review suggested the proceeds of this supplement could be used to support town centres. It called for this policy to be tested in a pilot scheme that Councils would have to make bids to participate in, and that no more than three towns would be selected. The Barclay Implementations Advisory Group (BIAG) called for a formal evaluation of the pilot scheme to help determine whether this scheme would be successful prior to implementation across Scotland. The BIAG voiced concerns over the scheme and suggested a number of safeguards:

a) A cap on the level of supplement set in legislation determined by Scottish Ministers.

b) A requirement for Ministerial and/ or Parliamentary approval for each scheme.

c) A requirement for the local Council to consult on the scheme, including with local ratepayers and to publish analysis of this consultation prior to any approach being made to the Scottish Government to take part in a pilot scheme.

d) A requirement for local ratepayers to have a say on how proceeds from the supplement are spent.

Question 3 – From 2020 a small number of pilot councils will have a new power to increase rates paid by out of town or predominantly online businesses. a) Do you agree or disagree with putting in place safeguards? b) Please explain your response to (a) including what the safeguards should be if you agree they are required.

6.2 There were 93 responses to this question with the largest respondent category being Representative Bodies. No respondents from the Other Sector category answered this question. The breakdown by each of the seven classifications of respondent is detailed in the table below.

Table 3: Respondents Categorised

Respondent Category Number of Responses
Businesses 11
Chartered Surveyors (Private Sector) 5
Independent Education Sector 1
Individuals 9
Local Authority / Local Authority Association / Local Community 25
Other Public Sector and Third Sector 0
Private Sector Professional / Representative / Trade Body 38
Valuation Boards / Assessors / Related Representative Organisation 4
Total 93

6.3 There was general support from across the respondent categories, that safeguards were necessary if the pilots were to go ahead and that the four safeguards stated in the consultation were appropriate. The safeguard with most common support was a statutory cap on the Levy to ensure certain industries were not being unfairly targeted.

6.4 Reasons stated for the requirement of safeguards included being able to see the revenue from the Levy to ensure it is being used to the benefit of town centres and the necessity to not unfairly target certain businesses.

6.5 It was highlighted that businesses (and other parties) involved in the pilot scheme should be consulted before and during the process to ensure that the scheme is in the interest of all parties involved.

6.6 Although there was support for safeguards, a sizeable proportion of respondents, mainly Representative Bodies and Businesses, expressed a negative view towards the implementation of a pilot scheme. It was perceived that any pilot would not be representative enough to apply more widely.

6.7 Some Representative Bodies felt that this levy would penalise the businesses they were representing, especially those whose members fall outwith the town centre due to the nature of their business, for example garden centres, oil & gas companies, agricultural businesses and construction companies. The response from Scottish Bakers is a case in point: "Scottish Bakers has a serious concern about the potential for this levy to be applied unfairly to our members, many of whom operate 'out-of-town' manufacturing plants that service a wider network of retail outlets and wholesale customers. Applying an out of town levy on a bakery that services its own chain of retail outlets is both counter-productive and counter-intuitive." Furthermore, respondents across all categories emphasised that businesses should not be penalised because they are not located in town centres.

6.8 Businesses in particular, raised major concerns that the Levy (if implemented across Scotland) may disincentivise businesses from investing in Scotland due to creating a more complex non-domestic rates system than the rest of the UK. The concern was that this would make Scotland less competitive within the UK, with knock-on effects for the Scottish economy. It was noted, by Businesses and Representative Bodies, that the Large Business Supplement creates an extra charge on some businesses and is already higher than the equivalent rates in England. Consequently, it was perceived that a further charge on a business for being 'out of town' or 'predominantly online' may widen the competitive gap between the two jurisdictions.

6.9 Alongside this, at a local level, concerns were raised over the pilot scheme only existing in certain areas. Some Local Authorities felt this may benefit or disadvantage different local geographies and cause businesses to move, potentially impacting on local economies. However, COSLA believe that "pilot schemes [are] a reasonable way to explore the potential benefits [of the out of town levy] with suitable safeguards in place."

6.10 Finally, there was a call for more clarification and consultation to determine what would be categorised as a 'predominantly online business' and what would constitute 'out of town'.

Question 4 - Do you have any comments on the criteria and process which should be used to assess the pilot scheme(s)?

6.11 There were 55 responses to this question, the largest respondent categories were Local Authorities and Representative Bodies. No Assessors or Other Sector respondents responded to this question. A breakdown of the respondent categories can be found in Table 4 below.

Respondent Category Number of Responses
Businesses 6
Chartered Surveyors (Private Sector) 4
Independent Education Sector 1
Individuals 6
Local Authority / Local Authority Association / Local Community 22
Other Public Sector and Third Sector 0
Private Sector Professional / Representative / Trade Body 16
Valuation Boards / Assessors / Related Representative Organisation 0
Total 55

Table 4: Respondents Categorised

6.12 A common response indicated that there ought to be quantifiable evidence of the Levy having an impact on town centres, supported in particular by Representative Bodies and Local Authorities. WYM Rating suggested the evidence was in the form of an "audit trail" to evidence "where the money is to be invested and proof that the works have been done". Other proposed quantifiable indicators included:

  • A comparison of historic trends of business failures in town centres business failures post-Levy.
  • A count of new business start-ups in town centres.

6.13 Representative Bodies and Local Authorities called for studies to be done of the wider local economy of the affected areas. It was suggested this could cover any relocations of businesses to other local authorities where the Levy was not imposed and analysis of general Key Performance Indicators, such as Gross Value Added (GVA) and employment. It was expressed that this could inform a more holistic assessment of the impact of any pilot.

6.14 A number of responses highlighted that it would be necessary to evaluate the pilot scheme over a set period of time. A substantial proportion suggested that a pilot ought to run for an adequate length to assess effect. However, only one response, from East Lothian Council, mentioned a specific length of time of "more than one financial year".

6.15 In addition, Businesses, Local Authorities and Representative Bodies advocated for consultation with stakeholders who would be involved in, or affected by the Levy. This would be both before pilots took place and after. Furthermore, responses expressed interest in seeing an implementation method for the pilot. This would ensure all pilots were transparent and consistent for those involved in / impacted by the Levy.

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