This item was published during the term of a previous administration that ended in April 2007
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Business rates to fall over two years
06/10/2005
A sum of £280 million will be provided by the Executive over the next two years to lower business rates, the Scottish Parliament was told today.
Finance and Public Service Reform Minister Tom MCCabe said the country's businesses would benefit from a substantial reduction in poundage from April 1, 2006, and afurther cut April 1, 2007, to bring Scotland's poundage into line with England.
At the same time the Executive will also seek to consult on creating rates incentives for research & development activity in Scotland.
Mr McCabe said:
"Growing the economy is our top priority. The Executive wants to create an environment where all businesses - large and small - can thrive. We have listened to what businesses have had to say and decided to bring Scotland's poundage in line with England.
"With rateable values that are on average lower than England, this move goes further than creating a level playing field for Scottish businesses. It will give Scotland's businesses a competitive advantage over counterparts in England.
"The Executive will provide £100 million to reduce the existing gap in poundage rates by half from April 1, 2006. And we will provide a further £180 million in 2007-08 to fully close the gap.
"As the First Minister outlined in his legislative programme, we also plan to consult on providing incentives through business rates for research and development to ensure Scotland is at the cutting edge of research and development.
"Both these developments will make a significant contribution to our number one priority - economic growth. We need businesses to rise to the challenge of using this competitive advantage to the benefit of Scotland. Innovative and successful Scottish businesses are essential for vibrant and sustainable economic growth.
"It will of course take more than a cut in business rates to ensure long-term economic growth which is why we need government and business to continue to work together to create more opportunities for Scotland's future economic prosperity."
Explanation of the £280 million figure:
England's poundage rate is tied to RPI through primary legislation. The Executive's policy has been to limit Scotland's rate increases to below or at the rates of inflation. Due to Scotland's below inflationary increases, in between revaluations, the different rates draw closer together and the cost to close the gap gets less.
The cost to fully close the gap in 2006 would be approximately £200m, making the cost to close the gap by half in 2006 around £100m. The cost to fully close the gap in 2007 is approximately £180m. Exact costs are dependent on inflation rates.
Another announcement will be made to Parliament later this year to announce the actual rates following the formal publication of inflation rates.