Jim O’Neill examines the curate’s egg that is the Barclay Report, and wonders what hapless Derek Mackay will do with it.

 

When the last business rates review was issued there was such an outcry that, first, the Scottish Government gave many businesses (including Trump Turnberry, who received £110,000) interim relief, and then, in a slightly panicky response, set up a review of business rates.

Unfortunately, the demand for a quick fix meant that the remit given to the group was not a full review of business rating, but only a quick review which had to end up with the same financial take as the current system. That meant that for every group exempted from business rates, others had to be added or increased to make up the income lost.

Predictably, Sir Adrian Barclay’s report does just that, and he has laid a curate’s egg of a report on the desk of Finance Minister, Derek Mackay. Mackay now has to decide what to do with it.

There are some recommendations in the report that are most welcome. The removal of day nurseries from liability for business rates will take a burden away from that hard hit sector and may mean the survival of much needed private nursery provision. Again, giving relief to community sports clubs but not to private sports clubs, including private golf clubs, protects an often struggling sector at the expense of their wealthier counterparts, and hopefully will allow greater access to sports in the community. (As a declaration of interest, I am a member, and former Secretary, of a Community Sports Club).

Similarly, the removal of rates relief from Private Schools (hopefully to be followed by the removal of their charitable status) is a welcome proposal as it again targets private rather than public provision. However, Sir Adrian has also come up with a number of less welcome proposals. For instance, the proposal to charge business rates on Local Authority Leisure Centres and other ALEOs will heap even greater strain on cash-strapped councils, while the proposal to charge business rates on farm production facilities may impact on rural jobs and force independent producers out of the market.

So, Mr Mackay has a dilemma. Does he accept the report in full and risk the ire of many in the community, including those wealthy enough and with the access to communications to oppose such a decision? Does he accept it in part, and, using his own rules, have to make decision about what on each side of the zero sum he has to change to ensure the same tax take? Or does he leave it on a shelf to gather dust, as his predecessor, John Swinney did to Local Income Tax, until the next, and even louder howls of complaint come from the business community? Over to you, Mr Mackay, but don’t take too long.

The other important report out last week was the Government Expenditure and Revenue Scotland (GERS) report. Unusually, the Scottish Government did not welcome it with howls of “Westminster fix” and even the First Minister accepted that an independent Scotland would have to make substantial public spending cuts. This is, of course, the First Minister who, the previous week, wanted to drop the word “National” from her party’s name.

The GERS report shows that the Scottish spending deficit is currently £13.3bn, some 8.4% of GDP and the largest in 20 years. It also shows that the Scottish deficit is some 4 times the deficit of the whole of the UK. In the light of this it will be interesting to see what Nicola Sturgeon meant when she set that she would “reset” Scottish Government policy in the autumn. How is she going to reverse the ongoing failings in education and health while bringing down this unsustainable deficit?

I will leave the last word on this to BBC’s Glen Campbell who ended his report by saying “if Scotland had voted for independence, Scotland would be in a far worse economic position that the Scottish Government predicted”. Nuff said.