29 November/1537/94 IAN LANG LEVELS THE PLAYING FIELD ON BUSINESS RATES __________ The Rt Hon Ian Lang MP, Secretary of State for Scotland, today announced the completion of the Government's five-year programme to harmonise business rates in Scotland with the lower level south of the Border. This is achieved with a unified business rate of 43.2 pence for 1995-96. All Scottish businesses will for the first time pay the same rates poundage as their counterparts in England, and business rates in Scotland and England will in future remain the same. Mr Lang also announced details of transitional arrangements to phase in the shifts in rates burdens which will follow the forthcoming revaluation and the introduction of the unified business rate. Under these arrangements, boosted by Pounds 72 million from the package for business rates in Great Britain announced today by the Chancellor, the maximum increase for any business will be limited to ten per cent, after allowing for inflation. Answering a Parliamentary Question, Mr Lang said: "The estimated outcome of the 1995 revaluation will allow the average non-domestic rate poundage in Scotland to be reduced from its present level. I therefore propose to prescribe for 1995-96 a single rate poundage applying throughout the country of 43.2 pence and, at the same time, to abolish industrial derating entirely. "The introduction of a unified business rate poundage of 43.2 pence for Scotland, at the same level as in England, represents the successful culmination of the progress that has been made in recent years towards harmonising poundages. In the years after 1995-96 we will maintain a unified business rate in Scotland and it will continue to be pegged at the same level as in England to ensure a level playing field for Scottish business. This harmonisation will continue through future revaluations, and maintaining it will not be a burden on The Scottish Office expenditure programmes. "Taking together the effects of the forthcoming revaluation with this decision on the level of the rate poundage, I estimate that there will be significant local and sectoral shifts in rate burdens. My Department's consultation paper, published last month, outlined proposals for transitional arrangements to phase in the effects of these shifts on rate bills. In the light of responses to that paper, and the package of support announced by the Chancellor of the Exchequer today, I now propose that no business will face year-on-year increases of more than ten per cent, after allowing for inflation. For property with a new rateable value of less than Pounds 10,000, the maximum real increase will be seven and a half per cent, while for part-residential subjects with a rateable value of less than Pounds 10,000 the corresponding limit will be five per cent. "The Exchequer contribution, amounting to Pounds 72 million in 1995-96, will cover part of the cost of the scheme. The remaining element will be met by limiting real reductions in rates bills, in line with one of the options presented in the consultation paper. For 1995-96, the limits will be ten per cent for properties with a new ratable value below Pounds 10,000 and five per cent for larger ones. "Other details of the transitional arrangements will be based on the proposals in the consultation paper. My officials intend to hold further detailed discussions with the Convention of Scottish Local Authorities and the Scottish Assessors' Association in the light of responses to the paper. Once these consultative discussions are concluded, Regulations giving effect to these proposals will be laid before Parliament." NOTES TO NEWS EDITORS In 1989 the Government introduced a policy of reducing Scottish non-domestic rates progressively to a common level. The aim of the policy was to set a single rate for the whole of Scotland by the end of the transitional period which would be equal to the English national non domestic rate. This convergence is completed by the Secretary of State's proposal to set, for the first time, a unified business rate in Scotland at the level applying in England from 1995-96. Up to now industrial derating has protected manufacturing and freight transport industries from excess rate burdens relative to similar subjects south of the Border. The Government has decided to phase out derating in parallel with the progressive reduction in non-domestic rate poundages. With effect from April 1, 1995 there will be harmonisation of valuation methodology north and south of the Border. Together with a common rate poundage this will end the kind of disparity which industrial derating was supposed to compensate. The Secretary of State therefore announced today that industrial derating will be abolished from April 1, 1995. These changes take place simultaneously with the 1995 revaluation. Taking all the relevant factors together, the pattern of changes in rates bills will vary across the country with some areas and sectors gaining and others losing. The Government recently consulted on proposed transitional arrangements to phase in the more significant changes. The Secretary of State has now announced the key elements of the transitional arrangements which will apply. The transitional arrangements will work by limiting year-on- year real increases from a baseline bill calculated by reference to the rates bill on March 31, 1995. It is envisaged that the limits will be the same for each of the five years up to the next revaluation in the year 2000. As announced in the Chancellor's Budget Statement, part of the cost of this will be met by the Exchequer. The Exchequer contribution for Scotland in 1995-96 will be Pounds 72 million. The rest will be funded by limiting rate reductions. For 1995-96 the proposed limits are ten per cent for small properties and five per cent for large. It is estimated that similar limitations will be required in 1996-97 after which reductions should start to come through much faster. The limits for 1996-97 and subsequent years will, however, be reviewed next year to ensure that the costs of the transitional scheme are kept in balance. As explained in the consultation paper, the transitional arrangement will apply only to non-domestic rate bills and not to bills for non-domestic water rates or non domestic sewerage rates. Media Contact: Andrew Baird: 031 244 4944 Public Enquiries: Stephen Tither: 031 244 5074 November 29, 1994