How the SNP has just delivered a double whammy to struggling rural communities
If the SNP cares about rural voters, it will think again about damaging measures in its draft Budget
Research published this week by the trade group UK Hospitality Scotland has revealed the significant increases in business rates set to hit pubs and hotels across Scotland. As a consequence of the current revaluation, the average pub in Scotland will see its rates bill increase by some £36,523 across the next three years. For hotels, the average is even greater, set to rise by £68,007.
These increases come on the back of rising costs elsewhere, particularly in relation to energy and staffing, not helped by Labour’s increase in employers’ National Insurance. Right across the country, we see pubs and hotels struggling to survive, and having to raise prices simply to balance the books, which makes going out even more expensive for a population coping with the rising cost of living.
As Leon Thomson, executive director of UK Hospitality Scotland, says, these rising costs are simply unsustainable. In his words, “the Scottish Government can’t expect the local pub to discover an extra £11,000 in the next two months to pay these significant increases”.
Important social hubs in rural areas
The situation is made worse by the fact that the current 40 per cent rates’ relief which was available to hospitality businesses is coming to an end. Over the past two years, the SNP government has not passed on the rates’ relief available elsewhere in the UK despite having the Barnett consequentials to do so, leaving hospitality businesses in Scotland at a competitive disadvantage to those south of the Border.
The impact of this will be felt particularly in rural areas. In many small communities, the local pub or hotel isn’t just a source of economic activity and employment, it also acts as an important social hub, particularly for those otherwise at risk of loneliness and isolation.
One does not have to drive very far through rural Scotland to see once-thriving premises now closed up with forlorn and tattered “For Sale” signs attached.
There was an opportunity in the Scottish Government’s recent draft Budget to address the issue and mitigate the impact of the rateable value increases. Unfortunately, what was announced by the Finance Secretary goes nowhere near far enough to cancel out the increases. The inevitable consequence will be a flood of job losses and business closures across the country.
Sporting rates but no sport?
Another little-noticed change elsewhere in the Budget will also have a detrimental impact on the rural economy. The Finance Secretary announced that the Small Business Bonus Scheme will no longer apply to sporting rates from 2026-27. Limited exemptions will remain in place, but will apply only to deer or vermin control.
It is now more than a decade since sporting rates were introduced, but for many farms these did not represent a financial burden, as the Small Business Bonus Scheme (SBBS) would apply. Without other activity on the farm that fell under the remit of non-domestic rates, the SBBS would ensure that most farmers had nothing to pay.
Sporting rates are calculated on the notional rental value of the sporting rights on rural land. Crucially, they are payable whether or not any sporting activity is carried out. Accordingly, there will be many farms where shooting does not occur, either inhouse or let to third parties, but nevertheless for the first time there will be a chunky non-domestic rates bill to pay.
This change was announced in the Budget with no advance notice, and no industry consultation. It will impact on family farms, not just large shooting estates.
Sarah-Jane Laing, chief executive of Scottish Land and Estates (SLE), describes this as “yet another policy dreamt up in a Central Belt meeting room with no grasp of the real-life impact it will cause to rural businesses, jobs and livelihoods. It appears to be pushed as political sop to the Scottish Green Party, without any meaningful impact assessment having been undertaken.”
Family farm tax
An SLE survey found that a small livestock farm in Orkney which used contractors to control the damage from geese would not be entitled SBBS relief, due to geese not being classed as vermin.
Farming businesses which also operate self-catering lets, another sector which has been hard hit by the current revaluation, could see increases in tens of thousands in the rates that they have to pay, at a time when farming is hardly a profitable activity. And all this comes on the back of the family farm tax from the UK Chancellor, which despite the changes most recently announced still represents a real worry to those in agriculture.
It's hard to disagree with Sarah-Jane Laing’s assessment of the policy. Whilst exceptions will apply to vermin control, those land managers who actively control wildlife numbers to protect ground-nesting birds and other habitats will not be protected.
There is also likely to be an unintended consequence of the policy, as those farms which do not currently let their shooting may in future be forced to do so on a commercial basis, to cover the rates. If the political intention was to reduce shooting in the countryside, this policy is likely to have the opposite effect.
It may be that the assessment has made in Bute House that ‘toffs’ shooting game birds do not elicit much sympathy, but this all points to an SNP administration which simply does not understand farming, or the economics of rural Scotland. The combination of the rates’ revaluation hitting hospitality, and the removal of the SBBS for sporting rates, represents a double whammy hitting rural communities.
The Budget is still at a draft stage and there is time for the SNP to think again. If they do not, we can conclude they have given up caring about rural voters.
Murdo Fraser is a Scottish Conservative MSP for Mid-Scotland and Fife
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