Budget concessions erode trust in Government, businesses warn

PA

The Scottish Government has been accused of breaking its promise to businesses on a tourist tax following its Budget deal with the Greens.

An agreement between the SNP and the Greens was announced shortly before a debate on the tax and spending plans began in the Scottish Parliament on Thursday.

But Andrew McRae, policy chair at the Federation of Small Businesses in Scotland, suggested the plan to allow councils to introduce a tourist tax could lead to an erosion of trust.

He said: “The Scottish Government’s draft Budget was a spending programme that most firms could welcome.

“But we’ve seen concessions from the Cabinet Secretary for Finance (Derek Mackay) that will erode the small business community’s trust in his administration.

“Instead of Brexit help for firms, we see more tax changes, including a levy on our vital tourism industry.

“Ministers repeatedly promised firms that they would not pave the way for tourism taxes without industry support. They’re breaking that promise today.”

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Scottish Retail Consortium director David Lonsdale welcomed the passing of the Budget, but he warned consumers and businesses could be hit financially by the tax-raising powers.

He said: “Firms will breathe a sigh of relief that MSPs are set to pass a Budget in a timely fashion, during a period when there is already more than enough political uncertainty.

“Whilst far from perfect, the previously announced moves on business rates, protecting ordinary workers from tax rises, and rejuvenating town centres all should help support retailers and the wider economy.

“Nonetheless, the new announcements of further tax-raising powers for local authorities means there is a risk that costs to consumers and businesses will rise.

“Higher council tax can eat into customers’ disposable incomes, reducing spending and ultimately growth.

“Household finances already face headwinds in the months ahead with a rise in the legal minimum employees must put into their pensions.

“Similarly, introducing extra costs on businesses through further levies is unlikely to lead to sustainable revenue in the long-term, especially for retailers grappling with an industry going through fundamental transformation.”

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STUC general secretary Grahame Smith welcomed the introduction of tourist tax powers, although he indicated his concern over the funding being allocated to councils.

Mr Smith said: “This deal struck by the SNP and Greens will bring little relief for public services under strain or for the staff who have suffered from reducing living standards year on year.

“Each and every extra million is vital but this deal appears to fall over £100 million short of the gap identified by local authority group Cosla.

“Meanwhile, the announcement that there will be yet more talks on replacing council tax raises more questions than it answers.

“How many more years of talks on this reform should workers and service users expect? Action is required now to free up councils to invest in services.

“By devolving tourist taxes to local authorities, the Government has recognised that this expanding economic sector is in need of an overhaul.

“Local taxes will bring welcome benefits for both communities and workers, who often work in low-paid and insecure roles.

“We look forward to working with the Government to explore how these tax changes can support the development of Fair Work and sustainable communities in every corner of Scotland.”