Lib Dems U-turn as business backs SNP supermarket tax

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by Alex Porter, Economy Editor

Almost three-quarters of Scotland’s businesses – 74% – support the SNP Government’s proposed ‘supermarket tax’, which aims to raise £30 million for public services, according to Scotland’s most important business organisation – the Federation of Small Businesses (FSB) Scotland.

With the Holyrood elections approaching the supermarket chains are behind a campaign to have the SNP drop the levy. This campaign by the corporate giants will promote the message that town centres and retailers in general will suffer, however evidence shows that around 92.3% of the tax will be paid by the big five out of town chains: Tesco, Asda, Morrison, Sainsbury and B&Q.

Lib Dem policy U-turn

Lib Dem finance spokesman Jeremy Purvis who has lodged a parliamentary motion to annul the measure and who called the SNP measure “perverse” and “anti-business” said,

“I heard the identical concerns from retailers about the damage that the large retail levy will have on jobs, the economy, Scotland’s competitiveness and our economic reputation.

“The SNP are putting Scottish businesses at a competitive disadvantage.”

However, it has emerged that only last week Mr Purvis listed on his website “more support for local retailers struggling against the big supermarkets” as one of his top 11 priorities for the Scottish Parliament.

The sudden U-turn will raise confusion among floating voters who will want to know if Mr Purvis’s view last week or his view this week now represents Lib Dem policy.

Business support for SNP plans

With 20,000 members the FSB, which represents Scotland’s small and medium enterprises, believes that the tax will help create a level playing field for its members when competing against the large corporate supermarket chains.

In their submission to Holyrood’s Local Government Committee on the proposed move, the FSB highlights that, despite claims the supplement will hit city centres, figures in the public domain suggest that 86% of the projected take (£25.7m of a projected £30 million) will be paid by the four major supermarket chains.

In the Committee’s hearing next week, the FSB’s Public Affairs Manager, Colin Borland, will argue that the SNP’s move willl bring more fairness and proportionality into the rates system.

Of local competitiveness, Mr Borland said,

“Supermarkets are here to stay. Their business model is incredibly successful and their record profits and turnover are testament to this. But, at a time when rising overheads are further squeezing margins in local small businesses, when cash-flow is tight and financial reserves depleted, it is now more important than ever that the playing field is levelled wherever possible.

“Progress has been made through the introduction of the Small Business Bonus. But rates are still a disproportionate burden for the small businesses who pay them, with nearly half citing them as a major barrier to their business success.  Contrast this with the 225 largest retail properties whose bills, according to Scottish Government calculations, account on average for only around 2% of their turnover.

“It is for these reasons that three quarters of our members feel that it’s time for the largest out of town supermarkets – who benefit from free parking and other amenities our members don’t enjoy – to start paying more of their fair share.”

In contrast David Lonsdale of the Confederation of British Industry (CBI) which represents large corporate businesses and has around 90 members said,

“Our members are greatly concerned that this new tax will make Scotland a less attractive place for retailers to invest and create jobs, and that other sectors could be similarly targeted in subsequent budgets from the devolved government.

“The campaign against this hefty tax rise on business is gaining support and momentum.”

Figures in the Times newspaper in an article entitled “Supermarkets see red over ‘supermarket tax'” on Tuesday 11 January show that under the SNP’s proposals to raise £30 million pounds, Tesco would pay £9m, Asda £8.8m, Morrisons £4.4m and Sainsbury’s £3.5m, a total of £25.7m.  This is around 85.7% of the total amount which it is estimated could be raised by the proposals. Included in these figures is B&Q who would pay £2m – bringing the projected total for these 5 out of town retailers to 92.3%.

In 2006, the FSB in Scotland published a report (1) based on an extensive research study entitled, “The effect of supermarkets on existing retailers” – looking at how new supermarket developments affected town centres and independent retailers in Alloa, Dingwall and Dumfries. The full report’s conclusions were that, in each of the towns, a new supermarket meant:

• A decrease in the number of convenience retailers operating in the town centre;
• An increase in the number of vacant units and corresponding floorspace;
• A broad shift in convenience expenditure away from the existing town centre retailers to those operating the new supermarket development;
• A significant decline in the level of business activities undertaken by existing retailers. This is attributable in the main to competition from the supermarket; and
• A general acknowledgment in respect of a decline in the overall number of shoppers frequenting the traditional town centre.

(1)http://www.fsb.org.uk/policy/rpu/scotland/assets/publi_spec_supermarket_dec2006.pdf