by Alex Porter, Economy Editor
The SNP government aims to raise £30 million to pay for public services by taxing Scotland’s predatory supermarket chains.
With the UK coalition about to slash the Scottish block grant by £1.3 billion and with workers already facing pay restraint the SNP government are looking at ways in which to spread the pain and protect front line jobs.
In order to mitigate against this funding shortfall Finance Minister John Swinney announced in his November budget last year that he would impose a levy on large corporate supermarket chains such as Sainsbury’s, Tesco, Asda and Morrisons.
Effect on local economy
Supermarket chain shareholders are, as one might imagine, none too pleased at the tax which is aimed at giant retail firms who own properties with a rateable value of more than £750,000.
Sainsbury’s chief executive Justin King threatened to shelve the supermarket chain’s entire Scottish investment plans unless ministers cancel the tax hike.
However the move will provide a new lease of life for small shops and communities the length and breadth of Scotland which have been decimated due to the predatory corporate tactics of supermarket chains, who are regularly accused of bullying and having overly close relations with politicians.
Representing the large chains, Fiona Moriarty, Director of Scottish Retail Consortium (SRC) has claimed that the SNP’s tax will put 8,000 jobs at risk. This concern will be viewed with a mixture of anxiety and interest by local supermarket workers many of whom will never have met Mr King or any supermarket shareholders.
Claims of job losses always raise anxieties and especially so during times of economic crisis. The supermarkets warn us of how many new jobs may be lost because of their threat to pull investment but in order to calculate the true cost to affected local communities these projections of jobs to be created must be set against the value of the jobs lost in small family shops and communities after supermarkets become established.
Communities are enriched by small shopkeepers. How this process works is simple. In a thriving community the barber spends £1 in the tea shop, the tea shop owner spends that £1 in the butcher’s, the butcher spends that £1 in the baker’s, the baker spends that £1 in the newsagent’s and so on until eventually it gets banked.
This process is what economists call ‘money velocity’. The benefits to the community are important in generating vital economic activity and a higher quality of life. Small shopowners have key relationships with the community offering jobs in book-keeping, loading and delivering, cashing up and banking, supplying, ordering, security, inventory, planning and other management skills.
Supermarket business models are widely documented. When supermarkets open, little shops close driving local owners and wealth creators away. Supermarket jobs are mostly unskilled positions, such as trolley collectors and shelf-stackers. Main street retail outlets close and become occupied by charity and betting shops.
The former community model which saw money velocity supporting a vital community is lost and replaced with benefits/low income family expendable income going into supermarket tills and then straight into investors’ bank accounts. Such investors will never know the names of most of the towns where their returns are generated.
Some might argue that supermarkets are one of the reasons for the UK’s economic crisis as communities are stripped of wealth and unable to contribute to the Treasury.
It’s not just higher value local jobs which are lost when supermarkets are established in a community, farmers’ livelihoods are squeezed across Scotland too.
Kenneth Campbell, who owns a herd of 400 cattle in Castle Douglas, said:
“It’s sickening when you see milk being used as the loss-leader in supermarkets. It is costing me 30p a litre to produce and I’m getting 25p for it. People are getting very despondent.”
James Withers of the National Farmers’ Union (NFU) Scotland said: “Family farms are not looking for special treatment, just fair treatment. The average milk price for a Scottish dairy farmer is 3p below the cost of production. And whilst they lose money on every pint produced, retailers are making millions on milk and other dairy products.”
Political fall out
All three Holyrood opposition parties are against the SNP’s “supermarket tax” and indeed now threaten to vote down Swinney’s budget if the measure is not removed.
Raising one serious concern the leader of the Conservatives’ Holyrood group Annabel Goldie said: “The retail sector in Scotland is a major employer – higher taxes will only make Scotland less competitive than the rest of the UK.”
As these same supermarkets exist in both Scotland and England this, Ms Goldie is implying, will lead to people across Scotland going to England to shop. This potential unintended outcome, Unionist opposition parties will argue, shows that the SNP haven’t thought these proposals through.
For the Lib Dems the matter is a little muddled. Their finance spokesman Jeremy Purvis said he had lodged a parliamentary motion to annul the measure and that it may ‘harm Scotland’s reputation’. However, until last week he 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.
Labour are thought by many to have very close, longstanding ties with big supermarkets. In 1998 it was reported that the lobbying firm LLM secured a waiver on paying a car park tax for their client Tesco. The tax would have cost Tesco £20 million per year but the waiver was secured and Tesco contributed £11 million into funding for Labour’s pet Millennium Dome project.
Like the Lib Dems, Labour also exhibit some confusion on the issue as during the minimum pricing for alcohal debates they argued that the Scottish Government should find a way to tax supermarket profits.
The SNP make the case that they back local businesses and that communities should have a fighting chance when it comes to competing with supermarkets. Christine Grahame MSP said: “The SNP is committed to backing small business and to levelling the playing field for our town centres.”
Threat or promise?
Sainsbury’s Mr King said that the SNP levy could force the supermarket chain to shelve plans for stores in Kelso, Nairn and Irvine as well as three planned extensions to existing premises in Linlithgow, Stirling and East Kilbride.
Given, as many argue, that the supermarket business model causes local economic and social stagnation, local residents and businesses will wonder if this is a threat from Mr King or a promise.