When John Swinney announced his draft budget last year he didn’t have many rabbits to pull out of the hat, but he did manage to pull a chicken from the shopping trolley. The announcement that an extra charge would be levied on companies with a rateable value greater than £750k seemed to come as something of a surprise to the public and to the retail industry. It wasn’t long before it was dubbed the ‘Tesco Tax’ and formed one of the main dividing lines between the Government and opposition parties.
For me, trying to balance Scotland’s economy and maximise jobs in these tough times means that those with the deepest pockets need to pay a bit more. This could mean higher income tax rates for top earners, a super-tax for energy companies that make super-profits and targetting companies like House of Fraser, Asda and Tesco, the latter of which makes £6k profit a minute. Of course, the Scottish Government only has powers to implement one of the above so it is little surprise that the Finance Secretary has taken this option.
However, like so many last ditch challenges, the legality of the situation has been called into question.
The challenge seems to be that a Government cannot employ favouritism in the system. That is, the SNP cannot penalise the larger companies without equally penalising the smaller companies. I can’t say I fully understand this problem in light of arrangements that already exist in the system.
The scrapping of rates for small business in Scotland is a prime example of ‘favouritism’ and, working the other way, so too are Westminster’s plans to make rich students in England and Wales pay much higher fees than other students. Replace Hooray Henry for Tesco and you’ve got the same situation. I don’t see how the Tesco Tax can flout EU rules if the two-tier tuition fees don’t.
But how can one comment on the suggestion that a Government policy breaks an EU law and how can clarity be assured before a vote takes place on the matter? You probably can’t but opposition parties still have the ideal fodder to hide behind if they want to vote against (remember minimum pricing and Local Income Tax were both vaguely mooted as breaking EU rules before being voted down)
At the end of the day though, this aim to raise £30m from the 0.1% richest companies surely won’t be seen as a losing approach for the Scottish Government and opposition parties will find themselves in a difficult position of backing large, profitable companies while still claiming to be on the side of those who are struggling.
An EU legal ruling may help to save their bacon and, well, every little helps but progress needs to be made this week if a decent budget is to be passed by Parliament.
#1 by Alec Macph on January 23, 2011 - 11:30 am
Swinney’s po-faced plea that it’s the responsibility of ‘serious’ Parties to put aside differences and work for Scotland’s betterment really tickles me.
Of course if the SNP says/does something I agree with I’ll agree with it, but after the past four years of believing they speak for all Scotland regardless of their being a mere minority Government, a little bit of humility wouldn’t go amiss.
#2 by Jeff on January 23, 2011 - 12:54 pm
I don’t know what the quote you’re referring to is Alec but I can’t see the logic of your argument there.
John Swinney, po-faced or otherwise, saying all parties need to work together is a clear admission that the Government needs other parties to support it to find a majority, proving that it knows fine well that it doesn’t speak for all of Scotland.
I think the SNP, by dint of being the SNP alone, come in for unfair criticism that the party claims to speak alone for Scotland or has a monopoly on the Saltire when that’s not what the party claims. Speaking up for Scotland is fundamentally different to speaking for Scotland and I reckon does the former more than the latter while quite openly inviting positive contributions from elsewhere, this budget included.
Other parties are welcome to provide an alternative to this budget and, to their credit, I believe that’s what Labour will be doing this week.
#3 by Alec Macph on January 23, 2011 - 7:00 pm
Jeff, I can’t find a link with the precise comment, although it was on my news ticker this morning.
The point is that Salmond – who is or, until only very recently, has been the SNP – definitely has couched his views and positions in such terms that criticism of them is implicitly taken to be criticism of the Scottish public; through judicious use of the royal we, or reacting to criticism of his claiming on expenses for hunting the snark [of impeaching Blair] by bloviating that the Scottish people would consider this a worthwhile endeavour.
As I said, it’s good to see some humility for these accidental heroes, but given it comes at a time when they’re on the edge, I doubt it’s entirely sincere.
#4 by NoOffenceAlan on January 23, 2011 - 12:59 pm
Why are the retailers in particular complaining ? – there are other companies which will be hit harder.
Example: my local ASDA’s rateable value is £2.2m but Glasgow Airport’s rateable value is £10m.
I’ve done a quick search of the SAA website and the companies with really big rateable values are the energy companies, the airports and BT.
Are the retailers acting as cover for the ‘big boys’, or are the SNP really playing favourites by singling out the retailers?
#5 by aonghas on January 23, 2011 - 1:31 pm
Well, I think the SNP ‘started it’ by referring to the tax as the ‘Tesco Tax’, a name designed to push buttons with its left wing or green supporters. The media will then automatically focus on comments from the retailers. But perhaps the SNP didn’t twig that there would be other non-retail businesses hit – given their performance in government, that’s not totally implausible.
I imagine the SNP are not bothered which big businesses are hit, because the aim is to get more spending money from sources that don’t correlate with large numbers of voters.
#6 by Alec Macph on January 23, 2011 - 7:02 pm
>> because the aim is to get more spending money from sources that don’t correlate with large numbers of voters.
Although, if these sources are vital services which could pass on the hits to large number of voters in the form of their customers, it could well be a concern/
#7 by fitalass on January 23, 2011 - 3:11 pm
“Well, I think the SNP ‘started it’ by referring to the tax as the ‘Tesco Tax’, a name designed to push buttons with its left wing or green supporters. The media will then automatically focus on comments from the retailers. But perhaps the SNP didn’t twig that there would be other non-retail businesses hit – given their performance in government, that’s not totally implausible”
Again, wrong battle at the wrong time. I have no doubt that calling it the ‘Tesco’ tax in an aim to demonise one particular supermarket, and trumpting smaller ‘independent’ buisnesses was a noble aim. But this isn’t just about Tesco’s, its about the other three major supermarkets that currently provide competition for Tesco, and therefore a better deal for the ordinary hard pressed consumer. Sainsbury’s have already threatened to pull out of planned investment in Scotland if this goes ahead. How does that help taking on the might of Tesco? Or provide cheaper deals for us consumers?
At the moment the two biggest threats to ordinary people’s incomes is raising food and fuel prices. You don’t then go and exacerbate that problem further, which is why the Westminster government is under pressure of the fuel escalator right now. In fact, I expect Osborne to pull a rabbit out of his hat come the budget for hard pressed car users.
This sudden desire for hitting big retailers in the same way Gordon Brown hit the Gas&Oil industry is just as short sighted, and only aimed at filling a black hole in this years budget. Brown was wrong to do so then, and the SNP are wrong to do this now.
Its also absolutely stupid to suddenly now try to bash major retailors after the last three years of economic recession and uncertainty.
Especially when they are finally seeking to start investing and creating more jobs, just as the public sector in Scotland is starting to shed them.
#8 by Jeff on January 23, 2011 - 3:34 pm
Thanks for the comment Fitalass.
It concerns me that you consider Sainsbury, Asda and Morrisons as the only competition for Tesco, not sure what High St you envisage in the future, but that’s kind of beside your point. You say that this charge will decrease competition amongst these ‘big four’ but that’s not the case if the charge is applied equally. Big supermarkets will make slightly lower profits in Scotland (or, worryingly I admit, pass the charges on in prices) but competition will not be impacted as all parent companies have the financial muscle and will to maintain and grow market share. If the charge had applied to Sainsbury and not to Tesco, then you would have had a valid point.
As for Sainsbury investing less in Scotland as a result of this decision, that may be sabre-rattling from the company but even if it is true then I don’t think trading in nurses and teachers for more shelf-stackers is a wise move anyway. Stopping 100 jobs being created while the Government is saving 1,000 sounds sensible to me. Anyway, Sainsbury’s makes a healthy enough profit to have few concerns over being a going concern. Other business do not have that luxury and therefore that makes it a valid target to help out in tough times. There is no solution that does not involve a little bit of pain for someone and those with the thickest skins make the most obvious targets.
I’d much rather see these supermarkets, and the energy companies and airports etc, admit that they’ve done very well in these troubled times off the back of hard-pressed families and are therefore more than happy to pay a bit more money to ease the strains on communities. I guess Capitalism doesn’t work that way but don’t be surprised if the Coalition doesn’t follow the SNP’s lead on this one and see the companies of Tesco’s size and standing as being fair targets for more revenue. I wonder if your opinion may change a little then?
#9 by Doug Daniel on January 23, 2011 - 3:59 pm
Exactly Jeff – Sainsbury, Asda and Morrisons are just as guilty as Tesco in the eradication of our high streets. In fact, I saw Sainsbury Local shops long before I saw my first Tesco Metro. There’s a Co-op on my way to work, and just recently a Tesco Metro has sprung up two doors down from it, so that’s Tesco trying to put a Co-op out of business. It’s bad enough they’ve been decimating our high streets with their out-of-town supermarkets, but now they’re trying to completely eradicate what little alternative choices we have by putting local shops out of business too.
The big four should not only be getting taxed a lot more (Tesco are massive tax evaders anyway – see the battle they had over claims in the Guardian and Private Eye which were proven correct), but I would also like to see those that give planning permission taking a default stance of “no, we have enough supermarkets” when the big four make new applications. When the big four talk about “investment”, what they really mean is buying up land so one of the other big four can’t get it first. It’s about time governments started making life difficult for the supermarkets, as well as energy companies – perhaps the next step could be enforcing reasonable energy prices and making supermarkets pay farmers a fair price for their produce?
#10 by Jeff on January 23, 2011 - 4:13 pm
Note also Fitalass, that Tesco would pay ~£9.9m/year and Sainsbury ~£3.5m so competition would actually be improved while simultaneously raising revenue to stave off some of the worst of the cuts.
#11 by fitalass on January 23, 2011 - 4:26 pm
“I don’t think trading in nurses and teachers for more shelf-stackers is a wise move anyway. Stopping 100 jobs being created while the Government is saving 1,000 sounds sensible to me. Anyway, ”
Jeff, that is a really disappointing response. And I say that as a former nurse who has a son currently stacking shelves to save for his University education. There is a far more people employed in the public sector than just teachers and nurses, and many of them are part time. With such a burden of debt held by our councils already, there are jobs going. When every single penny is accounted for, and loaf of bread or a pint of milk jumps in price, then there are many out there who really feel that hardship.
Its a shame that is not at the forefront of this argument right now along with fuel prices.
#12 by Jeff on January 23, 2011 - 4:56 pm
Why is that “really disappointing”? Rebalancing the job market between retail workers and frontline public sector staff is the nub of the issue. Why skirt around that fact? I wasn’t being derogatory to shelf-stackers, just saying that the public at large would rather jobs were saved elsewhere. If you read that differently, that’s up to you. I maintain that, given the considerably deeper resources that the retail market has, there is no reason why we can’t have growth in jobs in retail and also raise £30m towards job retention in the public sector. What’s that old Labour adage about companies serving society and not society serving companies? Maybe I made it up.
You make a fair point that food prices may rise further as a result of these charges being imposed. It would be a shame if that was the decision taken by these companies given some of the very high profits that they make but I don’t think Governments should kow-tow to the whims of the business sector, be that the coalition in the face of bankers threatening to move elsewhere or the Scottish Government in the face of Tesco et al.
#13 by haarandrime on January 23, 2011 - 5:15 pm
I support this tax on big retailers – they make huge profits and give little back to communities. I don’t think it will affect the expansion of supermarkets into Scotland and therefore employment as England must be nearly at supermarket saturation point. Waitrose is expanding north of the border. Tesco, in particular has had questions raised over its tax activities so if the Scottish government can take a bit back for Scotland then I think it should try.
#14 by Allan on January 23, 2011 - 5:19 pm
The problem with this proposal Jeff, is the same as with the tax on bankers bonuses, in that there is no accounting for the greed of the supermarkets. We already know that Tesco have several tax avoidance schemes on the go – including the “ofshoring” of their catalogue business to – i think – the Isle of Man. This will just be another tax for greedy companies to avoid paying.
On another point, it’s strange to see Scottish Labour’s opposition to this considering their reason for not backing Minimum Pricing (rather than it being unworkable) was that they objected to the extra revenues going straight to the supermarkets.
#15 by Indy on January 23, 2011 - 9:28 pm
The SNP has never referred to a Tesco Tax.
I suggest that everyone reads Calum Cashley’s summation of this issue on his blog.
It is quite extraordinary the amount of fuss that has been generated by the SNP proposing to bring the amount of rates paid by the biggest businesses in Scotland into line with the standard rate in England. I have rarely seen a more obvious example of people switching their brains off before opening their mouths.
The laugh of it is that if any businesses do try and mount a legal challenge in the EU it would surely be the UK Government rather than the Scottish Government that defended it. It would be hilarious to see the unionists try and square that circle. We might even see heads explode with the strain of it all!
#16 by NoOffenceAlan on January 23, 2011 - 11:29 pm
Is there not a certain irony in the SNP trying to make things in Scotland the same as the rest of the UK?
#17 by Indy on January 24, 2011 - 9:50 am
Yes there is a huge irony in it. That’s what is so bizarre about the whole row.
#18 by Alec Macph on January 24, 2011 - 10:53 am
Out of interest, then, who did start using the term “Tesco tax?
~alec
#19 by Indy on January 24, 2011 - 11:51 am
It’s one of those terms that is bandied about by various campaigning groups. I suspect they would not recognise what John Swinney is proposing as being particularly meaningful in those terms. as it is not really going to raise that much money in the scheme of things or radically re-balance things in favour of small businesses.
The SNP has not made a big campaigning issue of it, it’s the other parties who think they can make an issue of it on the back of the major retailers making a song and dance about it. You would expect them to do that of course, no business likes paying any tax, but the reaction of the other parties has been a tad bizarre. It’s not about the issue though, it;’s about the politics. Though my information is that a lot of Labour members are very unhappy because they don’t like the way it makes them appear.
I would guess the whole thing will turn out to be a bit of a damp squib in terms of the Budget process.
#20 by Indy on January 23, 2011 - 9:30 pm
Fitalass one thing is for sure – the Tories have shot themselves well and truly in the head as far as being the “party of small business” goes.
Thanks!
#21 by fitalass on January 24, 2011 - 12:59 am
Indy, thanks for assuming that my concern was simple for my party or the small buisness. Heaven forfend that I might actually care about all those people right now facing a big increase in their food and fuel bills. I mean, I was so partisan that I also brought in the comparison of the fuel escalotor, and the problems that has for the Coalition at Westminster.
So thanks for turning my attempt to properely debate this issue from another prospective into a partisan bit of point scoring!! This is simple pointless. And the SNP do them no favours if they cannot genuinely recognise a valid opposing view that might also have impact on how the electorate view this issue!!
#22 by Indy on January 24, 2011 - 9:49 am
Fitalass your comments suggesting that the SNP were targeting big business to try and fill a budget black hole were clearly political. 30 million will go nowhere near filling the budget black hole, that’s a laughable idea, and the SNP is not targeting big business any more than the ConDems are. I remind you again that the consequence of John Swinney’s proposal will result in these businesses paying the same poundage as applies down south.
Your suggestion that people will face increases in the cost of their food bills as a consequence of that is equally hollow – and equally political. Maybe you have been genuinely duped over this one but you are still making party political arguments, whether you know it or not.
The reality of this so-called “Tesco Tax” is a minor budget adjustment. Effectively the SNP are proposing to cut back a wee perk they gave to big businesses by setting the standard business rate slightly below the UK average.
It in no way warrants the ludicrously over the top coverage it has been given – which would not have happened if we were not in the pre-election period – because it is really not that big a deal.
#23 by Chris on January 24, 2011 - 10:19 am
This is a bit of a boutique tax, isn’t it? Sounds like someone dreamt it up after a few drambuies and managed to persuade their boss to present it to the minister.
It does seem very odd. The parliament has powers directly to raise income tax, which it could raise by 0.1p (it doesn’t have to be a whole penny you know) and has powers to raise council tax indirectly. Both these taxes (particularly the latter) have their problems, but they have the advantage that they are drawn from a wide pool.
I don’t know the maths but would a minor increase in income tax or council tax not just do the job? Introducing a new boutique tax, with its own assessment and collection costs, in order to avoid a hard choice, looks like political cowardice.
What do we do the next time there is a budget deficit – put a 10p tax on fish and chips?
#24 by Indy on January 24, 2011 - 11:58 am
Are you suggesting that someone the SNP invented business rates when they had had a few – or that they invented differential rates for differently sized businesses? Lol.
You know London sets a higher rate across the board. Maybe you should pop down and have a word with Boris Johnson. The standard rate in London is 41.8p Small business pay 41.1p.
#25 by Doug Daniel on January 24, 2011 - 12:21 pm
Raising income tax is nice in theory, but remember the fuss over SVR a few months ago, from which we found out that Labour and the Lib Dems had left SVR in an unusable state when the SNP came into power. Besides, the point here is to raise taxes from companies that can most afford it – council tax is a regressive tax (hence why everyone other than the Tories and Labour would like to be rid of it) and the SG can’t change just the top rate of income tax, so any income tax rises (even if they could do them) would be regressive also.
#26 by Chris on January 24, 2011 - 12:52 pm
Indy – I’ll keep my nose out of London’s affairs! You must admit it looks a bit drambuiesque.
Doug – I know about the fuss. So inventing a new tax in order to avoid a fuss looks like a weak political decision. People will take you seriously if you say you’ve had to raise tax by half a percent in order to pay for services, rather than looking for one sector alone to bear the burden.
Council Tax is an awful tax, I don’t think that Local Income Tax is a proper alternative as it skews the burden of taxation away from property and puts it more on to earners. We really need to reintroduce domestic rates, but no-one wants to admit the obvious truth in that.
#27 by Indy on January 24, 2011 - 1:32 pm
No I don’t think it looks a bit Drambuiesque. It looks quite dull and worthy to be honest which is why I think many people have been rather taken aback by the reaction.
This is not really a “new” tax. It is a variation of an existing tax.
You may not be interested in London but did you know that up until 2005 or 2006 (can’t remember which) the poundage rate was set to be higher in Scotland than in England?
Funny that, isn’t it? The Labour Party was quite happy to charge Scottish businesses more in rates than England but now objects to the largest businesses having to pay the same.
#28 by Chris on January 24, 2011 - 5:30 pm
You are talking as if NDR is a UK tax. Any NDR raised in Scotland stays in Scotland is redistributed (unfairly) on a per capita basis to Scottish councils.
Poundage is only half the story, if rateable values are lower then poundage needs to be higher to raise the same revenue. So you can’t simply say that Scottish business were paying more than English.
Before NDRs were nationalised (as part of the poll tax introduction) councils set the same rates for domestic and non-domestic rate. Rates were higher in Scotland due to increased service levels
#29 by Jeff on January 30, 2011 - 7:41 pm
Loving this post over at Newsnetscotland:
http://www.newsnetscotland.com/speakers-corner/1519-supermarket-wars