17 Jul 2017
David Melhuish, Director of the Scottish Property Federation
Brexit continues to dominate the political airwaves with the Scottish and Welsh Governments both criticising last week’s UK Government EU ‘Repeal Bill’, while closer to home the Scottish Government’s planning reforms have been updated and we expect imminently the publication of the Barclay Review of Business Rates.
Let us start with positive news that the largest office letting in Edinburgh for over two decades has been signed. The UK Government’s decision to open its first Scottish regional hub in the city centre, with 190,000 sq. ft. of grade A office at the New Waverley development, is a major spur for the east end of the City of Edinburgh. We hope that the city and governments can build on this good news by moving forward the long-awaited City Deal which will have a positive impact on many new and regenerative infrastructure projects across the wider region. Glasgow too will look for a speedy announcement on its own UK Government hub.
In late June, the Scottish Government released an update on its planning review which we gave a cautious welcome to, particularly around some promising suggestions on streamlining and simplifying the plan-led system that SPF members have long advocated. This included the use of Simplified Planning Zones, bolstering the National Planning Framework and Scottish Planning Policy.
However, we continue to hold major reservations about the prospect of a Scottish Infrastructure Levy and further discretionary fees on the back of a six-fold increase in the planning fees cap in Scotland. Any increase in fees paid by the private sector needs to result directly in an injection of additional resources for planning services, delivering stronger leadership that supports appropriate development and encourages new investment in our built environment. Unfortunately, we have yet to see full commitment from local authorities to commit their increased planning fees to additional resources to deliver a better service - particularly for major applications.
We want to see a greater understanding from the public sector of the upfront costs the private sector already pays during the planning process and the risks involved. If we are to drive local economic growth, jobs and investment, we must have strong public leadership and an efficient, aspirational and delivery-focused planning service.
More ominously, we saw recently another example of an investor taking the difficult decision to press ahead with demolishing a modern multi-million-pound office block in Dyce due to drastic business rates rises and vacant rates. This is the latest in several examples of properties running into difficulties caused by the punitive vacant rates system, which is set at too high a level, applied too early and as a result, is reducing the rates tax base. This policy not only negatively impacts on the businesses concerned, but it is also a deterring factor for new development. The result is that the government and taxpayers are left to contend with a shrinking tax base, which adds to the burden faced by relatively few larger properties through the large business supplement. We have argued that this policy needs to be reformed and reduced in impact together with a positive incentive for new build, where there should not be taxation for a significant period until point of first occupation.
As the work of the Barclay Review of Business Rates nears completion in the next few weeks, we hope to see a fundamental review of the rates system with more regular assessments at its heart. If revaluations happen at least every three years we would see less out of date assessments, meaning the hike in rates would not come as such a shock to ratepayers as we have seen for the licensed trade recently. Also, if the ‘tone’ date was set just a year previous to the revaluation then this would reduce the gap between current market reality and that of two years before. This would reduce the likelihood of vastly out of date rateable valuations, such as those for the Aberdeen office sector in the 2017 revaluation.
Without some positive intervention, we fear similar stories, such as the Dyce example, may become more common and place additional pressures on the supply of commercial property and the wider tax base.