Scottish hospitality operators are demanding accountability from the Scottish Government after news it has reneged on plans for Non-domestic rates reform it promised in 2023. Public Finance Minister Ivan McKee has now admitted that there are “no plans” to pursue changes to the non-domestic rates system for licensed hospitality.
The U-turn comes despite a previous pledge to the Scottish Parliament by Finance Secretary Shona Robison in December 2023 to “work with the [hospitality] sector to explore long-term targeted solutions” to the issues with the non-domestic rates system.
In January trade bodies including the Scottish Hospitality Group (SHG), Scottish Beer & Pub Association (SBPA), Scottish Licensed Trade Association (SLTA), UK-Hospitality Scotland (UKH), Night Time Industries Association Scotland (NTIA Scotland) and the Scottish Tourism Alliance (STA) signed a letter to the Kate Forbes, Deputy First Minister, saying, “We are unanimously agreed on the urgent need for non-domestic rates reform for licensed hospitality, which includes a revision of the methodology used.
“As a collective, we stand ready to bring our extensive and varied experience to bear, in assisting the Scottish Government with implementing this vital reform to ensure the sustainability of licensed hospitality in Scotland.”
Despite this the Scottish Government appears to have totally ignored the industry and has instead dealt Scottish hospitality industry a body blow.
Stephen Montgomery, Director of the Scottish Hospitality Group, said, “The Scottish Government has now almost completely abandoned Scotland’s hospitality sector, and this news is an absolute body blow for landlords, restaurateurs, and hoteliers across the country.
“Not only does this announcement break a direct pledge from Finance Secretary Shona Robison to the Scottish Parliament, it also leaves Scotland’s hospitality industry at a significant disadvantage compared to our counterparts in England, where the UK Government has followed through on its pledge to reform the unfair non-domestic rates system.
The failure of the Scottish Government to deliver on that pledge will also leave Scotland’s hospitality sector at a notable disadvantage to counterparts in England, where the UK Government has followed through on its pledge to reform the non-domestic rates system ahead of 2026.
The current non-domestic rates system in Scotland penalises hospitality by charging businesses in the sector on their turnover, compared to other sectors, such as retail, which are charged on their square footage.
Stephen Montgomery continues, “Without significant reform of the unfair non-domestic rates system ahead of revaluations in 2026, many licensed hospitality premises will unfortunately need to make significant cutbacks or, sadly, close entirely. That will mean lost jobs and lost economic growth across the country, as well as a further setback for beleaguered high streets.
“Time is now running out for the Scottish Government to finally make good on its promises to the hospitality sector, and I would urge them to seriously engage with the Scottish Hospitality Group before it is too late.”
In addition in response to a written parliamentary question, Public Finance Minister Ivan McKee admitted just 600 of an estimated 5000 hospitality business premises across Scotland would be eligible for full non-domestic rates relief. That is just about one in ten.
Of the 600 eligible businesses, half are estimated to be on Scotland’s islands, which enjoy an existing 100 percent non-domestic rates relief scheme, meaning the new support in the Scottish Government’s 2025/26 budget will fully assist just six percent of mainland hotels, restaurants and pubs.
Ivan McKee also revealed the Scottish Government had undertaken no analysis of how much it would cost to remove the controversial £110,00 cap on the relief, which had been a key demand of the Scottish Hospitality Group ahead of the budget.
Stephen Montgomery comments, “Barely ten percent of hospitality premises across Scotland will receive support over the next financial year, including just 300 hotels, bars and restaurants on mainland Scotland. Meanwhile, the Scottish Government seems happy to admit it has not even bothered to work out how much it would cost to provide additional, much-needed support to the sector.
“That is utterly unacceptable at any time, but particularly when the Scottish Government appears to be reneging on its commitment to work with the industry on long-term reform of the unfair non-domestic rates system.
“Scotland’s hospitality sector now risks being utterly left behind compared to our counterparts in England, who have benefitted from a far fairer 75% rates relief for the past three years and will receive 40% relief – regardless of the rateable value – in the coming year.
They can also look forward to promised reform of the non-domestic rates system by the UK government ahead of 2026.
“Time is now running out for the Scottish Government to deliver tangible, practical and real-world results for Scotland’s hospitality sector, and I would urge ministers to engage seriously with the Scottish Hospitality Group on reform before it is too late.”