Business chiefs are calling on the Scottish Government to cut business rates after it was confirmed they will rise by more than 3% next year.
The Retail Prices Index (RPI) – a gauge of inflation – fell from 3.3% in August to 3.2% in September.
The measure is used to calculate the annualised increase in rates north of the border – but last night Finance Secretary John Swinney faced calls to scrap the planned rise.
Liz Cameron, chief executive of Scottish Chambers of Commerce, said the “fragile” economy could be hindered if he presses ahead with another increase. “The September inflation figures are of particular importance to business, because it is this month’s RPI figure the government uses to calculate annualised increase in business rates,” she said. “The figures released today mean that business rates for Scottish firms will rise by the RPI of 3.2% next April.
“Current rates bills are based on the notional rental values of properties at the peak of the market in 2008 and have risen every year since the revaluation in 2010. It is a policy decision of the Scottish Government to continue to raise business rates, even though these notional rental values bear such little relation to current market realities.
“Over the next three years, the Scottish Government is expecting to raise an additional £400million from Scottish businesses in rates. At a time when we need to be encouraging businesses to invest to strengthen what is still a fragile recovery, it’s time to think again about increasing the rate of this tax on business year after year.
“The Scottish Government have it within their power to take this action to make a real difference to businesses. They should be using their powers positively – and they should do so quickly.”
A Scottish Government spokeswoman said: “We currently offer the most competitive business rates relief package in the UK, worth an estimated £570million in business rate tax breaks to Scottish business in the current financial year.
“We have committed to set the same business rates tax rate (poundage) in Scotland as applies in England for the lifetime of the current parliament. The UK Government takes September RPI into account when setting the English poundage rate.”
Yesterday’s figures will be disappointing for policymakers hoping to see inflation start to drop towards the Bank of England’s annual rate target of 2%.
Despite the drop in RPI, falling fuel prices failed to make a dent on inflation in September as the Consumer Prices Index (CPI) remained at 2.7%, against expectations of a slight fall. Lower costs at the pumps were offset by an upward contribution to the CPI from air fares, including a rise for domestic flights.
Petrol prices fell 0.2% over the month, or 0.5p per litre, to stand at £1.37 a litre. This compared with a 2.7% rise for the same period in 2012. However, a usual decline in air fares at this time of the year was smaller than normal for long-haul and European flights, while domestic flight prices rose.
Elsewhere, education inflation reached an all-time high of 21.4% since records began in 1997. Food inflation was 4.8%, well ahead of wage increases but little changed on last month.