Is the Small Business Bonus Scheme a success?

[Scottish Business Owner]

This Small Business Bonus Scheme has irked me for a while. This is a scheme brought forward by the SNP which effectively elimates business rates for small businesses that have premises. Alot has been written about it and it's set to play a major part in the forthcoming Scottish election.

Scottish Government: Web page currently unavailable.

My own thoughts:

It does nothing for any small business that doesn't have premises. Surely the majority?
It costs a massive amout of money to implement. Surely a more universal form of business support would be better? (and no Business Gateway does not count! :001_tt2.

There's another angle to this as well and my thoughts were drawn to this by a post on the Uniq blog called Would tax savings and reduced business rates stop your business failing. As much as saving businesses money is probably going to be well received what about giving them the tools to market and sell their businesses better as well as opening up access to public sector contracts etc?

What's your views on the SBBS? Am I barking up the wrong tree?

 

[Wills]

I had a shop for my business for a good few years and this is a very positive initiative. Many town high streets are littered with empty premises that could be stepping stones for new retail businesses but the high start up costs deter most leaving our streets like ghost towns boarded up with little interest to walking shoppers.

With little to offer many travel to the shopping centres, adding to congestion on the roads, pollution and a way of life that is becoming more the normal. Every centre is a clone of the next with the greedy corporates sucking the cash out of the local community with little re investment that benefits the local community in either richness of life or culture.

Small diverse businesses bring interest to a town, be it a haberdashery, traditional food like bakers and dellis rather than mass factory produced produce, and of course the plethora of small independents struggling again the supermarket giants.

Any initiative that can help get these businesses flourishing is worth every penny, I read in this edition of the Insider that Aberdeen council have taken over 7 retail spaces in the decimated Torry area and will be giving them for free to businesses for a period to help build up the area and encourage small businesses to take the jump. This should be rolled out to every town in Scotland but should never be extended to any of the multis.

My thoughts...

 

[Mike Lewis]

,

I agree with some parts of your argument, but not with others. However, I'll leave it to other forum members to air their views before I chip in with mine.

But I'm curious about your assertion that "surely the majority" of small businesses don't have premises. I find that surprising. Do you have any information to support that, or is it an assumption?

I suppose there are a lot of one-person businesses where the owner works from home. There are also a lot of tradespeople (plumbers, electricians, etc) who work on the customers' sites and who use the home of one of the owners as a business address.

But I wonder if these form the majority of small businesses.

I'm really only raising this out of curiosity.

Mike

 

[craig_mckenna]

As always a few varying but still valid opinions on a topic.

My opinion is simply that the SBBS works very well for an specific sector of the small business community and not for others. For the businesses that can benefit it is a good thing and there is no downside to the others that cant other than they dont benefit of course.

My issue is that it has been presented as a wonderful solution to all our problems and is being used as a vote winner. It is good for what it is but it is not what we are being told it is.

Does that sound cryptic?

 

[Gouldie0]

The key question is, do we want high street shops and a bustling city centre?

I'm of the opinion that it works in some areas but doesn't seem to be applied in a fair way. I've managed to dig out an article from last year highlighting one of the more high profile cases >>here<<

I think this article highlights how the government are trying to pull the wool over our eye's by saying this will help businesses, but it won't help them all and in some cases goes some way to making them fail. The amounts of money payable on a monthly basis are in some cases abscene and forcing us away from moving into premises and selling our services on the internet.

Maybe we should be looking at other ways to help businesses, irrespective of whether they have premises or not. The fall in corporation tax from April 2011 is a start but I think we should be looking at more.

 

[davidk1]

I think you should look back at a previous thread on this subject.

The Rates scheme for small businesses was introduced by the Labour Party under Jack McConnell and was then re-named the SBBS by the SNP, but it was already in existence and was proving a success. It remains a success and has helped many small businesses get their business off the ground. If this scheme is stopped (and IMO it won't) there will be many small businesses who will cease trading.

 

[Mike Lewis]

If this scheme is stopped (and IMO it won't) there will be many small businesses who will cease trading.

If any business cannot survive without a subsidy on their rates, then maybe it's better if they don't survive. Better for the customers, the employees and the economy in general if a more efficient business takes their place.

 

[Gouldie0]

If any business cannot survive without a subsidy on their rates, then maybe it's better if they don't survive. Better for the customers, the employees and the economy in general if a more efficient business takes their place.

I can't agree with that Mike as there are plenty of people who would like to move their business into shop premises, who can't because of the huge amounts of money the council are expecting them to pay.

This has no reflection on whether there a viable business or not becuase let's be honest, if any of us chose to have shop premises and factored business rates into our forecasts, many of us would not be viable.

We should be looking to encourage as many new start businesses as possible, some will grow and be able to pay the rates as they increase there premises or size of business. Others will simply fail because of varying reasons, but one thing is for sure, business rate reflief or the small business bonus scheme (whichever way you want to tagline it) does help small businesses.

I think the point was trying to make originally was, if you don't have premises you're somewhat missing out and should there be an alternative that covered the whole spectrum of business types/sectors/legal structures etc.

Neil

 

[davidk1]

So Mike, does your argument hold up for the small businesses that get help from the Government to train people in Modern Apprenticeships. Does your argument hold up for the small businesses who take school leavers on as work experience students who are paid by the government. Any subsidy is welcomed whether it comes in the form of rates relief or another form but if it helps a business on its way, it gets my vote.

 

[Mike Lewis]

So Mike, does your argument hold up for the small businesses that get help from the Government to train people in Modern Apprenticeships. Does your argument hold up for the small businesses who take school leavers on as work experience students who are paid by the government.

In a word: Yes.

I didn't expect anyone to agree with me - well, not in a business forum, anyone. It happens to be my long-held belief that business should not get government subsidies, but I realise that's not a popular opinion around here, so I won't stir things up by expanding on my arguments.

Mike

 

[craig_mckenna]

I can see where Mike is coming from, so many businesses exist only because of Government money or grants and they aren't "real" businesses in many ways and they don't generate any return on the "free cash" or create jobs.

However there are also a significant number of businesses who have entered into the spirit that the money is given with and have gone on and thrived and created jobs after weaning themselves off the "free cash".

 

[Adventurelife]

I benefit from the rates reduction so obviously I like the idea form a cost saved perspective

However, a bit of a story.

I spend most of my time looking at how we can grow develop and expand our business interests. I pay others to do the day to day doing. I did start expanding across the UK and took on more premises and people in various locations.

The cost of doing so was significant. Office/retail space in good locations is just stupidly highly priced if you add in all the true costs which rates are just part of. Hence you are seeing shops, hotels, and various other businesses deserting the high streets etc.

I reigned back my expansion in the UK because the hard fixed costs of doing so, the ones I could not avoid were just to high which means I would have had to pass the costs onto the clients which means I would have been at a disadvantage on pricing.

The result is although we are still creating more UK jobs they are nothing on the scale they could have been as I am investing overseas more than here because of simple value calculations and costs being significantly lower in most but not all cost areas.

This gives start ups a chance in the critical first few years.

The issue is much wider than small business paying rates or no rates. Starting businesses that have growth potential and employment potential which the country desperately needs is a very expensive action and as such encourages businesses to stay as non-employers.

I tend to agree with Mike I do not like seeing tax payers money being given to businesses as most gets totally wasted ( disclaimer I am in a SE growth scheme but to date have not taken any £) I would prefer that money to be spent reducing the costs of doing business. IE Nat insurance a jobs tax and the every increasing employment laws that stop small businesses taking on people

 

[Mike Lewis]

Let me modify my earlier reply.

DavidK mentioned apprenticeships and training. I am not against the government giving money to a business to perform a socially-useful task that the business would not otherwise do.

Apprenticeships might fall into that category. If the aim of the money is to help young people get trained, rather than it going into the bottom-line of the business, I'm in favour.

My real objection is to the government propping up businesses that wouldn't otherwise survive, especially given the possiblity of more efficient businesses taking their place.

Mike

 

[shredder]

In my mind all that will happen is that rents will increase by the amount of the subsidy. Rent is set by supply of and demand for the accommodation. Where there is no rates subsidy a business will factor the cost of rates into their business plans and the amount of rent they "bid" in the market will be a set level. Remove the cost of rates and they will offer more to rent.

It benefits businesses in the short term if they have already agreed a rent, then they receive a windfall but when they renew their lease or have a rent review it almost certain that rent will be higher by the amour of the saving.

 

[Gouldie0]

My real objection is to the government propping up businesses that wouldn't otherwise survive, especially given the possiblity of more efficient businesses taking their place.

Mike

The problem is Mike, we don't exactly have a queue of 'efficient' businesses wanting to jump into renting a building, unit, shop whatever it may be.

I agree that the SBBS is a short term solution, a sort of carrot and a stick approach to get people to try and expand there businesses. However it isn't a long term answer and ultimately if the rates don't get them, something else will like a VAT bill or unexpected expense.

 

[Mike Lewis]

The problem is Mike, we don't exactly have a queue of 'efficient' businesses wanting to jump into renting a building, unit, shop whatever it may be.

Well, I don't know if that's true or not. But if it is, maybe it's an argument for saying that businesses in general would become more efficient if government subsidies were removed. The less efficient businesses would die, and the more efficient ones would remain.

 

[davidk1]

The SBRB scheme was never about propping up businesses. The reason it was introduced was to encourage small businesses to become more sustainable and efficient and ease their cash flow problems. Exactly what Mike is suggesting. If the SBRB scheme is being used for other activities and it can be proved then the offending business should lose their right to participate in the scheme. I'm sure there are many businesses who have survived and prospered and maybe even employed people because of the help the SBRB scheme gave them. I don't think all businesses that qualify for the SBRB scheme are merely being propped up by this subsidy, and anyway where are the "more efficient" businesses who would turn down a chance to operate "rates free"............my bet is irrespective if they were "more efficient" they would still hold out their hand for the rates subsidy.