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Podcast Transcript – Non-domestic rating account S22

I’m here with Caroline Gardner, Auditor General, to talk about a new report on the Scottish Government’s Non-Domestic Rating, or NDR, Account. Auditor General, to start us off, could you explain what non-domestic rates are and how the NDR account works?
Of course: Non-domestic rates are more commonly known as business rates – they’re effectively a tax charged on properties that are for private businesses and public and third sector properties.
The NDR account shows the amount of non-domestic rates collected by councils and then redistributed back to them by the Scottish Government during the year. 
So what’s the purpose of your report?
It aims to help the Scottish Parliament understand how the NDR account works and to explore some important issues. That’s particularly important at a time when Scotland’s public finances are getting much more complex with the introduction of big new financial powers. 
And what are those issues?
One relates to the transparency of the financial reporting on non-domestic rates. At the moment information about non-domestic rates is fragmented across a number of different Scottish Government accounts and budget documents. That matters because non-domestic rates make up a significant part of the total Scottish revenue budget each year, and Parliament needs more transparent information to support effective decision-making.
You also highlight that the NDR account was £297m in deficit at the end of the 2016/17 financial year. Why is that an issue?
Well, the figure has built up over the last four years and it means the Scottish Government has redistributed more to councils in recent years than local authorities have actually collected in non-domestic rates. The Scottish Government itself decides how much to redistribute each year as part of the Scottish budget. And my report highlights that while the Government has signaled its intention to bring the account back into balance, there’s currently no formal plan for doing so. 
So what recommendation are you making?
I think the Scottish Government  needs to set out very clearly how it’s going to tackle the non-domestic rates deficit balance, including the impact on its overall financial position. That’s an important part of its commitment to longer term financial planning. It will also help MSPs to build up a clearer picture around non-domestic rates and their part in the Scottish budget, as well as its impact on Scotland’s longer term financial sustainability. 

Auditor General, thank you very much. 
And if you want to read the Non-Domestic Rating Account report you can download it from our website - audit-scotland.gov.uk. 
ENDS