Memorandum by the British Chambers of
Commerce (BCC) (LGR 12)
INTRODUCTION
The British Chambers of Commerce welcome the
opportunity to participate in the debate on local government finance.
Business plays a key role in wealth creation in local areas and
should have a central voice in this debate. Chambers of Commerce
are the only business organisation with a strong regional base,
representing 135,000 businesses and 4.8 million jobs across the
country. We have consulted the entire network on this issue and
the opinion of that network is represented below. We trust that
our opinions will be given commensurate weight in the deliberations
of the Committee on this matter.
RESPONSE
— What is the role and purpose of government
grant in ensuring adequate local government revenue?
Our main concern is that Government is mandating
councils to carry out more tasks but seems to be providing them
with insufficient resources to do so. We feel that either more
money has to be provided to local authorities to support councils
with this extra workload, by reducing national expenditure elsewhere,
or that there should be less scope for direct instructions on
what local authorities should have to do from central government
and more local control of what councils do at local level to deal
with local needs and priorities.
— Is the current balance between centrally
and locally raised revenue appropriate?
We recognise the difficulties that arise when
councils wish to raise extra funding they have to raise Council
Tax by four pounds to raise one pound in revenue. This is due
to local funding making up 25% of council money compared to 75%
coming from central Government. However, we maintain that either
local control is increased in deciding what projects receive how
much money or that more funding needs to come from central Government
to attain aims set by central Government.
— Should businesses contribute directly
to local services?
Business currently believes that the existing
business rates system is generally working well. There are issues
around the fact that smaller firms pay a larger proportion of
their turnover than is strictly fair but in the main our members
have told us that the system is not broken and so no attempt should
be made to fix it. The danger of replacing a reasonably effective
system with a worse mechanism is real in the minds of our members.
If measures were taken to align the tax with businesses' ability
to pay linked to their profitability and to simplify transitional
relief arrangements then this would be welcome. But the overall
system is in no need of the drastic and dangerous move to relocalise
the control of the business rate.
BCC members can remember when local authorities
exercised local control. Retaining the business rate at a national
level ensures national scrutiny of it. Returning it to local control
would avoid any effective accountability and we oppose it most
strongly.
The example of Westminster council, where business
rate revenue vastly outweighs the entire council expenditure,
shows that some form of redistribution mechanism would be needed
if relocalisation were reintroduced. Therefore, the system would
become complicated and counteract the very aims of relocalisation.
Please also see Annex 1 for a full response
to the Local Government Association's proposals on relocalising
business rates and the Government's proposals on Local Authority
Business Growth Incentives.
— Is the Council Tax a viable and
adequate source of local revenue?
That there is a problem with local government
funding is not in doubt. Council Tax is where that problem lies.
Business does not wish to comment on Council Tax except to say
that given the problems of recent Governments with local government
taxation we recognise the need to resolve the issues. Yet reform
of the Council Tax is a nettle that must be grasped, as this is
where the problem lies. Our members see no need to punish them
through reform of the business rates when the difficulties lie
elsewhere.
— What other local taxes might be
acceptable? (eg a congestion tax, workplace parking tax, tourist
tax, earnings related tax or sales tax.)
We feel that there is no need for extra taxes
to cloud the issue. A simple, transparent and fair system of taxation
is what is required. Therefore, the business rate should be left
alone given that it generally works well and is understood. Any
reform of the Council Tax should ensure that it is simple to administer
and easy for the public to understand. This will ensure local
accountability and should avoid the current dispute about who
is to blame for Council Tax rises, local government or central
Government. The electorate do not know and accountability suffers
because of it.
Specifically, we are fundamentally opposed to
the work place parking levy as it is simply a tax, there is no
effort to incentivise more environmentally friendly ways to get
to work. It is a blunt instrument that will not achieve any gainful
progress in reducing pollution or congestion.
— Should there be a ceiling on local
government expenditure and taxation, and if so how should controls
operate?
We feel that the business rate does not need
to be altered. The political considerations of the potential changes
to the Council Tax are not for us to comment. However, we would
like attention to be paid to the impact that any potential changes
to Council Tax would have on the local economy.
— To what extent does central Government
control or influence contributions to local government expenditure
and taxation?
As stated above there is a feeling that local
government is being asked to do more and more but without sufficient
resources to achieve the targets being set. Either more room to
manoeuvre should be granted to local authorities to prioritise
free from central Government targets or sufficient funding should
be granted to meet said targets.
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