Annex A
Supplementary memorandum by the British
Chamber of Commerce (BCC) (LGR 12(a))
INTRODUCTION
The British Chambers of Commerce (BCC) welcome
the opportunity to participate in this debate. Business plays
a key role in wealth creation in local communities and should
have a central voice. Chambers of Commerce are the only business
organisation with a strong local base, representing 135,000 businesses
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 Government on this matter.
SUMMARY
— The British Chambers of Commerce
recognises the problem in local government funding. As the national
voice for local business we are ready and willing to play a fully
constructive role in reform whilst representing our members' interests.
— We strongly reject the suggestion
that business rates should be returned to local authority control.
With no direct accountability to business there is a strong likelihood
that we will see a return to previous times when business rates
were increased to unsustainable levels, damaging business precisely
because of the lack of a business vote.
— We suggested Business Improvement
Districts as an alternative to the Government's supplementary
business rate proposals and we were pleased when this alternative
was selected instead for implementation. This should ensure that
local authorities engage more effectively with their business
communities to improve their areas due to the voting rights of
firms. If the LGA or the Government feels that this engagement
is unlikely then the emphasis should be on them to reform their
own way of working, not to put further financial pressure on business.
— The current business rates system
is not ideal, but it works and in general is fair. We see no need
to alter it.
RESPONSE
1. Accountability is vital to any work by
any level of government and we are pleased that this is a key
theme of the LGA proposals. However, we find it difficult to reconcile
this to the proposals to transfer the control of the level of
business rates to local government. Local authorities are not
accountable to the business community and only national control,
where they gain national attention when altered, keeps the business
rate across the country at a sustainable level.
2. The proposals for revenue neutrality
are also worrying for business given that there is a desire to
reduce the burden on council taxpayers (despite the fact that
they have the right to vote out profligate councillors that business
does not). Our members, who employ over four million people, cannot
sustain a rise in business rates such as those experienced in
the past when the level was under local control. Our members create
the wealth of this country and to put them under even further
pressure risks the jobs of their employees and the economy as
a whole, not just at local but at national level too.
3. A full review of local authority funding
is long overdue and we would support such a project and would
feed in to it on behalf of our members. These proposals from the
Local Government Association (LGA) and considered by the Government
do not examine the fundamental problems of the system. All non-statutory
spending should be examined for efficiencies before extra funding
is sought.
4. The current system of business rates,
while having minor problems such as the disproportionate burden
on small firms, works quite well. We see no need to change it
for merely change's sake.
5. The link between local government and
their business communities is now supposed to come through Business
Improvement Districts (BIDs). If the LGA is not confident that
a democratic system of extra funding from local companies will
not engage local authorities with local firms then it is local
government in need of reform, not its financing.
6. The British Chambers of Commerce do not
agree with the proposals in the Government's document "Local
Authority Business Growth Incentives" (see Appendix 1). It
is overly complex and is not accountable. Local authorities are
rewarded for recruiting new businesses to their areas but are
not punished for poor performance or for losing existing firms.
Therefore the unintended consequences for existing firms could
be worse than the benefits intended for new companies.
7. Local discretion to vary business rates
is something we reject most strongly and we will fight this proposal
every step of the way. We recall when local authorities last had
this power and firms were subject to unrealistic rises that threatened
their very viability and in some cases drove companies away from
certain areas. This would work against the Government's desires
to regenerate town centres and we cannot therefore see the attraction
for this proposal, especially when generally the current system
works well in general.
8. The representative arrangements that
the LGA wish to see closely resemble the proposals for a BID Board.
We suggest that this is enough to enable engagement between local
government and employers. The only other alternative that we could
accept is for the body that determines the business rate, should
it be localised, to be composed entirely of business members elected
in the same way as the legislation for a BID levy ballot sets
out. This is accountable and will then ensure that the local authority
cuts its cloth according to its fabric.
9. As the LGA points out, the business rate
raised £15.6 billion last year. Such a large contribution
to the well-being of the country should be rewarded by recognising
the needs and concerns of the companies that raised such a large
amount.
10. The LGA also states that 26% of national
income tax goes to fund local government. This makes local authority
funding a nationally important issue and we contend that this
should ensure that the financing coming from those who do not
have a vote should be protected by the national spotlight remaining
on it.
11. We do not agree with allocating a proportion
of income tax to local authorities. The scheme is too complex
and we believe that accountability is best served by transparency.
The current system guarantees that and we contend it should be
maintained.
12. Making the Inland Revenue responsible
for collecting income tax and then passing it on to local authorities
is overly complex and invites disaster. Again this proposal fails
the transparency and accountability test.
13. Finally, localising other taxes such
as vehicle excise duty, sales taxes, stamp duty, and land value
tax are unnecessary. The desire to increase local power is understandable
from an organisation representing local politicians. However,
there is little accountability at present at local level. Without
an increase in scrutiny of local authorities and a larger say
for business there is no mechanism for local politicians to take
responsibility for their actions in this field. We therefore do
not support greater powers for those who do not wish to accompany
them with greater transparency and accountability.
CONCLUSION
The Minister of State for Local Government and
the Regions agrees with the LGA when he states that firms will
have to face up to higher business rate payments in the future.
However, the Chancellor of the Exchequer in his recent pre-Budget
Report outlined his intention to "to strengthen Britain's
enterprise culture". Increasing business taxation is a peculiar
way to go about that aim.
Council taxpayers have been the victims of higher
bills in recent years but they at least have the vote to remove
local and national politicians who increase this burden. Local
allocation of business rate revenues is one thing but local control
of the level of the rates is something that we cannot accept.
Business Improvement Districts (BIDs) have recently
been introduced in place of the Government's originally proposed
supplementary business rate. BIDs were an idea that we suggested
based on American projects and we are pleased that the Government
listened on that occasion. This scheme has the advantage of improving
local services only where local businesses have given their support
to the increased levy on them through a vote. This was proposed
to ensure that local government engaged with the businesses in
their area.
If the LGA or Government is now suggesting that
they are not confident that local government can engage with companies
in this way then this should be their first target for reform.
Until accountability is built in to the local business taxation
regime, we cannot accept putting the control of local business
rates in the hands of people who have previously proven unable
to exercise such power.
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