Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Minutes of Evidence

Examination of Witnesses (Questions 300-319)


11 MAY 2004

  Q300 Christine Russell: I will ask Mr Cornish in a minute, because he represents a particular sector of business, but from your perspective you think the views you have just expressed would go across the whole spectrum of business interests in the south west?

  Mr Lewis: Undoubtedly. Hence Somerset did not answer your question about consulting businesses.

  Q301 Christine Russell: Do you want to comment, Mr Cornish, on your views from a tourism perspective?

  Mr Cornish: Tourism is a highly competitive business. If we are going to attract people to the south west, it has to be as good a deal or a better deal than the obvious alternatives. Many of the obvious alternatives are the near abroad and the near abroad is taxed less heavily than is the south west and the rest of the UK. The EU average tax faced by visitors is 8.5%. Popular destinations for Brits and for other people who might come to the south west include Spain, 7%, and France, 5.5%. Up against that sort of thing, our 17.5% looks high. There is one other statistic that comes from the BTA, when the BTA existed. For the average American family of four going to any of 52 prime cities in the world, the tax burden on London is the second highest of the 52. In other words, there are 50 places cheaper in tax terms to go to. In terms of competition, the tourism business, hotels, restaurants, catering for tourists, the attractions or whatever in the south west are already facing an uncompetitively high rate.

  Q302 Christine Russell: Would both your organisations still be as averse to the relocalisation of business rates if increases were pegged to increases in council tax?

  Mr Lewis: Yes.

  Mr Cornish: I am not going to answer that directly because we are concerned about the burden, the dividing line between moneys raised centrally and moneys raised locally is of less concern. We are only concerned about the competitive position for the business.

  Q303 Mr Cummings: When you are talking about the 52 other cities in relation to London, what is the position with public health in these cities and public toilets? Are you talking about Bangkok? Are you talking about third world countries?

  Mr Cornish: I am talking about cost.

  Q304 Mr Cummings: What about services?

  Mr Cornish: I am talking about the tax. Of course there are all sorts of things like that but the tax burden on the visitor is what I was talking about. What you get for that tax burden depends massively as to whether you are in Bangkok or Taunton and the sensible ones will go to Taunton.

  Q305 Mr Cummings: There are those who favour relocalising business rates who would argue that it will strengthen the partnership between local government and businesses and increase accountability. Do you accept these arguments?

  Mr Lewis: Speaking on behalf of the business community, they would say there is little accountability and should be no taxation without representation. They have no vote so it is an interesting argument.

  Q306 Chairman: They live in the area, do they not?

  Mr Lewis: Some do and some do not. It depends on the size of the business and the area which you talk about as local. There is obviously the possibility which we are working hard on in the regions, both through the Regional Development Agencies, through the business bodies and through our local authority partners, to engage with businesses and that is happening very successfully. Indeed, there is a good example of that in Torbay with the new Torbay Development Agency.

  Q307 Mr Cummings: You do not have a position at the present time on it?

  Mr Lewis: We do not see that it is important to have the revenue raising going along with that. We can get the business cooperation without that.

  Q308 Chris Mole: You are encouraging a discussion when local authorities are obliged to consult their business rate payers, even though the business rate is nationalised. Every year, the local authority has to have a meeting which business rate payers can attend, even though the local authority no longer sets the local business rate.

  Mr Lewis: I am not personally encouraging that and I have not come here to talk about that. It seems to me that is a meeting we could do without.

  Q309 Mr Cummings: There is also a school of thought that says that the lack of accountability argument does not work because we never hear it in relation to corporation tax or the many other charges that fall upon businesses. Would you care to comment on this point of view?

  Mr Lewis: Again, it is difficult for a government quango representing business to go into that level of detail. Businesses would come back and say they want consistency, certainty, simplicity at the top of the list, then they would obviously add, "They would say that, wouldn't they?" and a low level of charge. I think we should be advocating as public servants looking after business interests just those first three: consistency, certainty and simplicity.

  Q310 Mr Cummings: You do have a viewpoint as a development agency, or you do not have a viewpoint?

  Mr Lewis: As a development agency, we represent the interests of business back into government. That would be the viewpoint of business.

  Q311 Mr Cummings: The local business rate is an immensely important element of local business. Do you have a particular stance?

  Mr Lewis: Local business rates are part of the base costs of businesses. At the moment, it works acceptably and there is no wish in the business community to abolish them or change them.

  Q312 Mr Cummings: So you do have a view?

  Mr Lewis: Yes.

  Q313 Mr Cummings: Both the organisations here today work very closely with businesses and local authorities in the south west. Can you tell the Committee firstly what is your assessment of the level of understanding by local authorities of the needs and concerns of business? Secondly, how big a risk is there that if business rates were to be relocalised local authorities would set the rates at a level where they would damage businesses?

  Mr Cornish: It is a general question and I can only answer it in a general way. One of the features of the tourism industry is that it is highly fragmented and is represented by a very, very large number of mostly teeny, tiny businesses. Many of these businesses do make it their business to keep in pretty close tough with local authorities. My general guess is that in the areas where there is tourism, which is an awful lot of the south west, you will find in local authorities, whether they want it or not, that they have been forced to take on board the preoccupations of these businesses to a fairly steady degree.

  Mr Lewis: The relationship between local authorities and their support for businesses, like everything, varies dramatically across the region. Some are very good and some are very poor. All we seek to do as a Regional Development Agency is publicise the examples of best practice and encourage the laggards to catch up.

  Q314 Mr Cummings: Do you believe that there is a great degree of understanding by local authorities as to the needs and concerns of business?

  Mr Lewis: In some, yes. We have some exemplars of best practice. In Bristol, they are particularly aware of the need to help social enterprise and are very active in doing so. That is to be encouraged. I just mentioned the example of Torbay Development Agency where they followed the best practice example of Cornwall and set up a separate agency, putting their economic development activities outside. In some local authorities, yes; in others, not. That is what local democracy and accountability are about, presumably. It varies.

  Q315 Chris Mole: Let us look at that from the other end of the telescope because you both want a climate in which businesses, whether it be the tourism business or businesses generally, can succeed. Does the current system of local finance hold local authorities back from investing in economic development?

  Mr Lewis: Again, it varies. As the treasurer of Somerset County Council said, it is very complicated and certainly if it is complicated for him it is impenetrable to me. I am happy to talk about the finances of regional development agencies, although with Rita sitting in the corner I might be a bit nervous. The answer is we cannot quite understand. In some, like Bristol, they seem to be able to find the funds to do very well. Cornwall as well, but there is European money there as well. I am told that it was in the block grant, it depends historically how much they spent on economic development activities and business support activities. This impacts on their capacity to do so in the future. All I know is that it is variable and that businesses obviously want to see the example of the best followed.

  Mr Cornish: Most tourism businesses believe, I think with good reason, that the tourism budgets of their local authority are under very severe pressure indeed. The effects are being seen in attention to public realm facilities, the usual things, cleanliness of beaches, public loos etc. There is a widespread perception that, try as they may, an awful lot of local authorities are struggling like crazy to continue to provide a decent service and in many cases are not succeeding.

  Q316 Chris Mole: Are things like a day out in Somerset, if something like that exists, subsidised by your local authorities?

  Mr Cornish: We are talking about tourism publications?

  Q317 Chris Mole: Tourism promotions and publications.

  Mr Cornish: Yes. That typically would be largely financed out of the local authority's tourism budget. If it formed part of a campaign that we were running, the money that we would be using for that campaign typically would come largely from the RDA.

  Q318 Chris Mole: Let us focus on the RDA. What proportion of your funding comes from central government?

  Mr Lewis: 100%.

  Q319 Chris Mole: Does your reliance on that high level of funding affect your ability to meet your objectives?

  Mr Lewis: I do not want to be trite but obviously one of the problems that the South West RDA suffers from is a problem that I thought Somerset would raise more strongly, which is that generally speaking when government allocates resources the south west seems to suffer under those formulae. Certainly the South West RDA, in our view, does not get a fair share of the national two billion budget that is available for RDAs and therefore it affects our ability to perform, yes.

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