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
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
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
Q317 Chris Mole: Tourism promotions and
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.