Examination of Witnesses (Questions 480-499)
MR PHIL
SHAKESHAFT, MR
TIM JAMES
AND MR
ANDREW SUGDEN
18 MAY 2004
Q480 Mr Betts: Businesses do not pay
for policemen or fire engines, so there are certain things. Do
you notice the difference in different authorities?
Mr Sugden: Absolutely. The Chamber
of Commerce operates an award on an annual basis which we call
"Best for Business" and the only candidates for that
award are local authorities within the north east region. The
entries for the award have just closed this past week, and what
is encouraging is how positive and how much engagement and awareness
of the business community there is from a small number of local
authorities, and something that we recognise as a Chamber of Commerce
is that, of course, issues around crime, environment, cleanliness,
and the ability for employees to be able to get from A to B are
services that are provided by local authorities in the district.
Mr James: And, indeed, those local
authorities now have local strategic partnerships and many of
the groups, Crime and Disorder, for example, have members involved
and members do appreciate—because we consult with Northumbria
police in Tyne & Wear, and the other local authorities—how
much police are doing to streamline, improve efficiency and fight
crime. So we do not ignore the fact that there is a lot of good
work going on.
Q481 Mr Betts: The Local Government Act
2003 gave authorities new freedom to borrow, track business, to
trade, and charge for services. Has there been any noticeable
impact from that freedom in terms of your members?
Mr James: Yes. I think you have
seen charges go up in local authorities, and we do not have an
argument with people charging the true cost of providing services,
so we have seen evidence of that. We have seen evidence I think
of people starting to look at prudential borrowing and using that
as a mechanism for investment.
Q482 Sir Paul Beresford: Do you not fear
that local authorities as municipal traders are at an unfair advantage
over business? They do not have to make a profit, they do not
pay business rates or taxes, they can absorb their overheads and
cannot go bust because they are supported by public subsidy.
Mr James: I was referring to the
services that only local authorities can provide. There is another
element to the services they provide in that they have public
works departments, and that might be a bone of contention, that
our members might like to compete on more equal terms. But it
is not a huge issue at the moment with the way the construction
market operates in the north east.
Q483 Sir Paul Beresford: But it could
be if the local authorities decided trading was an in thing, and
you suddenly found your members are competing with your local
council.
Mr James: It would be an interesting
situation.
Q484 Sir Paul Beresford: Well, you would
go bust, would you not? Down the swanny? Your businesses would
be at a distinct disadvantage.
Mr James: They would suffer if
there was an element of subsidy in the services that they were
competing against, yes.
Q485 Mr Betts: In 2005-06 the Local Authority
Business Growth Incentive Scheme is expected to come into force
and local authorities will be able to keep a certain proportion
of the extra revenue that comes in from the growth of the business
rate business in their community. Do you think that is a good
idea, or do you see it as localisation by the back door?
Mr Sugden: There is a lot of local
sympathy for local authorities to be rewarded for their efforts
in terms of economic regeneration and development. More broadly,
the concern that we have is the disparity between the business
growth rates and the business formation rates in the north east.
We have areas such as Easington and Wansbeck which are very much
at the bottom of the league table of business formation, and they
are just a few miles away from very prosperous dynamic business
growth areas such as the centre of Newcastle. We are concerned
as the Chamber of Commerce that we do not want to see those authorities
which are hamstrung by structural failings in their economy further
hamstrung by a re-allocation of finance, but at the same time
we do concede that some reward and some mechanism for being able
to reward those well managed, well run effective authorities,
is something our members are keen to see. There is a contradiction
in that and it is one we do not have a robust solution for.
Q486 Mr Betts: So you understand the
contradiction is that the government can sort it out?
Mr James: We think a lot of the
problems will arise from the detail, and when you start getting
into the detail it becomes very complicated.
Q487 Christine Russell: Moving on to
the rural areas and the impact of business rate relief, we know
that agricultural land and buildings are exempt but there are
quite a lot of schemes for encouraging the re-use of agricultural
buildings, and there is rate relief for trying to retain post
offices and community shops and facilities. Do you have any views
on that kind of rate relief? Is it useful?
Mr James: It is useful in helping
farms find use for redundant buildings and for creating jobs locally.
Obviously we welcome such rate reliefs and in rural areas and,
indeed, urban areas undergoing regeneration.
Q488 Christine Russell: That was going
to be my next question. So you think it has had a beneficial impact
in the rural areas. How would you like to see it extended? What
do you think of the small business rate relief scheme that is
coming in next year?
Mr James: I am not familiar with
the details of that, I am afraid, but any relief for small business
is going to be a reward.
Q489 Christine Russell: It is relief
for where it is a very small business, probably a one-person business,
where the rateable value of the property they are using is less
than £8000.
Mr James: This applies to a single
unit business.
Q490 Christine Russell: Yes.
Mr James: Broadly we welcome that.
We have discussed that at the Valuation Office Agency Panel. It
would be a good thing and we would welcome it.
Q491 Christine Russell: Do you think
that would be particularly useful for the north west, that it
might encourage a lot of younger people to have start-up businesses?
Mr James: Any measures that reduce
the burden on small businesses are welcomed by us.
Mr Sugden: To reiterate some other
points that Phil has already mentioned, a lot of local authorities
already find some mechanism or another to try and stimulate enterprise
in small units and small start-up businesses, and try and find
creative incentives, so that the additional burden of not just
business rates but the start-up cost burden is reduced in terms
of providing additional communications facilities, rent relief
as well rate relief, so there are a number of different mechanisms
which are brought into play by a number of local authorities and,
broadly, they are very welcome.
Q492 Christine Russell: Are there any
particular small enterprises that you would like to see specific
relief going to?
Mr James: Yes. I would like to
see more done in the way of relief for small businesses that operate
in areas undergoing regeneration. You know that the north east
has a housing market pathfinder renewal programme, and in undergoing
change in an area—and the west end of Newcastle is a prime
example where the housing stock has been reduced because there
is a renewal in process—the trick is to try and keep those
businesses that provide local services and jobs in business while
the area is being regenerated, so they both come out the other
side of the regeneration.
Q493 Christine Russell: Do you think
it might be more useful if the relief was applicable to the location
rather than a type of business?
Mr James: I think selective relief
in areas undergoing regeneration would be very valuable indeed.
It is not just corner shops we are talking about; it is actually
the small businesses that employ very local people and have done
for some time. History shows that, if those businesses close and
move or relocate, people do not tend to follow those businesses
and it is very difficult to start new businesses in run down areas,
so it is imperative that we retain the business stock in areas
undergoing regeneration.
Q494 Mr Betts: Moving on to regional
assemblies, there is clearly a referendum coming along. If there
is an elected regional assembly, should they have some role in
the area in terms of local government financing? Should they be
overseeing it in some way? Should they be looking at the distribution
of central funding for local authorities within the region? Do
you see any of that being appropriate?
Mr Sugden: It may be appropriate
in areas where there is a clear overlap between the remit of the
elected regional assembly and the remit of local authorities.
It is certainly a major concern of the business community in the
north east that there will be a lack of clarity between national
government agencies, an elected regional assembly, and local authorities,
and defining that clarity and those clear areas of responsibility
and who is statutorily responsible for certain services and certain
delivery elements is something that we are pushing quite heavily
to be finessed in the final Bill. As regards having any control
or authority over the local authority financing, it is something
we have not given a great deal of thought to in the White Paper,
which we are currently lobbying to see strengthened and to see
additional more effective powers for elected regional assemblies,
if that is what to be available for the north east. We have not
considered the local government revenue implications of that.
Q495 Mr Betts: A more effective and powerful
regional assembly might well have the power to fix the business
rate?
Mr James: It may well do!
Q496 Mr Betts: That is something you
would be lobbying against, is it?
Mr James: I think you know our
views!
Q497 Mr O'Brien: We spoke earlier about
the gearing within the financing and the balancing of funding
in local authorities. One of the suggestions being made by local
authority associations and other bodies is that we should be looking
at other forms of tax raising in the area of local authorities.
As you know, there has been a basket provided with all kinds of
taxes including bed taxes for tourism, local congestion charges,
local sales taxes, more charging for services, vehicle exercise
duty locally—a number of suggestions have been made. What
effect would this have on your members if there were to be introduced
some other forms of tax raising for local services?
Mr Sugden: The principle that
we would like to reiterate here is we would not like to see an
additional burden on businesses which is where, on issues such
as congestion charging, there is a much more sophisticated argument,
as you have seen played out in London, around reducing congestion
and the ability that that may have in terms of reducing a congestion
burden in return for increasing the charging burden. It is something
that we would be very cautious about supporting, but there may
be some very locally specific circumstances where elements such
as congestion charging would be totally appropriate, and where
those revenues were to be used or hypothecated for public transport
improvements. Some of the other measures, issues like a bed tax
for tourists, we feel very nervous about. Tourism is growing in
the north east and we are very proud to see it grow at the rate
it has, but at the same time it is very much emerging and to threaten
that by levying additional charges on tourists is something we
would feel very nervous about. Similarly, on some of the proposals
around workplace car parking charges, there is a very persuasive
argument about reducing the number of people who use their cars
to travel to work and simply park outside the office all day and
then drive home, but at the same time the proposals are seen as
very punitive without any incentive in terms of using that taxation
for improved public transport networks.
Q498 Mr O'Brien: One of the issues you
have raised is that of market forces. If local authorities have
facilities available which could raise taxes like car parking
and other areas, would you agree that that is a discretion that
should be left with local authorities to use so they can cover
their costs?
Mr James: We support local authorities
who use car parking charges to regulate the use of those car parking
spaces as a method of managing them so people do not park in them
all day, and some authorities very effectively use the revenues
from car parking to improve the car parks. There is a public safety
issue with regard to car parks, they should be lighter, airier,
with CCTV, and where local authorities are doing that then we
are highly supportive of that measure.
Q499 Mr O'Brien: One of the points you
made earlier when talking about education was the fact that a
lot of services are ring-fenced by government taxation, and you
scorned at that, but now you are saying that we are suddenly ring-fencing
income from car parking for car parking services, and yet you
are saying that some of the other charges should be hypothecated
to make sure it goes into that service. Are you not facing two
ways on this issue?
Mr Sugden: Quite possibly! The
main point is not necessarily that we would like to see 100% of
that revenue used for a specific purpose, but we would see it
as simply a punitive measure to introduce charges such as congestion
charging or workplace car parking without any similar investment
or any co-ordinating investment in public transport networks.
We would see that as a sensible means of investing in an improved
public transport network to reduce congestion, rather than necessarily
ring-fencing one budget purely for that purpose.
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