Examination of Witnesses (Questions 640-650)
MICHAEL ROBERTS,
LUCINDA TURNER
AND SIMON
PARKER
25 MAY 2004
Q640 Chris Mole: Do you think your members
would like to operate in a regime in the private sector, and were
gearing to apply would it help to encourage innovation and efficiency,
if, say, to cover a 5% increase in costs, a firm had to increase
its prices by 20%?
Mr Roberts: I think, frankly,
to the business community the whole of local government finance
seems just odd and a lot of people do not understand the inwardness
of it all. I think, being more serious, what they reflect on is
that probably there are bigger questions to be asked as to what
is the fit between what local government is expected to do and
the resources which are made available to it, whether those are
set or raised locally or whether they are raised centrally. Alongside
that are issues about the efficiency with which then they spend
the money to deliver the things it is deemed fit that local government
should spend the money on. Without trying to suggest necessarily
we have all of the answers to all of those extremely challenging
questions, our view is that, whilst a lot of the discussion in
the debate about reform of local government finances tended to
focus on whether it should be a reform on council tax or a change
to business rates, there are those rather more important, fundamental
questions which perhaps are not getting the attention they deserve.
Ms Turner: I think also it is
important to highlight that business is operating in a very different
context. We have to provide for cost increases in many areas—taxation,
regulation, wages, etc.—actually while having to reduce
prices because of the competitive environment we are working in.
Many firms are working at RPI minus X, rather than, as we have
heard about in terms of local authority funding, RPI plus X.
Q641 Chris Mole: Let me move on to another
aspect of delivering efficiently. You are arguing the case for
some local authorities to increase the role of the private sector.
To an extent, that is true already, great chunks of what local
authorities do are contract-provided. When local authorities are
expected to deliver, as the Red Book expects them to, 2% savings
through efficiency in a year, are you quite happy for that to
be passed on to those providers who are providing through a contract?
Mr Roberts: That sounds to me
like endorsing the merits of competition, which is something that
we have always been in favour of. At the end of the day, we are
not suggesting that the private sector always will be the best
solution to a particular challenge that local government has,
or indeed anyone in the public sector. What we are saying is that
diversity and contestability are the watchwords which should govern
how Government seeks to improve procurement with value for money.
In some circumstances, the private sector's ability to compete
on value and price will be a better deal for local government
and for councils and business rate-payers alike; in other cases,
it will not be. In a sense, that is the challenge which has got
to be met by local government as the client. In some cases, yes,
I am sure the private sector will be able to come up with a better
deal and that is how it should work.
Q642 Chris Mole: What do you think a
local authority should do, if you are demanding improvements to
transport infrastructure and yet the price of black-top is going
up 20% a year, which has been characteristic over the last few
years for road maintenance costs?
Mr Roberts: I think that needs
to be taken into consideration when it comes to setting or giving
out the contract. It may be that a particular provider in the
private sector can find other ways of offsetting that increase.
I think certainly the client needs to be aware, where there are
legitimate pressures, of the effect that has on the contract price
which is being offered.
Q643 Mr Betts: Local income tax. Does
the CBI have any view about the possibility of producing a local
income tax, particularly the impact on employers with regard to
the collection of a rate which might vary from one local authority
to another?
Ms Turner: I think that is the
one area where we are trying to determine a view, because in the
broader perspective again it is an issue between the personal
tax-payer and Government and local government. In terms of where
the burden might be seen to fall on the employers in the payroll,
there are significant potential impacts. You mentioned the number
of different local authorities, potentially. There is also the
issue of people moving and who is responsible, whether it is the
employer's responsibility to track where their employees are going
and alert the Inland Revenue to that, it depends on how the system
is set up. It is very difficult to take a view ahead of any firm
proposals as to how the system would work, but there are potential
implications in terms of complexity, cost and burden on business
in administering the scheme.
Q644 Mr Betts: You say it is difficult,
in advance of any system. You must have got some idea about whether
broadly you would welcome it or whether you have got such great
concerns that you would be saying, "No way. We don't want
to go down that route"?
Ms Turner: There are definitely
concerns among businesses, particularly on the SME side where
the payroll operation is a greater burden, proportionately, for
them, but it is early days in the discussion process. What we
can let you have is a memorandum we submitted to the Balance of
Funding Review, looking at some of the detailed issues.
Q645 Mr Betts: Would you see any problem
in terms of businesses looking to relocate if income tax levels
varied from one area to another? Have you any idea of that sort
of effect, or have you not done any research?
Mr Roberts: We have not got a
view on that. I think our focus has been more on the mechanics
of how employers might be involved in actually how you collect
the income tax, rather than some of these broader implications.
Ms Turner: Locational issues would
be difficult to discern, seeing that many businesses' employees
come from many different local authorities, so it would be difficult
to relate that directly to where the business is located, in many
cases.
Q646 Christine Russell: You will be aware
that the Local Government Association has come up with a basket
of alternative taxes, sales tax and bed taxes and workplace parking
taxes. Have you assessed any of them? Have you come to any views
on the likely impact that any of those additional charges could
have on your members?
Ms Turner: Again, ahead of formal
proposals it is very difficult, but, in broad terms, sales tax
would be a very difficult thing in this country because of the
boundary issue and the ease of moving from one retail area to
another. In terms of congestion charging, something we have supported
in principle, we have supported it mainly as a mechanism to target
congestion rather than specifically as a revenue-raiser. I think
our opinion would differ according to specific proposals.
Q647 Christine Russell: We seem to have
had some support for a workplace parking tax from, I think it
was, the South East, I am not sure if it was the RDA or the Tourism
Association from whom we took evidence. What about that particular
one?
Ms Turner: In terms of impacting
on congestion, we believe it would have very limited impact, given
that it targets only a particular section of road-users, and it
is likely that if they moved off that road space the road space
would soon fill up with those who were not paying it. So we have
concerns about a workplace parking levy, we far prefer congestion
charging.
Q648 Christine Russell: You have mentioned
the concern over the sales tax. Are there any others that you
would not like to see the Government encouraging because they
would be detrimental to your members?
Ms Turner: A tourism tax, again,
would have a differential impact, I think, in many of those areas
which need the extra revenue most. It would be far harder for
them to raise the revenue through a tourism tax because of the
sensitivity of that market. I think we would have to assess each
proposal as and when. I think the important thing to bear in mind
is, again, that wider context of business taxation. We are facing
proposals, you have mentioned the Kate Barker proposal, there
are proposals on Section 106, we have got one potentially on Business
Improvement Districts, in which we are engaging. It depends. There
will be a finite number of measures that business would be able
to absorb without it impacting on local economies. Again, I think,
assess it individually but also within that wider context.
Mr Roberts: Briefly, I think the
overall point just to register is that our members generally favour
tax simplicity. They have been concerned about what they see as
an increasingly complex tax system and there is a danger, which
I am sure could be managed, that if you have a wide variety of
different forms of taxes, some of which are set at differently
applied local rates, actually you are working to increase complexity
rather than against it. In terms of the overall attraction of
the UK as a place to do business, we do not see that as being
a good thing, necessarily.
Q649 Christine Russell: In general, are
you arguing to keep business rates exactly as they are at the
moment and retain the council tax perhaps with some modification?
Ms Turner: Council tax, again,
we have not taken that view. In terms of business rates, I think
there are enormous fears as to the potential of relocalisation
and the impact on business.
Q650 Christine Russell: Have you had
a look at the possible role of elected regional assemblies in
monitoring, policing, any of these additional taxes which could
cross boundaries? You said there would be difficulties in administering
the sales tax, for instance?
Mr Roberts: We have not looked
at the issue of assemblies with regard to that particular issue.
More generally, I think it is probably well known that when we
have consulted members on this issue of elected assemblies they
have a number of questions as to whether or not they will genuinely
add value to the things that matter to business, and those questions
I think still remain unanswered, in large part. On the specific
question that you have asked, we have not had a particular view.
Chairman: On that note, can I thank you
very much indeed for your evidence. Thank you.
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