Memorandum by the County Councils Network
(CCN) (SBR 15)
The County Councils Network (CCN) is a Special
Interest Group within the Local Government Association (LGA),
with all 37 English Shire Counties in membership. The Network
exists to promote the voice of our members within the LGA, and
the values and interests of the English Counties. Together these
authorities represent 48% of the population of England and provide
services across 87% of its land area.
The CCN would like to thank the House of Commons
Communities and Local Government Committee for giving them this
opportunity to input into the examination of the case for Government
to introduce a power for local authorities to levy a supplement
on the business rate within their area.
The CCN would like to address the issues under
the headings provided at the time of the announcement.
1. THE RATIONALE
FOR INTRODUCTION
OF A
SUPPLEMENTARY BUSINESS
RATE
The CCN welcomed Sir Michael's proposal in his
final report that local authorities be permitted to introduce
a supplementary business rate to be retained locally. The CCN
believe that local authorities should be given the freedoms and
flexibilities to invest in infrastructure to promote economic
growth. This is something both businesses and local authorities
have called for. Locally focused funding would be able to draw
on the specific knowledge and details of the needs within that
area, something which is impossible at a national level.
If predictable and reliable over a number of
years, this new income stream will produce a guaranteed income
resource. This will enable Local Authorities to make better use
of their prudential borrowing powers and put ambitious projects
into action, which if successful would in turn contribute to the
area's economic prosperity.
The CCN would however like assurances that this
potential income stream will not influence the allocation of grant
funding for housing, economic development and transport.
2. ACCOUNTABILITY
AND APPROVAL
MECHANISMS FOR
THE INTRODUCTION
OF A
SUPPLEMENTARY BUSINESS
RATE AT
A LOCAL
LEVEL—THE
ROLE OF
BUSINESS AND
THE WIDER
COMMUNITY
The CCN believe that any mechanism for supplementary
business rate must be transparent, simple and easy to administer.
Local Authorities must be encouraged to develop these systems
in partnership with the local business community; a concept also
recommended by the Lyons Inquiry.
In the short term a supplement on business rates
would increase the cost of property occupation and may result
in potential reductions in the capital value of property. In the
longer term, business rates are likely to be passed on to owners
in lower rentals and could lead to a reduction in rateable values.
This in turn could lead to an increase in the national tax rate
in order to raise the same amount of revenue nationally. The CCN
would request full exemplifications of the potential impact of
this to ensure that the introduction of a supplementary business
rate would be beneficial overall and that any additional income
would be material.
However the opportunity to expand the tax base
and improve dialogue with business is welcome. We believe that
active engagement between local authorities and businesses in
economic growth and development projects can only be beneficial.
3. CONSIDERATION
OF IMPLEMENTATION
ISSUES, INCLUDING
THE IMPACT
ON LOCAL
AUTHORITY TAX
BILLS AND
DECISION-MAKING
IN TWO-TIER
LOCAL AUTHORITY
AREAS
The introduction of the locally collected and
distributed SBR must be clearly differentiated from the locally
collected but nationally distributed NNDR. Any ringfencing restrictions
must also be clearly detailed to taxpayers. The CCN believe these
restrictions should be set locally to meet local needs.
It has been proposed that upper tier authorities
set the supplementary levy. However, we feel it should be linked
to wider stakeholder governance arrangements for long-term strategy.
Nevertheless the agreement of the levy would
assist in ensuring the revenues raised meet the overall needs
of the area as well as allowing for careful assessment that the
one rate set for the County would not adversely impact on individual
Districts.
4. THE IMPACT
OF A
SUPPLEMENTARY BUSINESS
RATE ON
EQUALISATION
Under a wholly localised business rates system
Central Government would need to reallocate approximately 70 authorities'
local tax revenues to other authorities in order to maintain current
levels of equity. This would not provide any incentives for growth
as the taxes raised locally would not resource the locality nor
would it help build relationships between businesses and local
authorities. To avoid this, a levyed supplementary business rate
should be ringfenced from Formula Grant distribution of NNDR and
RSG.
5. THE APPROPRIATE
SCALE OF
THE SUPPLEMENT
In his report Sir Michael Lyons suggests that
authorities hold some flexibility over deciding which size of
business should pay the levy. The CCN would support this local
retention of flexibility, which allows for local negotiations
regarding the precise structure of contributions.
6. THE THRESHOLD
FOR PAYMENTS
AND WHETHER
SMALL BUSINESSES
SHOULD BE
REQUIRED TO
PAY
Whilst the CCN regard small business protection
as a necessity, LABGI, BIDS etc are all aimed at promoting business
growth. Therefore levying a supplementary rate must be carefully
assessed to ensure there is no negative impact and larger businesses
do not feel that they are unfairly and effectively subsidising
smaller businesses.
A discount or exemption for smaller businesses
is unlikely to substantially reduce the overall yield for the
supplement although it's precise design may vary according to
the nature of proposed projects SBR is expected to fund. This
should be managed at a local level taking into account local economic
conditions.
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