Memorandum by Yorkshire & Humber Chambers
of Commerce (SBR 21)
INTRODUCTION
1.1 Chambers of Commerce in Yorkshire &
Humber welcome the opportunity to provide a submission to the
Committee on the proposals to establish a Supplementary Business
Rate following the recommendation in the Lyons Review.
1.2 This response provides some collective
thoughts from the Chambers in Yorkshire & Humber. The British
Chambers of Commerce (BCC) are providing a national submission
and individual Chambers may submit further views from their members
locally, which reflects the importance of the SBR proposals.
ABOUT YORKSHIRE
& HUMBER CHAMBERS
OF COMMERCE
2.1 There are nine accredited and independent
Chambers of Commerce in Yorkshire and Humber who collectively
have 12,500 business members of all sizes, all sectors and in
all places in the region. These businesses employ more than 500,000
people in the region.
2.2 Taken together the Chambers in the region
are amongst the strongest in the country. They are the dominant
"voice of local business" in the region with unrivalled
policy and representation structures lobbying on key issues of
concern to their local business communities. Chambers of Commerce
are the leading business body at a local level across Yorkshire
& Humber and their relationships with local authorities gives
them a unique perspective on this issue.
SUMMARY OF
KEY POINTS
The key points we raise in this submission can
be summarised as follows:
— Chambers welcome the Lyons Review
and recognise the vital role that local authorities have to play
in developing economically strong towns and cities.
— In principle, we support the
further devolution of appropriate powers and responsibilities
to a local level for decisions in areas such as planning and transport.
However, it should be recognised that there is currently no direct
accountability of local councils to their business communities.
— We are therefore opposed to
the introduction of a SBR along the lines proposed by Lyons which
would introduce an additional tax, with no safeguards or direct
role in the decision making process for local businesses. A scheme
with limited business involvement would damage relationships between
business and local authorities which would be a serious set back
given the huge emphasis on partnership working at a local level.
— Chambers are already working
closely with their business communities and local authorities
in several places in the region to develop Business Improvement
Districts. They approach them positively because BIDs are business
led and must get enough support win a referendum. This democratic
principle should be carried through if any SBR scheme was to be
introduced.
— However, if a SBR system could
be developed in such a way that it would provide the appropriate
safeguards for business, then it may have the potential to contribute
to local economic development and win the support of local businesses.
This means that any scheme would need to:
— Ensure local businesses were central
to both the development of an SBR project and crucially be a formal
part of the decision making process preferably through a referendum.
— Ringfence all revenues raised by
a SBR for the specific purposes developed and agreed by the business
community in a referendum.
— Fund additional projects or services
to what the local authority already provides and this should be
clearly set out in any proposal put to a business vote. An SBR
must not be used to replace any existing council services or replace
any capital investments they would otherwise make.
— Projects should be clearly defined
and time limited with possible extensions after three or five
years following a further vote depending on the nature of the
project.
— Local businesses would need to be
convinced about the monitoring of any SBR project and the outcomes
would need to be clearly demonstrated and communicated to those
paying an additional levy.
— We recognise the need to invest
more in projects which will stimulate business development in
our localities, particularly in areas such as transport. SBR could
have the potential to make a contribution to these projects, but
only if it was introduced with the appropriate safeguards and
could win the support of local business communities.
SUPPLEMENTARY BUSINESS
RATES
Rationale for introducing a SBR
3.1 Chamber members want to see strong,
effective and efficient local government and we welcome the fact
that a number of local authorities in the region work positively
and proactively with their local Chamber. However, performance
in local government is inconsistent and too often fails to meet
business needs in terms of local provision of transport, education,
planning and civic leadership.
3.2 The way in which local government is
financed, its powers and responsibilities and how it is accountable
to local taxpayers (Council Tax and Business Rates) are vital.
The overall purpose of the Lyons Review was therefore positive
if its recommendations could drive up performance in local government.
3.3 Stronger local government would also
open up the possibility for further devolution, either to individual
local authorities or city-regions. In general terms, this is a
process Chambers support to allow more important decisions to
be taken locally and to reinvigorate the role of civic leadership
and attract higher calibre councillors, including from the business
community.
3.4 We were concerned during the Lyons Review
that the thrust of the local government input worked on the assumption
that businesses don't contribute enough in business rates as local
authority spending has risen, and the burden therefore falls on
the local electorate. We reject this view. Businesses already
pay huge amounts in business rates (circa £15 billion
nationally per annum) and other taxes which are re-circulated
back to local authorities from the Government grant. Irrespective
of whether rates are set nationally or locally, the Lyons Review
should not be used as a pretext to hike up revenue from business
rates, particularly as there is no direct accountability back
to the business community.
3.5 Our perspective on the context of the
Review was that local authority spending has risen considerably
in recent years and the "gearing effect" means Council
Taxpayers have borne a disproportionately high burden. We believe
local government must do more to keep its spending down and drive
through efficiency savings. If Government is asking local authorities
to do more necessitating increased spending, it should carry the
burden not business rate payers.
Figure 1
EXTERNAL CONCERNS TO BUSINESSES IN YORKSHIRE AND HUMBER, 2003-07
Source: Yorkshire & Humber Chambers of Commerce Economic Review.
3.6 Figure 1 shows the relative levels of
concern amongst businesses in the region about business rates
and corporate taxation (interest rates are also included to provide
a relative comparison). The graph shows that concern over business
rates is relatively modest with an implied satisfaction of the
current Uniform Business Rate system.
3.7 However it also shows that corporate
taxation in general is a bigger concern and has been consistently
higher than interest rates in recent years. The tax burden on
businesses has increased overall (despite lower levels of corporation
tax) and Government should avoid further increases, which is in
effect what SBR would be, unless there are clear business benefits.
Business engagement and accountability
3.8 Local areas will not thrive without
strong and vibrant business communities. There are some excellent
examples in the region of local authorities and Chambers working
very effectively together and this is to be supported and recognised.
However, there are too many that engage poorly and there is no
relationship of trust with local businesses. We fear the SBR process
could damage relationships further in areas where local authorities
are not committed to working with their business community.
3.9 Local authorities should be encouraged
to engage much more effectively with businesses in terms of meaningful
consultation, involvement and accountability in local policy making
and on service delivery. This could include the further development
of BIDs and LABGI etc and will become increasingly important as
city-regions emerge.
3.10 In terms of implementation, one issue
that would need to be considered would be for schemes which were
either delivered or had benefits across more than one local authority
area. Clearly this would be the case for many transport projects
and it would add complication to the process both for developing
and delivering a SBR scheme. If SBR was to be used for significant
projects, it is likely that their scope would extend beyond a
single local authority. This is a complication rather than a fundamental
barrier to a business friendly SBR as greater cross boundary and
city-regional working is vital if further powers and responsibilities
are to be devolved.
3.11 With regards to equalisation, our view
is that all revenues would be locally retained and ring-fenced
which would mean the issue of equalisation would not apply.
3.12 If SBR was introduced in a manner in
which projects were developed and supported by the business community,
the issue of the scale of supplement is one where local discretion
should apply, although a level of less than 4% would seem sensible.
A flexible approach should therefore be taken, depending on the
nature of the project. More important is the need to time limit
any scheme with the possibility of extensions through further
votes if an SBR scheme was proving to be successful in delivering
business benefits.
CONCLUSIONS
4.1 Yorkshire & Humber Chambers of Commerce
would not support the introduction of a SBR on the basis set out
by the Lyons Review because it would be an additional business
tax, with no genuine involvement of business in the decision making
process and no commitment for SBR to be additional to existing
council spending.
4.2 SBR introduced in this way would put
at risk the excellent partnership working which has developed
between some local authorities and their business communities,
and would do huge damage in areas where these relationships are
not currently strong.
4.3 Business would however be more open
minded if a "business friendly" SBR offered the potential
to take more decisions locally through the devolution of responsibilities
on planning, transport and economic development with the opportunity
to generate revenue locally to fund projects which would have
major business benefits.
4.4 This means SBR could work if it involved
business in scheme development for clearly defined projects such
as transport and crucially gave them a vote as applies in BIDs.
If SBR was accountable to business, ringfenced, additional to
existing local authority activity and time limited than it could
provide a mechanism to deliver schemes which would improve the
local business environment and devolve more power and responsibility
to a local level.
4.5 Without these safeguards, SBR would
simply be an additional tax on business which would provide them
with no direct benefits and could seriously damage relationships
with local authorities. It would therefore be strongly opposed
by Yorkshire & Humber Chambers of Commerce.
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