Memorandum by Manchester City Council
(SBR 22)
1. INTRODUCTION
1.1 Manchester City Council welcomes this
opportunity to respond to the Communities and Local Government
Committee's request for views on the idea of Government introducing
a supplementary business rate.
1.2 The City Council believes that the Lyons
Inquiry into Local Government has provided a comprehensive analysis
of the role and functioning of local government, and in particular
its central role and leadership of "place-making". We
welcome Lyons' findings, such as the calls for central government
to allow more local choice and greater local flexibility, particularly
around governance and funding.
1.3 The idea of introducing a supplementary
business rate is not, however, something we have pursued in our
consultations with the local business community so far.
2. THE RECOMMENDATION
2.1 Lyons recommends that in the short-term,
existing national arrangements for business rates should be retained,
but a new local flexibility to set a supplement on the current
national business rate should be introduced.
2.2 After considering the localisation of
business rates, Lyons believes that a supplement would provide
local authorities with a more limited flexibility to raise new
investment, but it would also have a more limited impact on businesses.
3. THE MANCHESTER
PERSPECTIVE
3.1 Manchester City Council firmly believes
that the issue should not just be about additional funding for
agreed local, shared and transformational priorities, but also
the burden of that additional expenditure, and whether it is disproportionate
or not. This is an issue in places such as Manchester and was
not evaluated in the Lyons Inquiry. We would want to see clear
evidence that a supplementary business rate would not negatively
impact on the local business community and that the system could
be made sufficiently flexible.
3.2 The Council's Executive considered a
report on the Lyons Inquiry on 30 May and discussed this issue.
It was agreed that a supplementary business rate would not be
appropriate for Manchester at this time and that the Council will
continue to press the Government for more radical approaches to
greater financial control, including the relocalisation of business
rates.
3.3 We accept the need to build up confidence
between local and central government and the business community,
but we believe that this would not necessarily be achieved by
levying an additional tax on business. Instead we believe that
the Government should give more consideration to the issue of
relocalising the existing business rate. This could be done in
such a way that confidence and trust could be built between all
parties- for example by introducing a partial relocalisation initially
and then increasing the proportion relocalised over the long-term.
3.4 We would want to see an approach to
relocalisation that was based on incentives. Those areas delivering
the most would see further and faster devolution of powers and
resources. Incentivisation should become an increasingly important
influence on reform, both in terms of accelerating the modernisation
process of public services generally and where funding is concerned,
in rewarding success and achievement.
3.5 Local authorities should be rewarded
for taking an active and successful approach to growing their
local economy. Therefore those areas that grow their economies
should be allowed to retain a greater proportion of revenues generated
by that growth. Greater responsibility should also be exercised
by those authorities which perform, rather than hold them back
while non-performing authorities improve. For example, local authorities
which successfully tackle worklessness in their areas, should
be allowed to exercise more influence on skills and employment
service providers within their areas. The same could apply to
health, transport, and other programmes.
3.6 Our support for the principle of relocalising
the business rate is also based on the need for clear private
sector support for local investment strategies to grow the business
base. In examining any relocalisation strategy, we therefore see
a very clear role for the business community in helping us design
the scheme for investment.
3.7 Lyons does have sympathy for transferring
business rates revenues and decisions over tax to local control
but we understand his concerns: concerns in the business community
about the implications of greater local discretion over tax rates;
and wider concerns on the ability to equalise resources between
authorities. Clearly, this would be a solution to be developed
over the medium to long-term and these concerns would need to
be fully addressed.
3.8 If fundamental reform such as the relocalisation
of business rates, cannot be achieved in the short-term, then
there is still room for further flexibility through re-focusing
the Local Authority Business Growth Incentives scheme (LABGI).
As part of the debate on incentivisation, the scheme must be reformed
to ensure that only those authorities that create growth benefit
from it. The current formula applied leads to perverse outcomes,
in that it disproportionately benefits those authorities that
are not generating growth. We are now working on providing a detailed
analysis to demonstrate the effectiveness of the scheme, looking
at issues of how fair and equitable it is.
4. CONCLUSIONS
4.1 When considering the introduction of
a supplementary business rate, it is essential that the flexibility
it may bring, is offset by the additional burden created. This
is a key issue for places such as Manchester.
4.2 We are continuing to push the Government
for fundamental reform such as the relocation of business rates
and the re-focusing of LABGI in the short-term, which we believe
will help to achieve greater flexibility.
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