Memorandum by East Sussex County Council
(SBR 31)
1. INTRODUCTION
1.1 East Sussex County Council is a coastal
upper tier authority in the South East with a population of 511,000
(June 2007).
1.2 According to CIPFA 2006-07 statistics,
the county council area of East Sussex supports 16,300 business
properties with a rateable value of £261 million. They contributed
£94 million to the NDR pool.
1.3 East Sussex has 87% of businesses with
10 or fewer employees and only 2% of businesses 50+ employees.
1.4 The business community of East Sussex
is overwhelmingly made up of small (and micro) businesses. As
a result, amongst principal authorities, East Sussex has one of
the lowest average contributions to the business rate national
pool per '000 population (£187) and also one of the lowest
average business rateable values per Non Domestic Property (£16,000).
2. RATIONALE
FOR SUPPLEMENTARY
BUSINESS RATE
2.1 To our knowledge it has never been tested
whether there is any thirst locally amongst the business community
for a supplementary business rate (eg up to 4p). The large percentage
of small businesses in East Sussex, largely with low turnovers,
suggests that a supplementary business rate might not be at all
popular without confidence building and a very considered presentation
to them.
2.2 East Sussex agrees that only a local
discretion on the business rate levy will engage the business
community in local economic development issues. In view of the
discrepancy in yield between authorities, East Sussex contends,
contrary to the Lyons Report, that a comprehensive equalisation
process should be established to ensure geographical fairness,
particularly for small businesses, and in rural and deprived areas
(ref paragraph 5 below). In addition, the County Council would
wish to offer local relief or discounts to businesses to provide
a geographical incentive for businesses to locate themselves in
areas of employment/social need.
3. ACCOUNTABILITY
AND APPROVAL
MECHANISMS
3.1 There are a number of business organisations
within East Sussex: the actual number (and type) of business they
represent would need to be more fully understood as would the
actual accountability to their members. In principle accountability
might only be workable (currently) if a pragmatic view were taken
to the reasonable breadth and formality of representation achievable.
However, a process based on consultation rather than voting is
preferred, which would require clear rules and accountabilities
to be established for those participating.
4. IMPLEMENTATION
ISSUES
4.1 Strategic level business issues often
go beyond the lower tier local authority boundaries—including
for businesses travel, sales, gaining staff, etc. It is believed
that approximately 55% of East Sussex business markets are within
the county boundary. Because of this, the County Council agrees
with the Lyons Report that supplementary business rates should
be levied by upper tier authorities. The County Council most certainly
wishes for consultation input by the District and Borough Councils
not least as they will collect the supplementary business rate and
also they will have regeneration/economic development strategies
and local development frameworks of their own.
4.2 There is a large gap in provision of
business support for micro businesses which funding from a supplementary
business rate could help address. There is a discernable problem
with entrepreneurship throughout the county and particularly in
the more deprived areas (eg Hastings).
4.3 Having access to start up finance (eg
via a fund that would take the best practice from the now defunct
"Enterprise Allowance" and other enterprise funding
such as "revolving funds") could be a local funding
consideration.
4.4 In respect of capital finance, brownfield
land access issues with the poor road infrastructure in the County
remain a large barrier to private development and public finance
gap funding is often the only way to unlock this much needed provision.
5. EQUALISATION
5.1 Having a wide disparity of business
base nationally would lead to an unfair gap in funding provision,
especially in respect of infrastructure (for example road/rail/premises).
Yields will be fortuitous and not necessarily according to need.
Areas where business is growing in the more prosperous areas will
be unfairly favoured against those in the less prosperous areas
such as East Sussex. As per paragraph 2.2 above, contrary to the
Lyons Report, East Sussex County Council believes that consideration
should be given to a basis of equalisation for local authorities
that are economically lagging behind and more fairly to equalise
each local tax base.
5.2 For East Sussex County Council, the
lowest 1p levy might provide a small yield of less than (say)
£2.25 million per annum. This would need to be weighed for
real potential impact (on the businesses' bottom line) against
negative business reactions, against local authority and business
administration costs, against achievability of actions within
the business community (versus their expectations), and including
the balancing of political input that the five Boroughs/Districts
may have etc etc. Larger authorities and those with a larger business
base would benefit from a much greater yield for the same administration
costs. East Sussex County Council feels that a form of equalisation
should take account of administration costs for such a supplementary
business rate scheme.
5.3 Equalisation should also fund an exemption
for small businesses (ref paragraph 7 below).
6. SCALE OF
SUPPLEMENT
6.1 As per paragraph 2.1, the large percentage
of small businesses in East Sussex, largely with low turnovers,
suggests that a supplementary business rate might not be at all
popular without confidence building and a very considered presentation
to them.
6.2 A limit of less than 4p might enable
confidence to grow, albeit more gradually, amongst the community
of small and low profit businesses.
7. SMALL BUSINESSES
7.1 The high number of micro businesses
in East Sussex suggests significant eligibility for small business
rate relief. To economically compromise this relief by a supplementary
business rate seems counter-intuitive. At the same time the few
larger firms in East Sussex may not see a supplementary business
rate as fair if they were effectively subsidising non contributor's
by their levy. East Sussex believes small businesses should be
exempted from any supplementary business rate and that the exemption
should be financed by a funding equalisation facility (ref paragraph
5 above.)
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