Memorandum submitted by British Chamber of Commerce (BRS 01)

 

1.1 The British Chambers of Commerce (BCC) is the national body for a powerful and influential network of Accredited Chambers of Commerce across the UK; a network that directly serves not only its member businesses but the wider business community. Representing 100,000 businesses that together employ more than 5 million employees, the BCC is the Ultimate Business Network. Every Chamber sits at the heart of its local community working with businesses to grow and develop by sharing opportunities, knowledge and know-how.

 

Summary of the BCC position

2.1 With the UK in a recession and businesses facing a particularly difficult financial and economic situation, we do not support proposals for a new power for local authorities to raise Business Rate Supplements (BRS) across the country in their current form.

2.2 We believe that the possible combination of the new BRS, the possible additional Community Infrastructure Levy, congestion charging and Workplace Parking Levy alongside other long standing local taxes could place a significant burden and create an unacceptable level of unpredictability for UK business. This landscape of local taxation upon business needs to be urgently streamlined and simplified.

 

2.3 If there is to be an additional mechanism to lever in additional financial contributions from the local business community to improve their locality, this must have the kind of accountability to the private sector that has been achieved through Business Improvement Districts (BIDs). We therefore believe that any BRS proposals must be for infrastructure projects that business believes are necessary with a clear project plan, ring-fenced, additional funds, ongoing business oversight of the initiative and clearer business accountability. A mandatory business vote on all proposals would best ensure these criteria are met.

The introduction of a Local Authority power to raise Business Rate Supplements

3.1 Both current national statistics and the experience of businesses across the country indicate that the UK is in recession. Our member businesses across all sectors and sizes report a declining situation in most aspects of business activity right across the country fuelling real concern as to how long and deep the current downturn will prove to be. One of the key issues for our members at the current time is managing their cashflow sufficiently to remain in business in the context of a much more difficult lending relationship between businesses and their banks, as well as between businesses.

 

3.2 In the context of this ongoing difficult economic and financial situation, we are concerned about the potential cost upon business the current BRS proposals will create. The government's Regulatory Impact Assessment of the Bill estimates the cost to business of the BRS (based upon a number of local authorities choosing to take-up the supplement) as being £319.3 million a year or £2.748 billion over a ten year period. Clearly there could well be a more extensive take-up of the power. The BRS White Paper indicated that if the power was taken up in all regions in England, this would raise up to £597.1 million a year. Given the current economic climate we think there is a need for a revaluation of the need for the introduction of the BRS across the country. If the BRS power is to be made available to all local authorities however, there is a strong case for these provisions to be delayed, at least until the economic situation recovers.

 

3.3 We are more concerned however about the potential combined extra cost for business of the introduction of a BRS alongside other local business taxation measures. Over the next few years, the business community will be facing the possible prospect of the new BRS, possible additional Community Infrastructure Levies, potential congestion charging or Workplace Parking Levies (as being developed in Nottingham) with nothing to prevent possibility of these charges being layered on top of each other in one area. These may also be on top of additional costs for business arising from the recent changes to Empty Property Rate Relief and any long-standing Business Improvement Districts (BID) contributions they may be making (unless local authorities decide to offset these contributions against the BRS). This unpredictable combination of potential additional costs for businesses will make their survival through more difficult economic times much more difficult. The situation in regard to local business taxation needs to be streamlined to provide much greater clarity as to which mechanism of taxation companies will face and how much this is likely to cost them. This should include removing some of these measures, such as the Workplace Parking Levy, in order to ensure a simple system that enables business to effectively plan ahead and sensibly include these costs in decisions about planning for the future of their company.

 

The involvement of ratepayers in Business Rate Supplement decisions

4.1 Businesses may want to contribute to improvements in their locality, as many currently do through BIDs, but such a mechanism needs to offer sufficient accountability to the business community. We are aware that plans are in place for the BRS to be used to part fund the Crossrail project in London. The BCC strongly supports Crossrail which we believe is an important project of unique importance not only for our capital city but to the future of the UK economy as a whole. We understand that London business groups have agreed a funding package with government at the local and national level, based upon the provisions within the BRS Bill, and we have no desire to see action taken that will block this specific project from going ahead. It would make sense for a Bill to have been brought in to enable this funding mechanism specifically for Crossrail only. Unfortunately however we face the prospect of a mechanism which has been specifically designed for the purpose of helping to fund Crossrail in London being introduced for the use of other local authorities across the country that is not fit for purpose.

 

4.2 If a BRS is to be introduced, the measures around the involvement of businesses in decisions on such proposals are inadequate. The provisions for the involvement of ratepayers within the legislation seek to ensure that businesses are adequately consulted by any local authority seeking to raise a BRS in their area through an initial prospectus, but only offer the opportunity for a mandatory business ballot in circumstances where the BRS will fund more than a third of the cost of any project. We believe that a general power for all local authorities to levy new taxes upon business would best ensure adequate accountability to the business community through a ballot on all proposals. The experience of local businesses in regard to BIDs demonstrates what can be achieved by projects that are mandated by a business vote. Many of our members strongly support existing BIDs, which are largely well known and well regarded, and seen as business-led and business-like bodies with clear objectives in terms of delivering local economic benefit through specific, protected funds. The provisions within the legislation that try to ensure that BRS proposals will have clear project plans, with funding protected for specific projects that will deliver clear economic benefits and offer strong accountability to the business community all demonstrate a recognition of the factors that ensure BID schemes have the support of local businesses which are ensured through the final accountability of a business vote on the proposals. The Bill's provisions to include a business ballot in certain circumstances seem to recognise that there is real merit in having a business ballot to replicate the success of the BID model, but by enabling local authorities to take the option of structuring the funding of projects in such a way that a vote will not be required, the opportunity to introduce an effective model that can work across the country with adequate business accountability has been missed.

 

Liability to Business Rate Supplements

5.1 If the proposals to bring forward BRS without a mandatory business vote are taken forward, we believe that it is critical that the safeguards for business in the existing proposals are maintained. It would be clearly unacceptable for the 2p in the pound limit to be raised in the current circumstances or for this to be able to be changed through regulations, which would leave open the constant possibility of an increase in the limit hanging over the business community. If BRS is taken forward, the funds should also be ring-fenced, additional to existing local authority spending, and only used for economic development projects that business believes are necessary. The body that will be created to oversee the ongoing running of the project should also include effective local business representation and engagement in its operations.

 

5.2 We also do not support the legislation's proposal to give local authorities choosing to levy a BRS the flexibility to determine whether they wish to offset the contributions businesses are making to existing BID levies. If a local authority has made the significant decision to go forward with a BRS proposal they will have done so on the basis of the amount of funds such a scheme will raise. After they have worked out the extent to which the funding they will be able to raise will be sufficient to fund the particular project they want to deliver, it is extremely unlikely that they will then decide to forgo some of this total for the sake of a local BID, even if it is a very effective one. It is simply unrealistic to expect many local authorities to raise BRS funds for particular projects they want to deliver and then decide to use their local discretion to decide to restrict the amount of funds this will provide for the delivery of that project.

 

5.3 Under the current provisions, existing BIDs will have to seek to win ballots for their renewed existence in an environment where BRS payments will be already being levied on the people they are seeking to convince to vote for additional payments at the same time. This places an unfair disadvantage on these schemes and is likely to mean that many will be unable to successfully win future ballots under these circumstances. Many BIDs have become very successful schemes which enjoy the support of their local business community and we do not want to see these projects unnecessarily dropped. We therefore think there is a strong case for introducing a national offset for BID contributions in order to protect existing and future BIDs. This is particularly critical in the cases of those BIDs who are facing upcoming ballots in areas where a BRS is being levied over the next few years.

 

January 2009