House of Commons - Communities and Local Government Committee

The Balance of Power: Central and Local Government - Communities and Local Government Committee Contents

Memorandum by The West Midlands Business Council (BOP 01)

The West Midlands Business Council brings together over 20 mainly business representative organisations to speak with one voice on the key business issues across the West Midlands region, when appropriate. Further information regarding the West Midlands Business Council can be found in Annex A.

This submission focuses on one aspect only of the Committee's inquiry—which is the role of regional public bodies and its inter-relationship between central and local government.

REGIONAL PUBLIC BODIES AND LOCAL GOVERNMENT

The West Midlands regional business community would be very concerned at any changes to the balance of power between central and local government which does not take into cognisance the regional public agencies which have been established as part of the constitutional structure of the United Kingdom.

We see the concept of regional public bodies from a purely business perspective. The West Midlands is largely a homogenous travel to work area. Statistics provided by the West Midlands Regional Observatory and Centro—the West Midlands conurbation passenger transport executive—demonstrate that the vast majority of the administrative area of the West Midlands region has strong and established travel to work patterns.

This is one of the clear economic indications of a de facto regional economy being in place. In addition, statistics provided by a range of bodies, such as UK Trade and Investment as well as the West Midlands Regional Observatory, demonstrates clear commonality of economic interests across the region—such as agriculture in Worcestershire and Herefordshire, for instance, with urban markets in the West Midlands conurbation.

We therefore consider that regional agencies charged with developing the regional economy have a basis in commercial reality and we can therefore see the need and necessity for such a model.

Over recent decades, while the regional economy has continued to operate in response to market demands, the decline in traditional manufacturing industry has led to the need for an economic stimulus to exist to jump start the regional economy. One of the outcomes from the decline of mass production heavy manufacturing is that the West Midlands region is one of the worst performing regions in the United Kingdom in terms of low levels of adult attainment in skills.

In addition, the regional economy which is reliant on effective good transport networks, has suffered from severe shortcomings in the transport infrastructure. This has impacted on trade flows around the West Midlands region and across to other regions.

In addition, due to various economic and historical factors, the West Midlands region has one of the lowest rates of business start ups across the United Kingdom. The West Midlands region also has one of the lowest rates of R&D investment in the UK.

None of these issues can effectively be addressed by central Government or local government. While the policy direction of the Government and national macro economic stability is critical to regional economic growth, the issues outlined above requires a regionally based solution because many of these problems, though not all, are based on how the regional economy has developed over the years and is not necessarily just linked to the need for national macro economic stability.

We also consider that local government alone can not fully address such matters. The dynamics of the regional economy go beyond local administrative boundaries and therefore structures need to be in place to address this reality.

LOCAL GOVERNMENT AND THE ECONOMY

We support the Government's intention for economic development responsibilities to be part of the remit of local government. However, it is the caveat that the Government has also added in this context—that such activity needs to be aligned with the Regional Economic Strategy—which is critical for effective delivery.

The Sub National Review envisages delivery of economic delivery services from a regional level to a local government level. In essence, we are not against this. However, such a policy would put back regional economic development if this policy was adhered to in a doctrinaire fashion and responsibilities were devolved to poorly performing local authorities. Therefore we support a public interest test to take place before devolution of powers to any local authority takes place. This would recognise the correct balance between the Government's strategic role, the role of regional economic development mechanisms as well as the democratic accountability of local government.

Business is concerned that the guidance for the development of Local Area Agreements does seem to be leading to a doctrinaire approach with the development of LAA bids. This has been most clearly demonstrated in the West Midlands region in respect to the issue of business crime.

We were concerned that when we contacted all local authorities in the West Midlands region, most stated that LAA guidance precludes them from seeking funds for business crime prevention measures despite the fact that, according to the Government Office for the West Midlands, business crime is costing the West Midlands region £14,000 per hour.

We developed additional guidance for local authorities, which was supported by the Government Office for the West Midlands, which outlined how funds for business crime prevention work can be applied for via the LAA process. However, recent evidence to the West Midlands Business Council has shown that most local authorities are taking cognisance of the Department for Communities and Local Government guidance and so these funds are not being sought.

We do not believe this state of affairs was the intention of the Department but we are concerned that the example we have cited is occurring in other areas which are also of importance to economic growth.

We therefore propose that the guidance makes clear that there is sufficient flexibility for LAA bids to take account of local concerns and that a doctrinaire reading of the LAA guidance should not take place which precludes necessary investment for the local area.

LOCAL GOVERNMENT AND CITY REGIONS

There is no doubt that there is concern that the direction of Government policy has led to confusion regarding the balance between the roles of individual local authorities, the role of regional public agencies and the role for regional collaborative working. One good example is that of City Regions. In the West Midlands region, the City Region covering the West Midlands conurbation and Telford and a City Region covering north Staffordshire and south Cheshire were encouraged to be established.

It remained unclear how these City Regions related to the sub regional structures the Regional Development Agency (RDA) itself had established such as the Regeneration Zone in north Staffordshire and numerous Regeneration Zones in the conurbation and Telford city region, alongside other geographically designed RDA led delivery vehicles.

In addition, the slow progress of these City Region indicate that there may be uncertainty as to how the individual responsibilities of each local authority relate to assumed responsibilities in the form of collaborative working. This seems to deter such collaborative activity as a consequence. We believe that guidance needs to be issued to local authorities to clarify such matters, possibly as a consequence of discussions between the Department for Communities and Local Government and the Local Government Association.

While Government actively encouraged the establishment of City Regions, it did not clarify how these structures relate to the RDA. As a consequence, progress in the City Regions in the West Midlands region has been haphazard with very little activity in north Staffordshire and limited activity in the conurbation and Telford city region. Business proposes that clearer guidance is required so that clarification of roles and responsibilities can lead to a step change in delivery of policy objectives.

LOCAL GOVERNMENT AND TAXATION

We note that the Committee is considering the potential of local government to raise a greater proportion of its expenditure locally. It is in this respect, that we would like to express our severe concerns with plans to introduce a Business Rate Supplement (BRS).

We believe any process that enables a sub regional economic development authority to fit into the local authority performance framework would be flawed if the terms of the BRS introduction—and the impact on market confidence as a consequence—is not taken on board to ensure there is a consistency of approach and a level playing field in this process.

The business community sees a worrying trend in terms of Government seeking to enable Local Authorities to levy a number of new charges upon businesses with little or no statutory direct accountability to the private sector. The proposed BRS may well be accompanied by a combination of a Community Infrastructure Levy, road pricing, and possible Workplace Parking Levies. Additional local charges on business can result in companies deciding to leave the area (or the country), a souring of relationships between the business community and the Local Authority and a level of unpredictability for businesses that severely damages their ability to plan for their company's future. They may also stifle private sector willingness to engage in and invest in much needed development and regeneration.

We support the national stance of our colleagues in the British Chambers of Commerce, Confederation of British Industry, Federation of Small Businesses and Institute of Directors, who have outlined the following principles for BRS introduction.

Despite Government claims that the model for a Business Rate Supplement contains significant levels of protection for businesses we remain extremely concerned that, in their current form, the proposals will do little to prevent widespread abuse of the extensive powers you are intending to devolve to local government.

Without the adoption of clear protections it will be impossible for the business lobby to support the introduction of any scheme of BRSs.

The necessary safeguards are:

— A mandatory business vote before the introduction of any BRS (ideally the Business Improvement District [BID] model), requiring a dual majority of those voting on the day.

— Local Authorities commitment to being the funder of last resort in the event of project overruns.

— Mandatory offsetting of current and future BID payments against any BRS levy.

— Maintain the commitment to protect smaller businesses from disproportionate burdens by ensuring properties liable for business rates with a rateable value of £50,000 or less will be exempted from paying supplements; and for this threshold to be reassessed at revaluation in 2010 and increased in line with overall increases in Rateable Value.

— Maintain the upper limit of 2p.

— BRS funds must be hypothecated for necessary and additional economic infrastructure projects. In addition there needs to be a clear definition of precisely what is meant by the term "Economic Development".

— Establishment of a formal mechanism for local businesses to have strategic (and ongoing) oversight of the project.

— A robust, and transparent, cost benefit analysis of every project that requires some element of financing from a BRS.

— That the cost of a ballot would not be passed onto businesses, or come from the projected BRS budget.

— Require sign-off from the Secretary of State (DCLG) before the introduction of any BRS.

We do not agree with the view that each tier of local government should be able to levy a supplement on the business rate, and that there should be no threshold to protect smaller businesses from exposure to increased occupancy costs.

We are concerned that the private sector is increasingly being seen in some quarters as an additional revenue source to fill the gap in poorly funded local authorities. The private sector already makes a significant contribution towards local government finance, through general taxation, section 106 agreements, BID levies and voluntary contributions to local projects, and will continue to do so. However if operating costs continue to rise then these forms of local community investment will no longer be viable.

CONCLUSION

In conclusion, we would believe that any consideration of the balance between central and local government must take into cognisance the need for regional economic activity to exist. Otherwise, the aim for jobs and prosperity across all localities will be harmed as a consequence.

Annex A

British Ceramic Confederation

Business in the Community

Chartered Institute of Building

Confederation of West Midlands Chambers of Commerce

Co-operatives West Midlands

Country Land and Business Association

Engineering Employers' Federation

Federation of Small Businesses

Institute of Chartered Accountants in England and Wales

Institute of Chartered Secretaries and Administrators

Institute of Directors