Memorandum by The Federation of Small
Businesses (BOP 08)
INTRODUCTION
The Federation of Small Businesses (FSB) welcomes
the opportunity to present this submission to the Communities
and Local Government Committee inquiry into the balance of power
between central and local government.
The FSB is the UK's largest non-political lobbying
group for UK small businesses, existing to promote and protect
the interests of all who own and/or manage their own business.
With over 165,000 businesses in England, our members are
drawn from small and micro businesses across all sectors.
Before addressing the specific questions set
out the Committee's briefing paper, we wish to present as background
the role of small businesses in the community and their relationship
with both central and local government.
BACKGROUND
— Small businesses are the life-blood of
local communities. It is the independent local shops, farmers,
craftsmen, accountants, solicitors and the many others who give
towns and neighbourhoods their distinctive character. They are
the creators of wealth and employment.
— In addition, these same business owners
frequently support their local community in other ways. They sponsor
local sports teams, help local arts events and give of their time
to help others.
— Much of their contact with local councils
comes about because local authorities are responsible for enacting
some 80% of Government legislation. This responsibility ranges
from collecting business rates, enforcement of trading standards,
health and hygiene, issuing of licences to planning matters and
a host of other duties.
— Unfortunately, when it comes to consultation
by local councils with the public and the wider community, small
business owners often feel side-lined. Strategic plans seem to
concentrate on housing and neighbourhoods with the needs of business
and the need for business added as an after thought. Too many
Local Strategic Partnerships (LSPs) have little or no participation
from the local business community.
— Meetings are frequently held during weekday
working hours when owners are busy running their businesses. This
is a pity because many business men and women do wish to play
a fuller part as evinced by successful town centre partnerships
and business improvement districts (BIDs).
— Regarding the financing of local government,
business already contributes through business rates, Section 106 agreements
and licence charges.
— Although there are calls for the relocalisation
of business rates, to which the FSB is opposed, it must be remembered
that many local authorities benefit from the equalised distribution
of the total rates revenue.
— Now the Government has proposed a Community
Infrastructure Levy and a Business Rate Supplement both of which
will be paid only by businesses. British property taxes are already
among the highest in the world without the possibility of further
levies. It might be thought that Government considers business
a "soft touch".
ANSWERS AND
COMMENTS TO
QUESTIONS POSED
IN THE
COMMITTEE'S
BRIEFING PAPER
FURTHER DEVOLUTION
Does local government need greater autonomy from
central government? If so, in what ways?
1. Yes. There needs to be a slackening of
central control to allow local authorities the freedom to pursue
policies geared to their own unique localities. But to work authorities
need greater in controlling their own finances.
Do local government's role and influence need
to be strengthened in relation to other public services, such
as policing and health?
2. The FSB is not clear what would be gained
from this exercise. It could give rise to another set of Quangos.
Over the past years we have seen a huge explosion of quasi autonomous
non government organisations (Quangos) that are dealing with the
public on the government's behalf and yet are not accountable
to those whom they serve.
3. A Home Office Green Paper, July 2008,
suggests police authorities should be elected and not appointed
from local councillors. However, what is to stop elected councillors
standing for election to police authorities so nothing changes?
FINANCIAL AUTONOMY
Does local government need greater financial freedom?
If so, in what ways?
4. Only by allowing local authorities the
freedom to use Government grant monies as they see fit can greater
power at a local level be exercised. The Scottish model is a good
example where after satisfying statutory expenditure requirements
for education, social services, etc, local authorities in consultation
with their local citizens spend the rest as they see fit.
Should local government be able to raise a greater
proportion of its expenditure locally?
5. The FSB believes in strong local authorities,
delivering for local communities.
6. The FSB opposes the relocalisation of
business rates.
7. Businesses should not be treated as a
"soft-touch" when it comes to raising local revenues.
The perpetual increases in parking charges, the imminent Business
Rate Supplement, Section 106 Agreements and the proposed
Community Infrastructure Levy all take money away from local businesses.
8. A balance should be sought between what
level of service a business can expect from a local authority
from paying business rates (though this money is transferred to
the Treasury) and what level the business community is expected
to contribute to improve the footfall and sustainability of a
local community.
9. The FSB believes that small businesses
should not be made to pay for the funding shortfalls of local
authorities, and certain large scale projects that the Business
Rate Supplement is intended to pay for enhances the whole community,
not just the business sector.
10. The government needs to study the findings
from the Balance of Funding Review 2004 and the Lyons Inquiry
Report 2007 to see how local authorities are funded elsewhere.
What effect does the capping of council tax rises
have on local accountability?
11. The FSB feels that council tax capping
by government restricts growth and can have a negative impact
on small businesses. Local authorities will need to make up the
decrease in income and levies, charges and extra taxes on small
businesses is one method of doing so.
12. We are not convinced that the capping
technique increases efficiency, but rather local authorities simply
cut costs in areas such as the arts and green spaces.
EXISTING POWERS
To what extent are local government services a
product of national or local decision-making?
13. The vast majority are a product of national
decision-making. 80% of Government legislation is enacted by local
authorities. People think that it is their local council imposing
restrictions, charges, etc but it is at the behest of central
government.
14. Local authorities must be given more
flexibility within current and forthcoming legislation to accurately
reflect local communities and the diversity that exists within
business, skills and demographics.
Does local government make adequate use of its
existing powers, such as its well-being, charging and trading
powers? What scope is there for greater use of those powers?
15. The FSB would like to see all local
authorities stop using their trading powers as it impacts most
strongly on local businesses.
16. The FSB has seen the trading powers
used by Kent County Council, and we strongly believe that it is
not the place of local authorities to become involved within the
private sector.
17. Local authorities will have an automatic
advantage in accessing finance, acquiring contracts and employing
staff, which are to the detriment of local businesses.
Because the last three questions under Existing
Powers and the Constitutional Position are constitutional issues
the FSB does not comment on such issues.
September 2008
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