30 May 2008
The economic downturn has heightened business concerns about the new supplementary business rate, the British Chambers of Commerce has told Public Finance.
The government's draft legislative programme, set out earlier this month, promised a Business Rates Supplements Bill in the next parliamentary session. The Bill will create a new power for the highest-tier local authority in an area to levy a supplement on the business rate and reinvest the proceeds in the local area.
But David Frost, director general of the BCC, warned that the rate must not be used to plug gaps in council finances at a financially testing time.
'With a slowing economy and surging inflation, the last thing that businesses will want to see is local authorities using new business rate powers to dip into the pockets of hard-pressed companies to subsidise shortfalls in their budgets,' he told PF.
'Accountability will be absolutely crucial if businesses are going to buy into this. Firms must be allowed a vote on any proposals, be fully consulted beforehand on what the money is being raised for and have full involvement in the delivery of any projects. This must not turn into local authorities dictating terms to business.'
Local government minister John Healey recently urged a stronger relationship between local authorities and the business community, suggesting councils be allowed to retain more of the tax revenue generated by growth. This was trialled with the Local Authority Business Growth Incentive scheme.
But the BCC claimed anecdotal evidence suggested that the proceeds of the scheme had been used to fund general council expenditure rather than specific local infrastructure projects.
Frost said it was encouraging that Healey wanted to look at incentives for local authorities to support economic growth.
'Not all councils sufficiently prioritise supporting business growth in their areas and this needs to change. We believe that there should be an effective carrot of a new local incentive, combined with a stronger economic duty upon local authorities,' he said.
'This must, however, be done in close partnership with local businesses and in a way that ensures these funds are reinvested in projects that actually support local economic development.'
PFmay2008
