Local Government Finance Bill (Second sitting)

David Mackintosh Excerpts

Tuesday 31st January 2017 Public Bill Committees

[Mr Thomas]

Q What is wrong with the Bill, in your view? Obviously, the Minister thinks it is wonderful, but no doubt you will be slightly sceptical about whether that viewpoint is completely accurate.

James Lowman: From a business point of view, we support the Bill. Our concerns are about the notion of giving councils the opportunity to reduce the multiplier. We support that, but how realistic is it that the powers will be used and applied? That is partly because of issues with local government funding that you will know about much better than I do.

From our perspective, the Government have already introduced powers for local authorities to give discretionary rate relief for whatever reason they like. That can be used to support high streets, or particular sectors or areas. That is very under-used—it is being used by about 12% of councils at the moment—which makes us sceptical about the likelihood of councils using the powers in the Bill to reduce the business rates burden, given the pressures we all know they are under. Against that, while there are many good checks and balances against the introduction of increases in business rates and levies, there is a concern to ensure that powers in the Bill are not pushed as far as they can to try to increase business rates revenues. That would be our summary position.

Professor Tony Travers: In that the Bill carries on the work started by 50% business rate retention back in 2011—and even going back to the previous Labour Government, when they had the local authority business growth incentive scheme—those things are both rational in moving towards a system where local authorities at least have some chance of retaining the uplift in any growth in the tax base they generate. That makes sense, in my view. What is wrong is what is often wrong in UK—or, in this case, English—systems of local government finance. Although this looks like a move to a system where councils are completely dependent on council tax and business rates, in truth there are still many ways in which the Government of the day can intervene, making the actual business of running local government not as predictable as would be the case if it was a purely locally funded system of local government finance.

[David Mackintosh (Northampton South) (Con)]

Q This is a question for Mr Lowman. On Second Reading I agreed with the point made by your organisation that there is a potential for local authorities to try to increase business rate revenues by signing off larger planning applications for developments at the cost of small businesses. How can that be mitigated?

James Lowman: That is a concern regarding having a greater incentive to bring in large chunks of business rates through large developments, which was touched on in the previous session. There is a danger in our sector if a big out-of-town supermarket application is granted because of the effect it will have on the high street, other surrounding neighbourhood retailers and so on. In the grocery market, that is less common than it was a few years ago. None the less, it is true that out-of-town developments can harm high streets. The temptation to grant those applications concerns us because that may lead to a large slug of business rates coming up in the first instance but, over time, business rates income will diminish as those town centre and high street businesses come under pressure—of course, there are other effects.

The most effective way of mitigating that would be to have a long reset period. We have suggested 10 years, but some people have suggested longer. The reason is that the impact of those big developments can be felt more fully across that longer reset period. If you have a short reset period, you may see the upside of the development without the downside of the closures and other consequences. That long reset period would be one way of reducing that temptation for authorities.

[Jim McMahon]

Q Mr Lowman, your members provide a very important community service. Do they feel they are on a level playing field with the large supermarkets?

James Lowman: In respect of business rates?