Oral evidence: Business Rates, HC 665Tuesday 22 March 2016

Oral evidence, 22 March 2016.

Witnesses

Mike Cherry, Policy Director, Federation of Small Businesses, Tom Ironside, Director, Business Regulation, British Retail Consortium, Chris Richards, Senior Business Environment Policy Adviser, EEF, gave evidence.

Chair

Thank you very much for joining us this afternoon. For our records, could you just go down the table, say who you are and the organisation you represent, please?

Mike Cherry

Mike Cherry. I am the National Chairman for the FSB.

Tom Ironside

Tom Ironside, Director of Business and Regulation at the British Retail Consortium

Chris Richards

Chris Richards, Senior Policy Adviser looking after business rates and devolution at EEF, the manufacturers’ organisation.

Chair

Thank you very much for coming. Mike, Cherry, congratulations are in order. You have just become the National Chair.

Mike Cherry

I have, Chairman. Thank you.

Chair

How do you think the Government has so far performed in its approach to business rate reform?

Chris Richards

If you look at the two reviews they conducted—the administration review and the structural review—that dredged up a lot of issues that I do not think the Treasury and DCLG have fully understood. There are issues around, for instance, manufacturing, around plant and machinery and wider issues around the stability of the system. If they were to do the review now they probably would start off with some core outcomes and then perhaps do a more fundamental look at what some of the issues are, rather than this iterative process that we recently had.

Tom Ironside

Our perspective is quite similar. We think that the measures that were announced recently show there is focus on some of the right issues. There is obviously an issue around the timing of their introduction but for us they do not address some of the fundamental underpinning that, for an industry that has a process of structural change underway, we view as being really important. There is an issue there about the sustainability of where the business rate system is currently at—simplicity, as well, both in terms of reliefs and exemptions; we believe there is something there that could and should be engaged with.

Mike Cherry

Clearly, with the current context around the issues that small businesses are facing at the moment, we were very pleased indeed with the announcements in the Budget last week. There is still much needed work to be done on the reforms, especially around localisation and particularly around the appeals process that is now being consulted on and suggested is now being put into place. Also, a lot of the anachronisms and the anomalies in the system are not being address at the present time.

Chair

Whenever there are criticisms made on business rates or suggestions for change, they always seem to be made by organisations or businesses who want to see their share of the business rate reduced or what they pay reduced. Is that not a bit optimistic for businesses to expect that everyone is going to be able to pay less in the current circumstances?

Mike Cherry

No, the problem that you have at the moment is that there is a lot of unfairness in the system, particularly for those small businesses that are not outside of the latest announcements. You also have to look at the fact that you are dealing with a system that is on a fixed yield policy, which means, irrespective of the number of players within the system, the yield still remains more or less the same. That creates problems. We currently have, according to our recent surveys, around 7% of our members who are paying more business rates than they are in rent. That cannot be right.

Chair

Small businesses must be cheering now. Is that not a problem for the Government: that they give small businesses a windfall—even your press release has managed to accept you have done fairly well out of the budget—and the next complaint is there are some slightly bigger businesses that now feel totally unfairly treated?

Mike Cherry

No, Chairman. If you look at what we have been proposing, when you look at the fact that 64% of businesses only garner between 6% and 8% of revenue, you will understand why we were cheering so much around the budget announcement to exempt those at 12,000 rateable value.

Tom Ironside

The fixed yield is a real issue for the retail industry. If we look at where the business rate system is heading currently, we can see that we are already in a territory that is not looking particularly sustainable. We have a business rate multiplier that is approaching 50p in the pound. At the time of introduction in 1990, as you know very well, it was much more in the region of 34p in the pound. It is quite a difficult situation that we find ourselves in at a time when retailers are looking closely at their property portfolios as the approach of consumers and the potential of technology changes some of the dynamics around the industry.

Chris Richards

From the point of view of manufacturers, one thing that has not come out of conversations I have had with our members is the look around this as a cost. Manufacturers largely see business rate as a tax on property. When they are looking at investment decisions around their property, because their sector is more likely to be owner-occupied, they will look at this more on the investment side of things. That is why things like plant and machinery fall out, where if you do invest in plant and machinery within your property, your business rate increases. That is the kind of level that the manufacturing sector looks at business rates.

Chair

You all want to pay less, don’t you?

Chris Richards

The view that is coming back from manufacturers is that actually they want a stable system. They want a system where it actually encourages them to invest; then, looking more broadly at incentivising growth, having the local authorities invest within their local area to build up their local business environment to make it more attractive.

Chair

They cannot invest without getting money from you in the first place, can they? Is it a chicken and egg?

Chris Richards

To some extent it might be. Manufacturers will not start off from the point of, “This is too high; it needs to be lower”. It is more, “How can we make the system more stable and allow them to invest with a bit more certainty?”

Mike Cherry

You also need to have fairness in the system. At the moment you have a property tax that is clearly levied before a business even makes its first pound of sales.

Chair

I cannot hear anyone coming forward with suggestions about how some businesses could pay more to make sure those who are unfairly treated should pay less.

Chris Richards

If you look at how the system works, particularly around revaluation the issue is you do get flexibilities where properties are revalued with each revaluation cycle. Therefore there is always going to be a bit of uncertainty. Some will end up paying more, some will end up paying less based on that kind of hypothetical rental value. We are not looking for how to pay less, it is more about how does the system overall work and that is what we are trying to get out of a more stable system going forward.

Kevin Hollinrake

Is not what business wants a level playing field? Realistically, you cannot turn the rating system upside down or it is very risky to. The implications are almost impossible to assess. I can certainly see he internet sales argument and I can see the plant and machinery argument. To say, somehow, that we are going to fight one corner of this it is not realistically to want to alter the business environment like that.

Tom Ironside

To be very clear, from a retail perspective, we already pay 25% of business rate within the industry. We have 6% of GDP GVA. We account for around 11% or 12% of all business taxes. We do not think that the way to go is to try and find additional mechanisms within business rates to address internet retail when the line between what is a traditional retailer, an online retailer and any other sort of retailer is becoming increasingly blurred as they respond to change in consumer demand and change in technological activity. That does mean that the industry is any less committed to its role on the high street. It would be strange to look to business rates as a mechanism to raise additional funds from the industry in relation to some notional value around internet retailing.

Kevin Hollinrake

That was not the proposal from me. My point is: is this is a zero sum gain? However you all want to fight your different corners, the reality is, to wait until a business is making money before it starts paying business rates is just not realistic. What I would have thought from the business profession—and I was in business for 25 years before doing this—is that you are looking for a level playing field where we can all compete and the creative destruction of capitalism can win the day.

Mike Cherry

For fairness in the system, you still have the anomaly where manufacturers or large companies who need space are rated on that whole space. You now have internet companies in particular and high-tech companies that can be working out of somebody’s bedroom. That brings unfairness into the system where it is a manufacturer or whether it is a retailer. It is good for the individual with the high-tech company that is running it from home. If I come back to the fixed yield policy, the BAA’s own figures meant that 20% increase in the multiplier would have been necessary if the 2015 revaluation had actually gone ahead. We had seen a rise in almost 8,000 business payers when we had seen a fall in rateable value. You have those anomalies already in the system; surely we need some fairness into that that is more related to the economic environment that a business is working in. At the moment, we have very low rentals—or rentals are tending to move low—and we have got problems in the economic environment, yet we are paying some of the highest rates that we have known for some time because we have not had that revaluation and it is not related to economics.

Tom Ironside

We were looking to see whether there would be more of a solution that would sit within the business tax road map. For us, we are perhaps in a different position, in that we do believe there should be a general downward pressure on the level of business rate and its contribution. However, looking within the context of a business tax road map approach, there may be other ways to balance of taxation more generally. That would be where we would come from in relation to this issue because we can see have one of the highest commercial property tax levels in the OECD and it falls very heavily on property in terms of businesses.

Jim McMahon

It has to be balanced. There is always going to be a schedule of taxes that society has to pay, because as a society we demand decent public services and a quality of life in return for that. There will always be a schedule; there will never be one and that does it, because life is more complicated than there. It felt that there is a contradiction in the evidence, which was that you were reasonably critical of the idea that you charge a tax on a property whether you make money or not. That is true. The minute you occupy that premises, you are liable to pay rates regardless of whether you make any money or not. Juxtaposed with that was the point about an internet sales tax, which would be a tax on selling things and making money. Surely, in all this there has to be some balance because although, as a business you must see the value in this, trading is important. It is also very important for communities that they have a viable high street that is part and parcel of the community. Surely, with internet retail growing 10% last year, taxation needs to catch up with that changing world.

Tom Ironside

To be very clear, we do not support any form of internet sales tax. We think there are already many systems in place that capture the value that is generated through sales. There are other sorts of taxation as well. One thing we really would not be in favour of is using business rates to try and capture that value.

Jim McMahon

How would you marry that then? If life was that simple, we would not have had such a debate in the House about Google and their tax arrangements, or Amazon and Facebook.

Tom Ironside

I am talking about internet retailing here, rather than broader internet activity. We do not have a locus in relation to that.

Jim McMahon

Do you have a view about an internet sales tax for international transactions? Can the UK address this?

Tom Ironside

That is not something that we have an existing policy position on.

Jim McMahon

If you do not support property tax and you do not support an internet sales tax, what type of tax do you support?

Tom Ironside

We do not support using a tax for that purpose. We pay 25% of business rate. We do not see that there is a case for additionality within the system.

Chris Richards

Manufacturers are not against a property tax. It is a tax that is used in a vast number of countries. It exists and, as you heard in the previous session, it is easy to collect as well. We are not arguing against a property tax. From a manufacturing point of view, it is the stability within the system that is important and whether or not it allows them to invest. Manufacturers have all been competing internationally and they would be looking at other countries in terms of their property taxes is and how competitive the UK’s business rate system is as part of that. If they are making an investment, they need that stability, year on year, to know what their return on value is.

Jim McMahon

Would you not welcome, then, a closer relationship with the local area and the business that have chosen to invest in that area where the local authority could be able to say, “We do want to boost manufacturing engineering in our community and as such we are going to use the rating system to attract investment or expansion”? Would you not welcome that as a direct relationship?

Mike Cherry

We welcome the fact that the local authority should be totally devolved and has the opportunity to reduce the amount that a business pays. All the main business organisations are totally opposed and the Government recognised this in its announcement of the Budget that it should not be used to re-localise business rates.

Mary Robinson

Earlier on there seemed to be some comment about the inclusion of plant and machinery in the ratings and how that would affect you. Then we have had a discussion about the possibility of wanting to see a business tax road map. In terms of plant and machinery, there have been announcements and Government announcements that have given that additional relief to it and increases.

Chris Richards

The last full review of the plant machinery orders that governs what is and is not within plant machinery for rateable value was done in 1993, before the dawn of the internet and before any substantial work was actually done. Back then, the situation within British industry was completely different. Fundamentally for us—and again it comes back to this international competitiveness argument—other countries have looked to change their system. France, for instance, in 2010 removed plant and machinery from their system of local taxation on the basis, and I am quoting President Sarkozy here where he said, we actually want industry to sustain France by stripping out plant and machinery. In fact, they went even further and gave a 30% discount to factories within France. Looking internationally, the system, including plant and machinery, does not make it internationally competitive. That is why we were arguing quite strongly for it to be stripped out. We will continue to make that argument as well.

Mike Cherry

Not just plant and machinery: it also applies if you are putting in security—so, CCTV and other protective measures for your property. It is a disincentive to invest, basically.

Mary Robinson

The Government have been generous in the tax reliefs in terms of plant and machinery. In terms of the road map, is this relationship doing what we want to happen locally and also what the Government are capable of doing in terms of the national tax perspective. Can you see that working? I was puzzled that was not included in your thinking.

Chris Richards

Do you mean in terms of the capital allowances regime and how that has changed? We would not marry the capital allowances regime with the plant and machinery because, in a sense, the plant and machinery, which is rated, is quite specific set of different items. Obviously some companies will be looking at how capital allowances works within that. We can have a wider discussion around whether or not the capital allowances regime in this country is actually internationally competitive as well. Some people might argue not. Looking specifically at this as a property tax, it does not make sense for plant and machinery to be included within a property tax.

Helen Hayes

Most councils spend around three quarters of their budgets on children’s and social services, and adult social care. Do you think there is an accountability problem with businesses becoming the majority funders of local authority but not necessarily the majority beneficiaries of services?

Chris Richards

You are always going to have that challenge. Any kind of tax system is meant to have that balance these things. Even at a national level, there is always going to be that accountability problem in terms of who pays the most. It is not necessarily something that businesses are particularly worried about. What we would like to see is any surplus in business rates revenue going back to local business environments so businesses can generate the jobs that they need to.

Helen Hayes

That was going to be my next question. What do you think the guide or the framework should be for local authorities to decide how they spend any additional revenue that is raised through business rates?

Tom Ironside

We would echo what we have just heard, in which the idea is that you get a virtuous circle for any surplus that focuses on economic development. The experience that we have from business improvement districts is that sort of positive engagement generates the right partnership between local business interest and local authorities.

Mike Cherry

We would see it as adding economic growth to the local area. We would see things like broadband, skills, transport, infrastructure and things like that almost having that money ring-fenced to make sure that economic can occur.

Helen Hayes

Do you think councils should have that responsibility for things like skills and transport? Many councils have told us that they would like to have that responsibility and a corresponding relationship between additional funding and those areas of investment that, as you say, contribute towards economic growth very directly.

Mike Cherry

There is certainly a cause for that to happen. You also, though, have to be mindful particularly when you look at infrastructure projects that goes across the cross boundary and the LEPs would have to be involved with that. Let’s also not forget that the LEPs are going to probably be tasked with looking at the whole skills agenda and business support agenda as well. As long as people are prepared and are going to work together on all of this and it is going to benefit small businesses in their localities, we would be in favour of that.

Tom Ironside

We would tend to agree on transport. We can absolutely see the case that was just set out. On skills, we already have a very complicated landscape and we are only talking at a national level. One of the key areas that we are focusing on, as the apprenticeship levy moves forward, is how we can ensure simplicity to enable the maximum return on investment. There is a degree of trepidation about the idea that you could get more complexity arising from a localised arrangement, and it is about how that would be balanced as we move forward.

Chris Richards

We would echo that as well. When we survey our members, the number one issue that comes out is the issue of local transport networks. It needs to be addressed as an initial down payment for devolution. On skills, local authorities bandy around this term “skills”, but they need to be quite specific about what they are trying to achieve. To some extent—and a lot of our members do echo these concerns—that they see a big budget attached to things like apprenticeships and think, “We need a chunk of that.” Be quite specific about what you are trying to achieve, particularly when you think the more high skilled people get the more likely they are to be mobile and you lose that local connection anyway.

Chair

Is it quite possible that anyone could manage the Work programme a little better than it is managed now?

Chris Richards

I do not have a view on that, sorry.

Chair

That is one of the things the local authorities have suggested—that they might be involved in commissioning the Work programme.

Tom Ironside

We do not have a formal position on that. Our focus has been very much on the apprenticeships equation.

Jim McMahon

We verge in and out of the relationship between businesses paying to trade and the need to generate tax to fund public services that we all require. There is always a balance and we have talked about that before. Really good businesses—not just good employers—that are forward thinking recognise the way they treat their work force has direct dividends back in terms of productivity. Surely you recognise and support the need for taxation to fund really decent childcare, education, skills and higher education because it is not just good for society; it is good for business too.

Chris Richards

Absolutely. If you think about the manufacturing sector, it pays above-average wages compared to the rest of the whole economy and has productivity levels above the whole of the economy average. It is not the case that manufacturers are looking for ways to squeeze their costs in that sense. Manufacturers are more likely, as well, to tend to operate and site themselves within an area for a very long period of time. Like you said, it comes back to stability. If they know what their costs are going to be going forward, they can make an investment and look at the return on that investment over a 10-year cycle, rather than having to manage this on a year-by-year basis if their tax burden is going to be shifting in that direction.

Tom Ironside

We recognise that a property tax has a clear place within the overall range of approaches that are needed in order to generate the funding that is needed for all the things that you just described. We have got to a place where there has been a distortive effect on our industry as a result of the burden, or the proportion of that, that sits with business rates. That is the nature of our concern. We think it has got out of kilter; it has got out of sync, effectively. That is where we are coming from. We fully recognise that businesses have a duty and a responsibility to pay tax on a whole range of different things, hence we do.

Mike Cherry

I would agree with what Tom has just said. There needs to be far more engagement between the skills agenda, the education system and small businesses. It opens up a whole new arena whereby we need to be making sure that our young people are indeed trained for what we need for the future. Let us be absolutely clear about this: we are not saying we should not be paying business taxes; what we are saying is—and Tom has alluded to this—that the business rates system now is so complex, so convoluted and so unfair that we need to have some fundamental reform to this as well. The announcement in the budget we very much welcomed but that is on a basis that when you have got 64% of payers only generating 6% to 8% revenue and you now have proposals for the appeal system to make it even worse for small businesses to actually make an appeal, surely transparency—as the previous panel were saying—has to also be part of this agenda. It is fundamentally wrong that a business does not know the basis on which its rateable value is made so it can make an informed judgment and decision before it even either has to use a third party, and we know there are some not-so-well valued third parties at the moment who will take small businesses for a ride. If small business could actually see that valuation, it would not necessarily either have to use a third party or could actually say, “I do not need to put an appeal in. I know it is fair; it looks fair compared to other competitors who I am maybe trying to compete with,” and you have actually got that information to hand. That will be far more beneficial, not just for business, but also it would save the number of appeals that are currently clogging up the system; it would save the valuation office an awful lot of time and money, and, therefore, the Government. That, surely, should be the route map that we should be taking. Alongside all of this, you should not just be looking at business rates; you should be looking at the overall way business taxes are dealt with. You have got to the stage now where you should not really be looking at any one piece in isolation.

Kevin Hollinrake

On that point in terms of transparency, I totally agree with you. I know it has been in an FSB manifesto as one of the policies you would like to see brought forward as well as the one you had in the budget last week. In the Enterprise Bill, you have this “check, challenge, appeal”. Does that go anywhere near where you would like it to go in terms of transparency?

Mike Cherry

No. Until you get fundamental reform of ensuring that the business is allowed to know the basis on which its rateable value is raised in the first place you have a situation at the moment where the only way the business can actually find that out is once they have put the appeal in. It is very often when you have got to the doorstep for the appeal hearing. That is not transparent; it is not helpful; and it is costing everybody time and money.

Kevin Hollinrake

Would the owner/occupier register that one of the previous witnesses was proposing be a partial solution or a full solution to what you need?

Mike Cherry

It is something I am not aware of. It makes sense but it would obviously need to be looked at. If it stops people paying more in rates than rent it has got to be beneficial.

Kevin Hollinrake

It stops appealing because it costs everybody money. All valuations, rateable values and rents are based upon comparable market data. This would then bring all that information out in the open rather than having to ring round various agents to find that information.

Mike Cherry

Anything that brings transparency and reduces cost for both business and, by default, the valuation office has got to be welcome.

Chris Richards

The challenge—and I alluded to this earlier—within the manufacturing sector is the owner/occupation aspect of the sector. Primarily the issue there is around what is a hypothetical event. We are talking about sites that are going to be quite unique, usually quite geographically remote and trying to find a comparison is quite difficult. They will be going out and they do use rating assessors—that is the feedback we have had from members—to try and understand a bit more about how that hypothetical rental value has come up. If you then go to the other end of the extreme, which is about 250 sites in the UK, which is the contractors valuation method that is an even more complex system that looks at what the cost is to replace the building and then trying to work out depreciation rates off the back of that. It is quite a complicated system when it comes to you actually owning the site. Anything that can improve that, like Mike said, and improves some transparency around what is included within that will definitely help.

Tom Ironside

To build on Mike’s point in relation to transparency, if you take everything that he described then you place it alongside more frequent valuations you could get to a very positive dynamic, both in relation to appeals, relation to agents who maybe were not approaching things in the right way and also in relation to the relationship between rate payers and those flipping the rates. It seems like a very sensible way forward.

Helen Hayes

I have a couple of questions about the reset/revaluation period. What evidence is there that the current reset period influences economic development?

Tom Ironside

We do not have good visibility on the research. I was learning as much as anyone, I suspect, in the last session. We do not have good visibility on how it impacts. The only thing I could say is that you can see that there could be distortions as you approach a reset period as to decisions that are taken in individual local authorities or within combined authorities.

Helen Hayes

We have received some evidence that a lengthier reset period that perhaps rides out economic cycles can result in disproportionately high levels of payment during a recession period, for example. Do you have any evidence of the impact that that kind of situation has on rent payers?

Chris Richards

Between the resale or the revaluation period?

Helen Hayes

The revaluation period.

Chris Richards

We are probably slightly different to other sectors, in that the feedback from members was that long revaluation periods are preferable, primarily because then they understand what the rateable value is going to be for a longer period of time. As a result, they can plan and make their investment with a bit more certainty. The worry they have is if you have a more frequent valuation period, you start to introduce shifting rates that build almost year on year if you go to an annual revaluation, for instance. That is the level that they would prefer not to get to. I appreciate this might be quite unique to manufacturing but it is something that we made clear to the Government that five years makes sense. A lot of the members said even longer would be better.

Mike Cherry

We would slightly disagree with that for the majority of our members, insofar as more frequent revaluation would actually be more beneficial. It would bear more relationship to the economic cycle. It would also then stop any very significant hikes or, indeed, decreases that you get into the transition complexity of things.

Tom Ironside

We would agree with much of that. I would only add to it that with a dynamic property market within the industry actually having something that is more responsive along the lines of what has just been described is beneficial.

Helen Hayes

In the Budget, the Government announced they will introduce more frequent revaluations; at least every three years. For manufacturing is that too short of a period?

Chris Richards

We talked about the economic cycle. If you look at the last revaluation period in 2008 in the run-up to the 2010 rating list, now we had quite a significant event happening in 2008. If it had been a year earlier or a year after we would be talking about a completely different set of scenarios. Three years hopefully will not create that instability, particularly if you do have these economic shocks. If we are moving towards anything close to one year that is definitely something that would not be appreciated by the sector.

Jim McMahon

I am thinking slightly differently to the reset period. In just a couple of weeks, council tax valuations will be celebrating their 25th birthday. It would have been to university, got a job, got married and had kids by now. From what you are saying, would there be broad support for having different reset periods for different types of uses? You would not have an all-out revaluation; you might have an eight to 10-year revaluation to manufacturing, you might have a different valuation for supermarkets, for instance.

Tom Ironside

That would add to the complexity of the system. That is my gut reaction. We have not thought carefully about what the ramifications of that would be, but I can imagine it would lead to less visibility rather than more so I doubt we would be that supportive of that.

Jim McMahon

I pre-empted that response slightly to arrive at the conclusion it would probably be a compromise somewhere in the middle.

Mike Cherry

A compromise is probably the best solution without adding more complexity to an already overly complex tax.

Chair

What is your opinion of the infrastructure premium, which elected mayors are going to be able to levy with the support of their LEPs, particularly the mechanism for getting approval for it?

Mike Cherry

We are in favour of it, so long as the small business community is engaged in this in the same way that they are with the bids. Some of those have been very well received. Our concern is, despite the announcements in the budget, that unless you have true representation around the LEPs, which are supposed to be the vehicle that decides on this, small businesses are going to be excluded and it is only going to be large businesses that actually make that decision. As long as they are involved, if it going to be capped at 2p in the pound, if it is going to produce some genuine benefits for small businesses, we would not necessarily be against it.

Tom Ironside

We are in a more sceptical place. We accept the proposal of the mechanism, but we have surveyed our members. There are seven retailers on LEP boards in the UK. We do not think they have a representative role, as in a clear representative mandate. The experience of what we have seen in business improvement districts is that having a much clearer business rate payer endorsement is desirable. 80% of business improvement districts move forward to successful operations. There would not be vexatious opposition, but there does need be a much clearer business rate payer endorsement than necessarily mediation through a local enterprise partnership.

Chris Richards

Similarly an infrastructure premium if absolutely the right direction to go down. We need to be spending more money on infrastructure in certain parts of the country. Anything that can add value to that and help businesses alongside that as part of economic development is something that we would support. The issue we have with it, as has been discussed, is that if you are using local enterprise partnerships as the mechanism to give a sign off on that, is whether that is fully representative, particularly in areas such as the north east, which is going to be a massive area. Where do you decide to put the certain infrastructure that would benefit the entire north east rate payers? That is why we suggest in our evidence it might be helpful to retain some elements of the current system where business might gain the right to call in a decision if they do not particularly agree with it. The current system is that local authorities can introduce a supplementary levy; they just have to have a business vote. No local authority has ever done that. Within London, it was introduced before that requirement was put in. If you had that better engagement and you were clear about what infrastructure projects will be funded by this, you perhaps would get a better relationship between businesses and local authorities.

Tom Ironside

That is a really good point. For us, it should be about the quality of engagement and the quality of trust between both businesses and local authorities.

Chair

The sceptic in me asks just one final question. Say a local authority wants to extend a tram system and put a new line in. It is then too big a scheme for a bid, but all the business that do not benefit from that particular line may well vote against it. Are you ever going to get agreement to spend money on quite a bit of important and costly infrastructure that will only service one bit of a wider city region?

Chris Richards

You might in that instance go for multiple projects instead or look at phasing the projects that benefit business over time. Particularly considering the way some business might choose to locate because of the infrastructure you might actually get businesses moving to that area to take advantage of that from another part of the levied area. It is not the case that business would vote against it; it is that the engagement needs to be there so there is understanding around why that project was chosen over another one.

Jim McMahon

That is LEP in most areas. The LEP will sign off the infrastructure development plans, even if they are not the decision-making body, although in many areas they have a role in that sense. Is what you are really pushing for better or more transparent representation?

Mike Cherry

That covers my point. You have not got small business representation within the LEPs that can get the cohesive view of the small business communities to agree or disagree with that at the moment.

Tom Ironside

The same goes for the retail industry.

Chris Richards

Our worry is less on that side and more on the side that LEPs are not statutory bodies. If you get a disgruntled bunch of businesses, will they kick up a fuss and start forcing change on the LEP board itself? It is that background check that we are calling for; the right to call it in, not necessarily to say, “This is not a good idea,” but just to call it in and try and get some engagement going forward.

Kevin Hollinrake

I can quite understand the need for engagement; it is so difficult. You talk about combined authorities that are potentially huge areas with a single elected Mayor. It is so difficult to engage with all those businesses across a place like Sheffield, Greater Yorkshire or Manchester. They are huge.

Chris Richards

Yes. It is going to be difficult. Different areas will tackle it in their own ways. From our point of view, we will be trying to encourage manufactures to engage with it not just on that regional level, but also the sub-regional level to look at what might be best for certain pockets of these different LEP areas.

Chair

Thank you all very much for coming in this afternoon and giving evidence to us. I appreciate it. That brings us to the end of the public proceedings. Oral evidence: Business Rates, HC 665 20