The government’s plans to incentivise councils to boost local economic growth through the localisation of business rates could severely hurt the North East’s vital manufacturing sector which contributes £7.5 billion a year to the regional economy.
Speaking in Parliament on the issue, Alex noted that Business Rates from retail or commercial developments are significantly higher than manufacturing, and therefore under Business Rate localisation it is very likely that manufacturing developments would be seen as a less attractive proposition, despite the wider economic benefits they bring.
The Tory-led government’s proposals, which would reduce dependence on central funding by allowing local authorities to keep a greater share of the growth in business rates in their area, has also been criticised by the Association of North East Council who claim wealthy areas would grow stronger and poorer areas weaker if business rates are localised.
If the government’s proposals were applied to the 2011/12 and 2012/13 grant settlements for the North East, it would result in grant losses above the national average in percentage terms and substantially above average reductions in cash grant.
This significant reduction means that councils would no longer be able to provide the same level of public services in their area and would inevitably have to make deeper cuts in its budgets, and thereby put greater pressure on the delivery of the most essential local services.
Alex said:
“Sadly these proposals do anything but boost the position of small businesses and manufacturing who seem to take one hit after another while the banks are lavished with support.
“To create a system which would threaten the already uncertain future of the North East’s public services at a time of high
unemployment, greater deprivation and child poverty, an ageing population and worsening health inequalities is simply madness.
“This ‘survival of the fittest’ model is simply the wrong policy with the North East again paying the price.”