Business sense

by Apr 23, 2012 No Comments

The pressure on councils to foster local economies has never been stronger

As one trade organisation puts it, local authorities and small businesses did not cause the economic turmoil of the last few years but they are both having to deal with the consequences.

Councils have faced reductions in available public funding in the face of growing demand for their services. As for businesses, they continue to experience difficult trading conditions that threaten survival, says the Scottish Federation of Small Businesses (FSB).

The trade body emphasises that business does not expect their council to transform the local economy single-handedly, but they do expect local government to do all it can to support businesses to grow.

The FSB does not underestimate the huge service delivery challenges facing councils.

However, it says, these problems will only be compounded if economic growth and employment is not given a boost.

“We know that local government has come a long way in the last five years,” says Andy Wilcox, the FSB’s Scottish Policy Convener.

“But with small businesses likely to create the jobs the country needs, we expect the full support of our councils to promote economic growth.” In the FSB’s manifesto for the council elections, it calls for: Economic development departments to be given a stronger role to champion economic recovery across all local government departments; The use of public procurement spend to more effectively develop local economies; Building on work to tackle youth unemployment by placing greater emphasis on creating jobs in local businesses; Focussing planning reform on providing a better service to small business applicants; And to make it simpler for businesses to comply with local regulation by developing a more co-ordinated, standardised approach.

The FSB’s view of the challenge for local authorities chimes with Councillor Pat Watters, outgoing Convention of Scottish Local Authorities (COSLA) president: “Local authorities have coped well with financial pressures and councils continue to face tough challenges from reducing budgets and growing demands for services. This has always been the conundrum councils have had to wrestle with particularly in times of a downturn in the wider economy.

“As I have often said myself, neither challenge nor change is new for local government, but the current pressures on finances from reducing budgets and growing demand for services are substantial, indeed it could be argued that they have never been greater.

“Demand for our services will unfortunately always outweigh our ability to pay for these however our focus remains on how best to improve outcomes for people and communities across Scotland. The bottom line is that we live in a demand led society. People want the very best results from their public services.

“To make that happen, the Christie Commission showed that we need to invest in prevention across the whole of the public sector, and do more to ensure that services work together to focus on what matters most to communities our joint working with the Scottish Government around community planning partnerships will ensure that we continue to strive towards this goal.” But the sometimes contrasting approaches of council departments can frustrate business owners.

“Our local economic development office have been great in helping and supporting us to develop new areas of the business and to support marketing,” said one. “Staff are very friendly and helpful in providing useful information. Where the information is not known they always do their best to find out from other sources within the council.” But he added: “Policy and procedure within other departments of the council have proven to be both costly and time consuming and has resulted in our business postponing certain projects and business development plans.” A construction company manager said: “Our biggest issue in dealing with councils is prequalification questionnaires – they are extremely onerous and time consuming – they all want the same information – just asked from slightly different viewpoints.

“Time spent completing different formats with similar information is time lost on winning more business. The additional requirement now as opposed to five years ago means we need double the amount of administrative staff to deal with the same level of turnover. It is driving small business away from the public sector market.” Frustrations were echoed in the experience of a restaurant owner: “Having invested heavily in a new business, we were stopped from continuing refurbishment by the planning department, which set us back approximately eight weeks.

“In business terms we had already employed staff and had set an opening date, which meant two months’ expense without revenue coming into the business. This had a huge knock-on effect, which we are still trying to recoup.

“We eventually involved our councillor, who assisted in the conclusion of an unfortunate event. If the council had been slightly more flexible and adopted a common sense approach this need never have happened.” Andy Wilcox added: “The recovery is everyone’s business. We must see all parts of all of our councils consider their role driving growth. Every department should be signed up to that goal, thinking about how their behaviour is impacting on local businesses and how they could improve.

“Local government is going to face some tough times over the next few years. But things will only get worse if we don’t get local economies moving again. In practice, this means the procurement department really understanding how taxpayers’ money is spent locally. It means cross-department consistency in regulation. It means getting planning moving and reasonable, proportional local fees.

“In the short term, we need to see our local authority leaders, both members and officers, coming up with and driving local recovery plans which understand the importance of local growth.” There is a growing belief that the devolution of economic power to councils by the Scottish Government should be extend. The think-tank Reform Scotland believes that business rates should be returned to local control: “Just as it has been argued that there is little incentive for the Scottish Government to improve the economic environment if any increase in revenue as a result of improved growth is returned to Westminster, the same can be said of our councils and business rates,” says Reform Scotland chairman Ben Thomson.

“Devolving business rates to local councils would give local authorities a real incentive to increase economic growth and address specific problems they are facing.

“Councils would have an incentive to provide an attractive economic environment, but the decision would be up to them. For example, a council could seek to increase business rates which might have the effect of increasing income in the short term but is likely to lead to poorer economic performance and lower income from business rates in the longer term.

“However, the increase in local financial accountability is more likely to give councils an incentive to design business taxation policies and broader local economic development strategies to support the growth of local businesses, encourage new business start-ups and attract businesses to invest since this will benefit the council directly by increasing its income from business taxes.

“Although some more rural areas have a smaller business tax base than the big cities, giving control over the tax to the authority gives the power to adjust it to local circumstances. For example, while rural areas may not have the big shopping centres of the cities, they do have high streets, many of which are suffering. Being in full control of the tax would enable councils to experiment with schemes such as offering a year’s business rate holiday to companies which locate in their high streets.

Reform Scotland also believes that councils should be fully in control of their council tax. In other words, they should be able to raise or lower the rate and change to whom and how it applies.

And it goes further: “We would also argue that councils should be able to introduce new small taxes, such as bed taxes, where they feel they are appropriate for their area. If the electorate disagrees, they can vote the councillors out,” says Thomson. “Such small schemes also increase diversity and allow other councils to learn from the experiences. Importantly, it also makes councils less dependent on central government grants.”

Will Peakin Will Peakin

Beginning as a reporter on weekly newspapers in the North-East of England, Will moved to Glasgow and worked as a freelance for a number of UK national newspapers. In 1990 he was appointed News Editor of Scotland on Sunday and in 1995, Scotland Editor of The Sunday Times. In 1999, he and his family moved to the south-west of France where he wrote for The Sunday Times Magazine. Returning to Scotland in 2002, he was Assistant Editor (Features) and Deputy Editor at The Scotsman before joining Holyrood Magazine in 2004. He writes for the magazine's business pages and edits its series of...

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