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Let's not return to local taxes.

Byline: By David Rosser, CBI Wales

Everybody agrees we must find ways to boost the Welsh economy. But business can only generate the jobs and wealth communities need if local politicians create the right environment.

That is why CBI members are dismayed over proposals that could mean business paying millions more in local tax every year.

Council leaders want to return to a system where business rates are set locally rather than nationally. They believe this will reduce the pressure on council tax. But, in reality, it could undermine economic development, jeopardise jobs and sour relations between companies and local authorities.

This new idea is no more than a poor rehash of a policy that failed in the 1980s when business learnt the hard way that local rates lead to bitter disputes between firms and local authorities.

To put it bluntly: In the 1970s and 1980s, business was asked for cash and input - many local authorities accepted the cash, rejected the input and then asked for more cash.

It is absolutely right that businesses should play an active role in our communities, but merely imposing additional taxation will make them used, not valued.

Much is already being done to develop partnerships between business and local authorities in Wales. Initiatives such as Business Improvement Districts, regeneration projects and town-centre management schemes are all forging closer links.

These show that business is prepared to contribute more time and resources where it is convinced this will deliver genuine improvements. But this progress would be thrown off course by a return to politicised local rate setting.

The national business rate spreads the cost of funding local government more fairly between businesses in different areas. It provides firms with stability and protects them from 22 different - and volatile - rates in Wales, and a further 300 in England.

This stability is vital for companies when planning for both the short and long term, yet this would all be lost in the lottery of arbitrary local variation. And localisation would mean that the authorities which most need to encourage business investment are least likely to succeed. Deprived communities with a low business presence could find that a local rate puts strong financial pressure on individual businesses without raising significant revenue overall.

Chancellor Gordon Brown has promised no major business tax increases during the course of this parliamentary session, and companies will be counting on this. But business is concerned that it may find itself on the wrong end of a short-sighted policy.

If taxes continue to rise, there is a danger that potential investors will look elsewhere while current investors may be tempted to simply up and leave.

In this debate, we have heard a great deal about where extra taxation should come from, but precious little about the efficiency and quality of public services.

Rather than pitting council taxpayers against business, and rather than returning to the failed policies of the past, we should be taking a close look at the value for money we are all getting as taxpayers.
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Title Annotation:Business
Publication:Western Mail (Cardiff, Wales)
Date:Feb 25, 2004
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