Bill May Back-Fire Harming Local Economies

Businesses faces a double burden of unwanted extra taxes at the worst possible time if a new bill is passed by Parliament, the CBI has warned.

The Business Rates Supplement Bill has its third reading in the House of Commons tomorrow today.

It will allow local authorities to levy on companies supplementary taxes designed to pay for infrastructure projects which benefit local economies.

The taxes could total £800m a year, according to the Lyons Review into Local Government of March 2007.

These supplementary taxes would follow the overall 5% rise in business rates announced by Government, and set to cost £1.15bn, which is strongly opposed by business for being too large a rise at a very difficult time.The supplements would particularly affect manufacturers and retailers.


John Cridland, CBI Deputy Director-General, said: "These extra taxes on business could harm local economies by placing extra financial demands on firms when they can least afford it. They could make the difference between companies surviving the downturn or going to the wall."

The CBI is calling for an urgent amendment to the Supplements Bill. It says firms should get a vote to approve or reject proposed tax supplements to pay for new infrastructure projects. This would:

• Help avoid white-elephant projects that business does not actually need, saving money and cutting waste.
• Ensure that priority is given to the projects that are most likely to help local economies.
• Avoid extra taxes at times when business simply cannot afford them, helping avoid business failures that cost jobs
• Make the system fair - if only business pays a supplement, business should get a vote.
• Enhance trust and understanding between local government and business, helping local economies.

Mr Cridland said: "The Business Rates Supplements Bill is designed to help fund projects that benefit local economies, but may back-fire in its present form. It risks placing extra burdens on firms that are fighting for survival, and could lead to more firms going bust. It also risks taxing business for projects that are not what local economies need."

Cridland said that by amending the Bill to give business a vote it will ensure local economies get the right investments, which stimulate economic growth and create jobs, instead of threatening them.

(GK/JM)