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Everyone will have seen the daily headlines about the credit crunch and falling house prices, but no-one yet seems to have made the link between these issues and the debate on the future of local government. I think this needs to happen – and soon. All the debates around the Local Government Act, the Lyons review, the Sub-National Review and business rate supplements took place in the context of an economy which had seen year-on-year growth for the last decade. But now that the economic picture has changed in the last year, these assumptions must be re-evaluated. Specifically, in a worsening economic climate, local authorities need to properly involve the private sector in their decisions, and not look to shift the burden of their funding shortfalls on to local businesses. Now, I don't want to overdo the doom and gloom about the state of the economy. Our most recent quarterly economic survey showed that while there has been a slowdown, and the economic threats posed by the problems of the financial system are very real, British business remains resilient, and a recession could still be avoided, if the right policy decisions are made. But the situation is very difficult, and it is vitally important that the wealth-creating business sector is not harmed by these difficulties. The current situation is a cause of real concern. At a national level, in addition to the taxes which businesses already pay, the Government's handling of the capital gains tax issue has been of massive concern to business. At a local level, businesses already pay contributions in the form of business improvement districts and Section 106 agreements, but are facing the prospect of combinations of business rate supplements, new planning charges through the Community Infrastructure Levy, possible road pricing in cities across England, and workplace parking levies – as being considered by Nottingham City Council – as well as the recent abolition of empty property rate relief. There needs to be a recognition of the overall burden of the wide array of taxes and charges on business. Business has consistently made the case for greater investment in our transport infrastructure – whether it be Crossrail in London or other projects crucial to local economies across the country, and many of these taxes have been earmarked for this purpose. But there seems to be nothing to prevent all of these business being piled on top of each other. And let's not forget that, in addition to existing national taxes on business, UK companies already contribute £24bn in existing business rates without funding for these projects being available. In the context of tight financial settlements for local government and increased cost pressures from waste and social care, we are very concerned that local authorities will inevitably be looking at any revenue-raising options they can find, in order to fund the services they will continue to need to deliver. But if this happens, the impact on the private sector and the broader economy could be disastrous. The same argument applies for business engagement. While the economic going was good, some local authorities could get away with not working closely with local businesses without it necessarily damaging the local economy. But now, the prospect of a worsening economic climate means that this will no longer work. The forthcoming economic assessment duty on upper-tier local authorities is an opportunity for them to step up to the challenge of business engagement. Some local authorities are doing this effectively already, but many are not. David Frost is director general of the British Chambers of Commerce

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WHITEHALL

Charging ahead

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