by Kieran Neild, grassroots assistant at the TaxPayers' Alliance
Today, ‘Boris the Builder’ gave a major big speech on the future of the economy. As part of the government's commitment to ‘level-up’ parts of the country, a new Towns Fund has been established to invest in local infrastructure, connectivity and urban regeneration projects. The £3.6 billion fund will be distributed between 101 towns across England. Almost all of the towns eligible are encompassed in the government's Northern Powerhouse and Midlands Engine strategy.
Funding will be allocated based on successful bids by local authorities in partnership with other actors. This approach is modelled on previous ‘Town Deals’ between local authorities and central government. Local authorities are eligible for a certain amount of the funding but must produce a viable business strategy in order to successfully complete a ‘Town Deal.’ Once this strategy has been agreed, the government will sign the deal and release the funds. The government may also give councils additional money to get a bidding strategy in place.
The government is clearly aware that some parts of the country have not shared in the spoils of economic growth made in the cities and the so-called London ‘metropolis’. Unfortunately, as with so many well-intentioned efforts to pick winners, the government’s solution of the new Towns Fund falls far short. Pork barrel politics is not and never has been the answer. We need a country-wide low tax alternative to give our regions a boost, to free up capital and to incentivise investment - as the TPA made clear in our response to the shadow chancellor’s suggestion that tax rises were somehow the solution to the current economic crisis.
Local and regional government hardly needs extra money. The government has already massively increased funding for local authorities across England with the 2020-21 Local Government Finance Settlement. Large grants worth billions have been made available to councils struggling with social care responsibilities, giving them major headroom to spend on other priorities. The government has also provided emergency funding to councils to cover the cost of the coronavirus crisis. This is on top of inflation-busting council tax rises across the UK this year.
Ministers must stop simply assigning bags of money in the hope this will grow the economies of parts of the country. Too often, this spending results in no tangible benefits to residents who aren’t directly employed by the council. It’s little wonder that local councils across the country have failed to keep their budgets under control when week after week we hear scandalous stories of waste - detailed in our weekly bulletin. The scope for the public sector to regenerate anything or anywhere is invariably limited. To improve and regenerate these towns, we need more businesses operating and hiring.
This came through loud and clear in our landmark polling last year of working class taxpayers, who told us getting businesses back to their towns was the name of the game. “Rates are just so high aren’t they?”, asked a middle-aged woman in Bristol. “Everyone is shopping online these days and the shops on the high street can’t compete. Cutting their rates would help that no end." Residents instinctively understand that everything flows from getting local businesses going, and council initiatives are rarely the right way to do that.
To facilitate this, burdens on business need to be reduced. One big factor holding back local economies is business rates, which are a tax on occupying non-domestic property. Unlike corporation tax, which while enterprise-sapping is at least charged based on profit, they are levied on businesses, regardless of their financial state. This means that business rates can be the single highest burden on a small or medium sized business and scare away potential investors in new ones. This burden is shutting down the high street and preventing urban regeneration. The British Chambers of Commerce has suggested that business rates are a ‘kick in the teeth’ for manufacturers and retailers.
If the government’s goal is to get high streets across the country flourishing with the faint beeps of contactless payments, then of far greater benefit than the pork barrel politics of the new Towns Fund would be our proposal to cut the standard and small business multiplier to 30 per cent and rule out rises in business rates. This could help protect established businesses in the regions (who will doubtless be extremely concerned by the economic impact of the coronavirus), while greatly increasing the incentives to set up new ones - bringing jobs and opportunities to towns across the nation.
As well as urban regeneration, local transport infrastructure is cited as a key concern which the Towns Fund aims to address. But why should more of our money be spent on transport projects when the government has already committed to HS2? The £100 billion rail project will supposedly ‘spread wealth and opportunity to the north’. So why would the government commit to investing more money on local transport links if HS2 did what it said on the tin? Rather than making funds available for both local transport and HS2, the government should have scrapped HS2 and used some of the original budget to improve local transport links. Our Great British Transport Competition paper explained a series of individual examples of how this could be done - often in and between post-industrial towns.
One proposal was to reopen railway links between Blackburn and Hellifield for the modest cost of £15 million. This could improve the connection between east and west Lancashire, allowing quicker access to the major cities in the north west. Coincidentally, this would have huge benefits for Darwen and Todmorden, two towns which are set to receive cash from the Towns Fund. By scrapping HS2, billions of pounds of taxpayers money could be saved and a reasonable part of it reinvested to help local transport links. This would also end the need for additional central government funding for towns- killing two expensive birds with one stone and saving taxpayers’ money.
It’s also worth remembering, when considering spending money on transport links, that despite the overwhelming focus on train lines, the vast majority of Britons commute via car. Naturally, the Towns Fund further guidance prefers to focus on the “opportunity to speed up the process of restructuring our industry, commerce and communities towards a greener future” via an “increase in the number of bus services; new or upgraded cycle and walking routes; new or upgraded road infrastructure; pedestrianised streets.” As ever, the motoring majority barely get a look in.
By reducing the dependence on government handouts to wasteful councils and putting a halt to the never-ending dishing out of taxpayers’ money, in favour of lower and more business-friendly taxes, England's towns can bounce back. With gloomy economic forecasts, the UK needs to be making every penny of taxpayers’ money count. To ensure our towns and cities recover from the virus, we must continue to make the case for sensible measures which will reduce burdens on businesses and individuals across the nation - allowing business to lead the way in putting England’s forgotten regions back on the map.