The infrastructure sector reacts to Osborne's big plans

 

While the infrastructure sector appears mostly positive about the devolution of business rates and the creation of a National Infrastructure Commission, key figures have warned of the risks attached.

Council directors’ body ADEPT, called for ‘no place to be left behind’ as the devolution of all £26bn of local business rates to councils is set to transform the nature of local government’s financial landscape.

Simon Neilson, chair of ADEPT’s planning, regeneration and housing board, welcomed the idea in principle as a means to help council officers ‘plan, prepare and grow successful local places with much more certainty in future’.

‘However, we also recognise the current system of business rates is deeply flawed; and local funding based on business rates alone could create some perverse incentives for land use in local communities,’ he added.

‘There is also a very real risk of a postcode lottery in local government funding based upon the health of your business rate base; the haves will flourish at the expense of the have nots.’

Government sources have confirmed that there will be a redistribution mechanism attached to the devolved funding to support less affluent areas although no details have been released yet.

On the subject of the National Infrastructure Commission (NIC), Mr Neilson added that ‘we must guard against nationalising decision making at the expense of genuine devolution and localism. It will be a tricky balance to be struck and will be fascinating to watch.’

Richard Hayes, chief executive of the Institute of Highway Engineers, suggested that there could be a financial shift from rural to urban areas as a result of the full retention of business rates, although it did present a potential boost to local infrastructure investment.

He also warned against local government reorganisation by stealth, stating that with the added bonus of an infrastructure levy capability for city-regions with an elected major, councils were being encouraged to go down the route of large, combined authorities.

He also raised concerns over the role of LEPs in allowing the infrastructure levy to be raised, suggesting the bodies, which have representatives from councils and business on their boards, needed more transparency.

Areas with elected mayors will have to make a case that the levy needs to be raised and secure a majority vote in favour from the LEPs’ business members

‘We hear that LEPs work well in some places but sometimes they are not effective. In some areas it may not necessarily be the most appropriate people on these boards to make such decisions on infrastructure needs,’ he said.

He also called on the NIC to make demand management a top priority and cautioned against a focus solely on delivering major new schemes as it considers a 30-year vision for the UK’s infrastructure needs.

‘We don’t know what affect technology will have in 20-30 years time. We need to look at infrastructure as a wider issue than just the physical structures, including digital infrastructure for instance as a way to manage demand.

‘The Government talks about fixing the roof while the sun is shining but it seems like we are not fixing the roof but building a new conservatory. We have a finite amount of land. How many more of these major projects can we build?’

Howard Robinson, chief executive of the Road Surface Treatments Association (RSTA) responded to the announcement on business rates stating: ‘This is potentially good news for the maintenance of the local road network as it means that councils will have access to all of the business rates raised and will be able to direct where that money is used. Those councils who invest in the provision of a well-maintained road network will attract more businesses. More businesses means more business rates income.’

Speaking to Transport Network he raised concerns ‘for those that have less of a business community, I am not sure how they are going to cope’.

He also said that cutting back business rates to try and bring in more trade to the area could prove to be a ‘risky approach’ that would leave authorities with an infrastructure debt.

‘It is for local authorities to do the sums and work out what is right for them. There are still the same pressures on council budgets and there is no guarantee a cut in rates would work.’

In a statement on its website the Chartered Institution of Highways and Transportation, said: ‘CIHT believes that a logical compliment to an infrastructure commission is the development of a National Transport Strategy.

‘CIHT have long made the case to Government that the whole transport network is vital to the social and economic well-being of the UK and this will be helped if the infrastructure commission supports the development of a National Transport Strategy.’

 

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