The FSB has long called for a rebalancing of the UK economy so that the proceeds of economic growth are felt beyond London and the south east of England. We believe that the devolution of funds and powers presents a great opportunity for local areas to work in partnership with small businesses and create the right conditions that will help support local economies.
One example of this is the power for local authorities to retain the income generated by business rates. We hope this will create incentives that can spur local authorities into pursuing economic policies that support small businesses. However, we would urge caution in devolving tax setting powers. Checks and controls need to be in place to ensure that cash strapped local authorities do not use business rates as a way of plugging funding cuts in other areas.
Once more, there needs to be sufficient accountability so that small businesses are fully involved in decision making. In particular, lessons should be learned from the establishment of LEPs in England to ensure that governance arrangements are in place and small businesses have a voice in how devolved monies are spent.
Local areas are very often best placed to understand what will help their local economies. Providing the capability and capacity is there, this has the potential to offer better infrastructure, more tailored business support and more employability and skills programmes that are relevant for employers. But decision makers need to always bear in mind the law of unintended consequences whereby different initiatives could cause added complexities and costs to employers as a result of a fragmented tax and regulatory system.
In essence, devolution must not be pursued for devolution’s sake. But where it can be shown that local areas can deliver better outcomes than central government they should step up to the mark in partnership with the private sector.