Chancellor wants local enterprise

Chancellor Gordon Brown laid out a series of proposals to the Local Government Association Conference aimed at incentivising local authorities to create a climate for business start-ups in their areas.

He focused on measures to encourage what he termed the 'new drivers of prosperity in a modern economy' - namely enterprise, innovation, skills, investment and employment.

Enterprise

The current Local Government Bill gives a financial incentive to local authorities to encourage business start-ups in their areas by allowing local authorities to keep a share of the business rate receipts that result from new business creation.

Mr Brown said: "The old idea was that you got full employment from a small number of large companies. Today full employment needs a large number of small companies creating jobs.

"For every three small businesses creating jobs in the best off areas, there is just one, creating far fewer jobs, in the poorest areas - and as every Councillor knows, fewer businesses means fewer jobs which means reduced income for services and yet more social problems that public services need to fund.

"So one of the best pro-jobs, anti-poverty programmes is to help more people start more small businesses, and ensure that access to capital, advice, skills - once restricted only to an elite - is opened up to men and women in every part of Britain.

"In the past, with the rigidity of the uniform business rate, local authorities gained no direct financial incentive from giving priority to business creation. In fact local authorities could justifiably argue that they had to deal with the social and environmental cost of economic development - in transport congestion, environmental damage and pressure on services like housing and education - but that the financial gains through increased income tax and business rates were passed back to central government.

"So to tackle this, the current Local Government Bill will allow local authorities to keep a share of the business rate receipts that result from new business creation --- creating positive financial incentives for local authorities and the wider local community to maximise local economic activity while at the same time avoiding excessive bureaucracy and ensuring fairness between localities."

The Government has published a consultation paper on the details of the scheme. It believes that local authorities could gain up to £1 billion over the next three years. The Chancellor also indicated that local authorities will be given a greater role in economic development in the future and announcements in his Pre-Budget Report will reflect this.

The Chancellor continued a theme which has been prevalent among other Government Ministers recently by stressing his wish to see the enterprise culture growing in disadvantaged communities and areas of high unemployment.

Innovation

The Chancellor commented on the disparity between some areas and stressed the need to encourage local science and innovation, including improving links between schools, colleges, university and businesses.

Mr Brown said: "Our regional and local approach means we are already moving from centrally administered R&D policies to the encouragement of local technology transfer between universities and companies and the development of regional clusters of specialisms - encouraging the growth of the knowledge-based company and the business friendly university."

Investment

The Chancellor focused on rewarding faster responses to planning applications and simplifying planning guidance to promote local economic development.

Skills

The Chancellor stressed the variation in education achievements across the local authorities and the need for education to continue from school through the employment environment by offering firms incentives to give staff time off to train towards basic skills. There will also be an expansion of the modern apprenticeship scheme.

Employment

The New Deal programme remains at the heart of national and local policy to tackle unemployment. However, the Chancellor said that there were almost 600,000 vacancies in the economy and the next stage of the New Deal is to do more to link jobs without workers to workers without jobs.