Local business growth scheme should be ‘maintained’
The government has been urged to keep and extend a scheme designed to help local authorities develop business growth in their areas.
Last week, John Healy, the local government minister, announced the final phase of the Local Authority Business Growth Incentives (LABGI) scheme, naming the 371 councils that are to receive the third instalment of £300 million worth of funding.
Since its inception, the scheme has seen some £1 billion distributed to local authorities in an effort to boost business investment.
The plan now is to introduce a new scheme which will see annual business funding for local authorities fall to £100 million.
But the Federation of Small Businesses (FSB) has called on the government to recognise the success of the LABGI by extending its life span.
The FSB said that the present scheme has played a major part in offering entrepreneurs vital support, although it added that it is important the money be ring-fenced so that it benefits local business communities.
Roger Culcheth, the FSB’s local government chairman, said: “The LABGI scheme has been a great success and should be extended in its present form. It has encouraged councils to work harder to support economic and business development in local areas.
“But the money it raises must not get lost in council finances. It should be ring-fenced to support the success of local businesses in the future.”
Mr Culcheth added: “Given the economic hardships that many are facing at the moment, a less generous scheme to support local businesses is exactly the wrong thing to do. Extending and improving the existing LABGI scheme would be a shot in the arm for the 4.5 million small businesses that generate over half of the UK’s wealth.”
However, another small business group, the Forum of Private Business (FPB), has argued that the scheme has run the risk of failing to help smaller enterprises.
The FPB said that the awarding criterion laid down by the scheme, which is based on an increase in the collective rateable value of an area’s commercial properties, is inaccurate and a disincentive to start-ups. It also tends to encourage authorities to chase bigger businesses rather than support small firms, the FPB added.
Phil Orford, the FPB’s chief executive, commented: “In 2007, a full two years after the scheme was launched, we asked our members if they felt their businesses had benefited from the injection of funds.
“We received reports that businesses had lost out because the scheme had encouraged their local councils to invest in bigger business developments, such as out-of-town shopping centres, rather than promote the growth of small, independent businesses within the community. It is certainly not a process that encourages economic growth for the smallest firms.”
