Tony McDonough: Don’t take us back to the dark decade

Aug 29 2007 by Tony McDonough, Liverpool Daily Post

THERE are many business people in Liverpool who recall the dark days of the mid-1980s when the city became an investment-free zone.

A far-left Labour council led by John Hamilton and his deputy, Derek Hatton, took on Margaret Thatcher’s Government and Liverpool nearly went bankrupt in the process.

Whatever your political views on that era there is little doubt that most potential private sector investors gave us a very wide berth, and continued to do so for more than a decade afterwards.

With that still fresh in many people’s minds it would be likely that yesterday’s proposal to allow local authorities to charge businesses a top-up business rate, on top of the national business rate, would cause more alarm here than in most other places.

Centre For Cities, an independent urban research unit, says supplementary business rate (SBR) of 4p in the pound for Liverpool would raise an extra £13m a year, enough to support a 30-year loan of £190m.

This money, it says, could be ringfenced to pay for major infrastructure and transport projects and help accelerate economic growth.

The current uniform business rate was established in 1990. It is set on a formula and is collected by the Government and distributed to local authorities.

It was started specifically to prevent councils in certain areas of the country from hitting firms with inflation-busting business rate rises.

We have a level playing field in terms of attracting inward investment but allowing councils to set a top-up SBR could see that change dramatically.

If, say, Liverpool and Knowsley were to set very different SBR rates it stands to reason that the authority with the lower rate would become much more attractive to potential inward investors, and could even cause existing businesses to flee across the border.

And where is the accountability? Will small firms be given a vote in council elections? That seems unlikely and the probable scenario will be councils gleefully trousering the extra cash and spending it on whatever grandiose scheme they fancy, regardless of the views of the business community.

Business Improvement Districts, one of which is well established in Liverpool’s retail district, would seem to be the better way forward. BIDs allow participating businesses to have a full say in how their money is spent.

Liverpool will always need more funding for major infrastructure projects, but if you are going to ask businesses to pay then you have to give them a say.

THERE is much we can do as a city and region to encourage and retain investment from overseas, but sometimes it seems we are simply at the mercy of the global marketplace.

Jaguar Land Rover (JLR), part of car giant Ford, and cable TV operator Virgin Media, are both in the shop window ready to be sold to the highest bidders.

Both companies are reportedly being circled by the world’s biggest private equity houses.

In early August Virgin Media said it was extending its deadline for bids amid speculation that potential buyers were suddenly struggling to raise the necessary funds.

It could mean some potential suitors dropping out of the bidding race for both companies. It could also mean whoever does acquire them may load the deals with expensive debt which in turn may have to be serviced by slashing costs to the bone.

That would be a major worry locally as between them both groups employ more than 4,000 people in Merseyside. There is little we can do but sit, wait and hope.