March 16 2010

The Forum of Private Business is urging local councils to use the £50 million awarded by the Government's Local Authority Business Growth Incentives (LABGI) scheme to provide additional hardship relief for small firms.

By 'thinking smallest first' and pledging the money to bolster small business rate relief, councils could free up to £150 million in match-funding from the Government.

The business support and lobby group's call follows the yesterday's publication of the latest round of LABGI grants. The scheme is aimed at encouraging business growth by rewarding enterprise-friendly councils with grant funding that is not ring fenced - meaning they can spend it as they see fit.

"As the £50 million from the LABGI scheme is 'unringfenced', according to the Department for Communities and Local Government (DCLG), councils should use this money to pay for hardship business rate relief for struggling business," said the Forum's Rates Adviser Andrew Bacon, of LeaseholdersUnited.

He added: "If the entire £50 million was used by councils to pay for hardship relief the Government would have to give them another £150 million. This is because the relief is 25% funded by the Councils and 75% by the state but councils have sole discretion on granting it."

The LABGI scheme operated from 2005-06 to 2007-08. It did not operate in 2008-09 but, for councils in 55 sub-regions of England, it has resumed for 2009-10 following several changes the Government says will make it more 'transparent and predictable'.

These include allocating initial funds to sub-regions, which are then distributed to local authorities, rather than directly to councils. Further, grants are now awarded based on increases in income from rates rather than increases in the rateable values of commercial properties.

But there remain concerns, initially reported to the Forum in 2007, that, because the level of LABGI funding is based on increases in business rates, some councils are spending their time and money courting bigger developments, such as out-of-town shopping centres, at the expense of helping independent firms within their communities.

Mr Bacon explained: "The easiest way for a council to increase its 'bonus' under the LABGI scheme is by granting permission for large high value developments, or indeed diverting resources towards them,"

"Plus, as the new scheme doesn't ignore increases in business rates as a result of indexation, some councils will end up just getting paid for business rates rising by inflation and be left to spend the money on anything."

The Government wants to encourage sub-regional cooperation on economic development via the latest LABGI scheme, focusing on giving struggling small businesses a kick start.

The Forum of Private Business is responding by calling on councils to help achieve this by using the LABGI funding to boost the rate relief that is available.

In addition, the Forum is urging all councils to remember the importance of small businesses as major local employers when trying to secure LABGI funding, seeking inward investment and developing their economic infrastructure.

"Of course the funding is welcome, but, for the good of the community, as well as its economy, this latest LABGI scheme is only relevant if it encourages the council to focus on the growth of small firms," said the Forum's Policy Representative, Matt Goodman.

"Local authorities are free to spend the LABGI money as they please but given their importance to the community as employers and rate-payers, and with the tough economic climate we still face, it is fair that small firms should be the main beneficiaries.

"Let's give the money back to the businesses that are trading and get the economy moving again."

Formed in 1977, the Forum of Private Business is evolving following a year of intensive research about the real needs of small businesses.

As an invaluable extension to its members' teams the not-for-profit organisation has developed a range of tailored business solutions to support, protect and reassure small firms throughout the lifecycle of their businesses.

These are: 'Finance Director', 'Legal Director', 'HR Director', 'Health and Safety Director', 'Development Director', 'Purchasing Director', 'Communications Director' and 'Managing Director'.

Membership of the FPB automatically includes discounted access to LeaseholdersUnited's online services, which provide a cost-effective alternative to professional appointments.

Experts from LeaseholdersUnited can also help small businesses with many other aspects of property costs, such as rent, service charges and claims for Small Business Rate Relief.

For more information call 0845 612 6266 or click