Banking on economic benefits

SAM THOMSON takes a look at those pieces of new legislation which will most affect companies and individuals working throughout Sussex.

Business rates

One of the most controversial pieces of legislation wasn’t even mentioned in the Queen’s speech.

Details of the Government’s decision to press ahead with plans to allow councils to charge a supplementary rate only emerged after the monarch had finished addressing Parliament.

The Business Rates Supplement Bill will see authorities able to demand an additional supplement of up to 2p on the national business rate to promote economic development in their area.

Ministers regard the measure, recommended by the Lyons Report into local government, as a “vital tool for councils to promote long-term economic growth”.

But the proposals were condemned by business leaders.

Miles Templeman, director general at the Institute of Directors, said: “We deplore the decision to go ahead with business rate supplements in their current form.

“Any benefits from projects funded by these supplements will come after the recession, but burdens will be imposed during the recession.”

Mark Froud, chief executive at Sussex Enterprise, the county’s chamber of commerce, was equally unimpressed.

He said, “Sussex Enterprise is firmly opposed to the principle of business rate supplements, which will be an extra burden on businesses at a time of enormous global competitive pressure.”

Mr Froud added that 65% of respondents to Sussex Enterprise’s Voice of Business Survey for 2008 opposed supplements and warned that any move to introduce them would face huge opposition.

He said: “It is essential that businesses are given a vote on all supplements, regardless of the proportion of the money being contributed by businesses, otherwise it could become a case of taxation without representation.

“Supplements must also be for a major infrastructure project that businesses believe is necessary, such as transport, and have a clear plan with ring-fenced funds tied to the scheme.”

Introducing supplements would be a “backward step”, according to Mr Froud.

He said: “The uniform business rate was established in 1990 to prevent local councils in certain areas from hitting firms with inflation-busting rate increases.

“If local councils wish to raise more money from firms then the business improvement district mechanism, which allows businesses control and a vote on all proposals, is the way forward.”

Banking

A range of measures to strengthen regulation of the crisis-hit UK banking sector were given a cautious welcome by a Sussex-based financial expert.

The Banking Bill set out plans for the Bank of England and the Financial Services Authority (FSA) to be given greater powers to step in early to help failing banks, while confirming greater protection for depositors.

Fears have been growing over the consequences of the lending clampdown among banks, with Bank of England governor Mervyn King recently warning that it posed the biggest single threat to the UK economy.

He said it was vital to have proper supervision of the banks to ensure they begin lending again to consumers and businesses.

The statement on the Banking Bill said it would “strengthen the framework for protecting bank depositors, enhance financial stability through measures to reduce the likelihood of banks getting into difficulties and improve the tools available to resolve the situation if they do”.

The Queen said: “The strength of the financial sector is vital to the future vibrancy of the economy.

“Therefore, legislation will continue to be taken forward to ensure fairer and more secure protection for bank depositors and to improve the resilience of the financial sector.”

Andy Merricks, head of investments at Skerritts Consultants in Hove, welcomed the new legislation – even though it had come “after the horse had bolted”.

The Government is having to bail out major UK banks HBoS, Lloyds TSB and the Royal Bank of Scotland amid the current crisis engulfing the sector.

The collapse and nationalisation of Northern Rock last year at the start of the credit crunch led to calls for the Bank of England and the FSA to have a better system in place.

Since Northern Rock – which caused the first run on a bank in more than 140 years – Bradford & Bingley has also had to be rescued.

Many firms have complained in recent weeks about a lack of access to credit as banks refuse to lend to even the most viable business opportunities, despite the re-capitalisation and drastic interest rate cuts.

Mr Merricks said he could understand the frustration of business owners but believed banks should remain sensible.

He said: “It seems somewhat ironic that the Government castigated banks for lending too loosely and is now pushing them to lend more.

“Ultimately, anything that helps consumers is a good thing but I think more responsibility has to be taken over lending at both an individual and corporate level.

“You can’t force banks to do something that would be commercial suicide.

“They have shareholders and anyone with a pension fund also has an interest in their survival.

“Some small business are struggling and need a loan to stay out of trouble but should that happen automatically?

“We should not be forcing banks to lend money to companies which should not be taking on more debt.

“Unfortunately, in a recession some companies will fail but the ones that survive should be stronger.”

Equality

Nine major laws and 100 other regulations will be replaced by a single Equality Bill, which the Government pledged will strengthen discrimination legislation and tackle the gender pay gap.

Harriet Harman, minister for women and equality, said the economic downturn would not hold back the tough new measures, which include the power to ban discrimination against older people in the provision of goods and services.

The Bill will ban “secrecy clauses” so workers can compare their wages and challenge employers who unlawfully pay them less.

The move is aimed at tackling the gender pay gap, which the Government estimates is 21% when the wages of full and part-time female workers are compared with those of men.

Almost a quarter of firms ban their staff from talking about pay, with women more likely to be in the dark about wage rates, the Government said.

Public bodies will have to report on any pay inequalities, while ministers will look at how the £175 billion spent by the public sector on British businesses can be used to deliver more transparency over pay.

The Bill, which will cover Britain, replaces the Equal Pay Act, Sex Discrimination Act, Race Relations Act, Disability Discrimination Act and other legislation dating back 40 years.

Fiona Martin, employment law director at Brightonbased Martin Searle Solicitors, is a member of the steering group of Brighton and Hove Leader (Local Employers Acting on Diversity and Race).

She said the new Bill should make it easier for employers to understand their obligations and duties.

Ms Martin said: “In particular, the transparent pay requirements are a real step towards equality and open working practices.

“If employers cannot justify pay differentials on performance, skills and business needs, how can they prove their remuneration policies are based on tangible and fair criteria?

“Disclosure will force employers to be fairer and more open in how they reward employees.

“I believe this will be a benefit in terms of motivation and retention, not just equality.”

The new legal right allowing employers to appoint equally qualified but under-represented candidates to increase diversity should also be applauded.

Ms Martin added: “Obviously, this will need to be handled carefully by managers, but local employers with diverse workforces have always benefited by having a workforce which reflects the marketplace.

“This legislation should help other firms to focus more effectively on new ways to take advantage of the opportunities that are out there.”

Flexible working

About 25 million employees will benefit from a new right to ask for time off work to attend training courses under a new Bill.

Companies will have to give proper consideration to the requests, giving workers the first proper chance to have a serious discussion with their boss about training.

The Children, Skills and Learning Bill was aimed at giving workers the skills they needed to realise their full potential and will be backed up by increased investment in adult skills, which is expected to top £4.5 billion by 2010.

Research has suggested that a third of employers do not train their staff and eight million workers received no training last year.

Skills Secretary John Denham said: “Businesses that invest in skills and training are far more likely to succeed and weather the downturn.

“Research last year showed firms that don’t train are two and half times more likely to fail than those that do.

“I believe the new legislation will prove to be a powerful incentive for employers and employees to properly consider their training needs and to build a stronger future for their organisations and themselves.

“It will also encourage employers and employees to take advantage of publicly-supported skills training.”

Ministers said the new legislation, which is expected to become law in 2010, could help more than 300,000 people each year to receive training who otherwise would not have done.

The announcement was given a mixed response from businesses, with some worried about the burden of increased red tape.

David Seall, South East region director for EEF, which represents manufacturers, said: “At a time when companies are facing major issues arising out of the flexible working legislation that already exists, the decision to extend it further next year sends a bad signal to business.

“Manufacturers support the principle of flexible working but must be given more time to adjust to the regulations and manage demands that already exist.”

However, Anna McGrail, managing editor of Content Consultants, based at the Sussex Innovation Centre in Falmer, said flexible working has suited to her business.

She said: “We supply health content to websites across the world.

“Some of our main clients are parenting sites and for that reason many of our staff are mothers. This means we have a lot of staff working flexible hours.

“I had some qualms at first but I did not need to be worried at all.

“But to make it work properly, employers need to be pro-active about what they can offer so that the staff are clear about the options available before they make a request.”

Construction

A shake-up of public sector construction contracts was promised during the Queen’s speech in a bid to help the building industry through the recession.

Legislation is to be overhauled to improve the flow of cash and make the system “fairer” for construction firms.

The move will be included in the Local Democracy, Economic Development and Construction Bill.

Officials said the reform – an amendment of the Housing Grants, Construction and Regeneration Act 1996 – would create “a more level playing field”.

This would especially benefit stricken small and mediumsized firms which are vital to local economies, they said.

The Bill will also increase the role of councils in addressing the economic challenges in their region. Council leaders will be brought together on forums to draw up regional development strategies.

The Queen said: “My Government will bring forward legislation to promote local economic development and to create greater opportunities for community and individual involvement in local decisionmaking.”

Andrew Troop, regional customer leader for Rok Brighton, was pleased with the news.

He said: “As a builder with strong links to the community we welcome the emphasis on giving people more of a say in decisions affecting the look, feel and economies of their neighbourhoods.

“Anything which helps to streamline decision making at a local level has got to be a good thing.

“As a company that is active in the social housing sector, we are also pleased to see that tenants are promised a greater say in the provision of rented accommodation as demand for it is likely to grow during the recession.

“We have long argued that the old-fashioned form of competitive tendering for building work is flawed so we hope the new Bill will promote the partnering approach.”