Companies in Sussex could be driven to financial ruin if local authorities are given responsibility for setting business rates, it has been claimed.

At the moment business rates are set by central Government.

The money is dished out as the Treasury sees fit, regardless of where it originated.

Sussex has long been a net contributor, with a significant share of the money generated in the region going to less affluent parts of the country.

But, according to business leaders, proposals to give councils powers to set business rates could prove even more costly for businesses in parts of Sussex.

If that happens, business "wastelands" would emerge in Sussex with companies closing or choosing to move to less expensive areas.

Tony Mernagh, chairman of the Brighton and Hove Business Forum, said councils would put business rates up to cover shortfalls in the community charge.

He said: "The best the business community could hope for is for rates to stay the same but that is unlikely.

In most cases they will go up.

"But you cannot look at rates in isolation. Businesses are already paying corporation tax and national insurance so they would be reluctant to pay any more.

"At least with the present system of the uniform business rate, the increase is in line with inflation so businesses know roughly what to expect from one year to the next."

Sussex Enterprise, the chamber of commerce, has called for tight controls should the changes take place to make sure companies do not lose out.

The organisation wants assurances that businesses will receive something in return for any extra they are expected to pay out.

It wants local authorities to be accountable for how money is spent and businesses to have a greater say in where and how the money is spent.

The organisation made its appeal following a report by the British Chamber of Commerce to the Lyons Inquiry into the future of local government.

Sir Michael Lyons has been commissioned to report on the future role, function and funding of local government and will present his recommendations in December.

The Sussex Enterprise report challenges the assumption that "localisation" would benefit business.

It outlines the impact of giving local authorities powers to set business rates and claims that some businesses could end up paying a lot more for local services.

Mark Froud, chief executive at Sussex Enterprise said: "We would like business rates to be controlled locally with money collected being spent locally and increases linked to inflation.

"However, the North would lose out if that were the case so we don't think this will happen. Under proposals being considered, Sussex businesses can expect to see rates go up. We will fight them unless money raised locally stays local. Businesses already struggle under an oppressive burden of tax and regulation.

"Even though business rates have risen at a steady level over recent years, firms have suffered as corporation tax and national insurance have rocketed by 78 per cent since 1993.

"Increasing rates could create business wastelands, causing significant damage to quality of life as firms close or move to lower-rate areas."

Tuesday, August 1, 2006