The chief executive of Manchester City Council has called for a wider debate about the benefits of the city having more of a say over tax rates as part of the Greater Manchester devolution drive.
Speaking at the Great Manchester Economics Conference, co-sponsored by Alliance Manchester Business School, Sir Howard Bernstein said there was “an absolute necessity” for a national debate around fiscal devolution and whether the likes of stamp duty, airport taxes and business rates could be more imaginatively devolved to local authorities.
Ironically, his comments came just days before Chancellor George Osborne unveiled sweeping reforms to business rates at the Conservative party conference in Manchester, announcing that councils would in future be able to retain all their business rates.
Sir Howard said any national debate on fiscal devolution had so far been coloured by the views of business bodies such as the CBI. “The CBI has a policy of opposing fiscal devolution largely on the back of its experiences of dealing with local authorities in London. But this opposition within organisations such as the CBI is starting to really constrain the level and quality of the debate which we need to have. My sense is that we have got to have that debate, and take that debate down to London.”
Sir Howard said by using stamp duty “intelligently” you stood a reasonable chance of changing behaviour and improving the functioning of the housing market, while a measure such as giving an airport tax holiday for long haul routes would stimulate greater business activity.
In terms of business rates he questioned why local authorities shouldn’t be able to work much closer with companies to create value-added activities. “We are not talking about subsidising mainstream local authority services but doing things which are quantifiable and measurable, and which business as well as ourselves recognise as adding significant value to the economic performance of Greater Manchester. Why can’t we be allowed to do things like that?”
Meanwhile, Sir Howard admitted that in terms of the ongoing devolution of health and social care services, the city had taken on a “hugely challenging” process. “What we have got to do is build on the partnership framework with all our stakeholders. There is a huge appetite among all key stakeholders to make this work.”
Other speakers at the conference included Ismail Ertürk, senior lecturer in banking at Alliance MBS, who took part in a panel debate about if and when UK interest rates should rise alongside former Monetary Policy Committee members Andrew Sentance and Dame Kate Barker.
Ertürk said the current nervousness about raising interest rates, both in the UK and US, hid a “serious knowledge deficit” in terms of the macro-economic models employed to analyse whether rates should rise. “We need to look in more detail at the models that central bankers are using. We also need a wider range of tools to deal with the problems around low growth and employment.”
Sentance said he wasn’t sure if the nervousness over rate rises was justified. “The impact of a small interest rate rise in the UK would be quite modest and not have much impact on growth in the short-term.”