Will George Osborne’s devolution plan affect UK SMEs? » SMEInsider

Will George Osborne’s devolution plan affect UK SMEs?

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In his first post-election speech, Chancellor of the Exchequer George Osborne has promised that English cities will soon receive more decision making power. The Federation of Small Businesses (FSB) gives their verdict on the incoming changes.

The first city in the UK which will be able to benefit from the devolution plans is Greater Manchester.

In two years time the city will have more power regarding housing, transport, planning and policing. Someone once said that ‘with great power comes great responsibility,’ so what responsibilities will local governments have over small businesses?

Businesses won’t really be able to feel the differences until the changes come into effect. However the FSB, who have around 200,000 members across 33 regions and 188 branches in the UK, have outlined the potential opportunities and pitfalls that the plans could create.

‘‘The move to give cities greater power to shape their local economic environment is the right one. Local decision makers are best placed to understand local economic needs and if managed carefully, greater decentralisation has the potential to deliver the economic rebalancing which is so clearly needed,’’ said John Allan, FSB national chairman.

The devolution plan will give cities more control over public spending. Greater Manchester for example, can currently spend £5bn of public money every year, but will have an additional £2bn to play with once the devolution plans become law.

If the devolution plans are successful in Greater Manchester, other cities that have been sounded out for devolution, such as Birmingham, Leeds and Hull could soon follow suit, causing a domino effect that could change how small businesses operate.

Although the FSB welcome the plans, Allan states that caution should be taken when implementing the new system.

‘‘However, there are lessons to be learnt from the setting up of Local Enterprise Partnerships (LEPs) which should not be ignored. Increased localism doesn’t automatically lead to better outcomes. This requires strong governance arrangements to ensure accountability, transparency and local small business engagement.’’

‘‘One issue which will be particularly important to get right is localising taxes. Although we agree with the principle of local areas retaining more of the rewards of success, we do not think it wise to allow local variation in business rates. There is a big risk this would fragment the tax system,’’ continued Allan.