Tuesday, 17 November 2009

Public Procurement and SMEs

Has the time come for a fundamental rethink in the realms of public procurement. I remember a time when small businesses were able to 'bid' for small projects and small supply tenders by representing themselves to the 'buyer'. There was a need to provide evidence of being able to provide value for money, but since, so very often, these small bidders were also local ratepayers there was an inbuilt sense of a need to provide value for money.

It would be naive to believe that simply because someone was local that they were above a bit of 'adding value' to the end accounts, but there were also local remedies and blocks to that happening. Now though, as with so many things in this post-neo-liberal, neo-hysterical world, there now has to be so much regulation that a completely new industry is being born. Doubtless the European Union will be blamed for this shift in attitudes and for the adoption of this new paradigm supposedly protecting public funds - but the British Government are quite likely to be the greatest of sinners in my opinion.

The whole shift seems to have been accelerated by the hysteria whipped up over the scandals of the Members of Parliaments' expenses and the even more scandalous underwriting of the British arms trade that has a full culture of over-runs, over-charging aimed at the curiously complacent British Government whose complimentary culture of over-spend and under-manage has left massive holes in the UK balance sheets. The press eventually begin to wake up to these facts and with customary self-righteous indignation splash near hysterical headlines across their front pages. The reaction by Government - simple; they make it next to impossible for any small business to make a successful bid to any sort of tender. They make the paperwork impenetrable and the hurdles too great for anyone who has not got a trading record dating back to the last century - even though many are well funded and have vast experience.

The latest wheeze though, is the icing on the cake. In the past few weeks I have been inundated by adverts - usually from the Government funded Businesss Links, offering me training courses on how to cope with the paperwork (which confirms the levels that are now in place!). These courses vary in price and location but the cheapest that I have seen is about £75. I wonder how many take up this amazing offer - I must also wonder why it should even be necessary!

Tuesday, 10 November 2009

No taxation without representation!

It is good to hear that at least one MP has been on his feet in the house telling all that will listen that the current system of business rates is arcane and far beyond its useful life.

I am carrying out a study in a small market town for which an analysis of the rateable values was essential for a number of purposes. I noticed when reviwing the 2010 list that there were some anomalies and rang the Valuations Office Agency to try and discover a explanation.

The anomalies were simple. This is a very small town with one road acting as the primary shopping street with a traditional market place on one side and the remainder of the town's civic and other activities on the other. This shopping street goes through three name changes in the space of less than half a mile, and it is impossible to see, today, why the name changes were imposed at the points that they were. Let us call them Hill Road, Shopping Street and High Street.

Just off of Shopping street is the main pedestrian entrance to the markets and on the opposite side of the street is the most important secondary road which houses the civic offices, post office, the parish church and the cinema. We'll call this Cinema Road.

The busiest approach road into the centre of town is up Hill Road from the river valley below lying just north of the town. Through this valley runs a major trunk road linking two major conurbations. The Hill Road/Shopping Street/High Street route leads circuitously to another important town and Cinema Road leads to the nearest City, about twelve miles away.

The 2010 rates list shows that if your shop happens to be on Hill Road or Shopping Street then your rateable value is likely to have increased by 20%; if on High Street it is likely to have been increased by around 20% if in the first three or four shops closest to Shopping Street. Oher shops in the town have been increased by a staggering 0% - nil! Zilch!. I am quite sure that those retailers in the latter group are quite pleased but, why the level of difference. Why not an area where the average was around say, 10%?

The VOA oficer, with whom I spoke, told me that it was because the valuations of rentals in the area in 2008 were indicating these changes. I questionned him about the reasons that might have existed whereby a property might have had a rental increase of 20% over its immediate neighbour. He was insistent that this data was based upon rental returns and information supplied by landlords and tenants in the area, and that there would have been a factor pertaining in 2008 that would have affected these figures.

I have carried out a reasonably thorough investigation, talking to retailers, commercial agents and local estate agents, talking to the local council and looking through three or four years worth of council and newspaper reports and I can find nothing. There is no evidence that would support this kind of differential. A cynical person might opine that the VOA were guaranteeing themselves a job because of the number of appeals that this kind of differential would generate? Not that I would hold any such thought, but you can see where it might come from!

The fact that a system that is based on rentals; rentals that are themselves often artifically inflated by upward only rent reviews; and that these rentals are measured in a time of significant boom, only to have the resultant valuations implemented during a period that is dominated by a long and deep recession a couple of years later, is careless at best. This is an issue where the size of your business is not a determinant of your opinion about the system - retailers believe this to be an iniquitous system - members of parliament believe this to be an iniquitous system. Who is it, I wonder, that believes this to be a good system? The Chancellor I must presume, and the Prime Minister - but who else?

The time has come for root and branch reform. Let us question the validity of the basis of the valuation; let us question the concept of setting a universal business rate; let us investigate the formal relationships between business and government, at all levels, in terms of taxation and representation; most importantly, let us free up the system so that local needs are met by local decision-making, supported by regional strategies developed in concert between locally elected bodies. Whatever system is adopted it must be fair and equitable to all sizes of business and not with the current need to employ professional intermediaries to argue the case with a central government department - the current system has an in-built bias towards those businesses who can afford that professional input and is especially bad news for SME businesses who are consequently disadvantaged..