34 M. D. Fletcher

Solinger, 0. (1982), 'The Fifth National People's Congress and the Process of Policy Making', Asian Survey, XXII , pp.1238-275. Weng, B. (1982), 'Some Key Aspects of the 1982 Draft Constitutions', The China Quarterly, No. 91, pp. 492-506. Womack, B. (1982), 'The 1980 County-Level Elections in China', Asian Survey, XXII, pp.261-77.

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THE BUSINESSMAN'S BURDEN : RATES AND THE CBI Timothy May

The C B I i s widely seen as an organistion which concentrates i t s e f for t s a t national level. 1977) and the many textbook discussions of British pol i t ics re f lec t this emphasis. Conversely the l i t e ra ture on local po l i t i cs has l i t t l e or nothing to say about the Confederation. For example, Kenneth Newton's Second City Pol i t ics , one of the most detailed dissections of the local role o f groups, never mentions i t . There i s no reason to suppose that f a r much of the history of the Confederation (and i t s main predecessor, the F.B.I.), this emphasis is seriously misplaced, t h o u g h i t does re f lec t a general neglect of historical research on pressure groups and especially an absence of such work a t the local level. the committee structure and the professional apparatus in London would seem t o support the picture of an organisation which emphasises the importance of national pol i t ical ins t i tu t ions , especially those populated by Ministers and c iv i l servants.

However i t has been clear that i n recent years some s ignif icant changes have taken place in the CBI's s ty l e of lobbying. Although these have been noted (Grant, 1981; May, 1982) they need t o be more widely recognised in the accounts of the nature and significance of the Confederation. i l lus t ra t ion of these changes has been the unprecedented concern w i t h local poli- t i c s . In i t i a l ly this in te res t focused on the question of the rates b u t the cam- paignhas broadened out into a wide-ranging concern w i t h the functioning of local government. T h i s description and explanation must be preceded, however, by a sketch of the local rating system which has so at t racted the Confederation's attention.

There are important differences i n the way local government levies ra tes on business premises and domestic households. mises were doubly represented: they had a vote from the i r domestic residence and a vote from the i r place of residence. The 1948 Representation of the People Act abolished such plural voting. Consequently businesses do not now possess the direct electoral influence of domestic householders. Businesses have also been distinctively affected by the tangled history of de-rating or different ia l rating. The 1929 Local Government Act allowed business premises a 75 per cent de-rating. Since the War this concession has been eroded t o the advantage of the domestic rate-payer who i s favoured by the present system of ra te - re l ie fs . As a resul t business has paid an increasing share of the r a t e income - up from 43 per cent i n 1938 to 61 per cent in 1975 (Dearlove, 1979, pp.240-41). The burden of the rates has also grown a t a time of fa l l ing prof i ts . A f ina l but, s ignificant difference between the business and domestic rate-payer dates from the mid-60s: private householders can spread the i r ra te 1 iabi 1 i ty through the year i n monthly instal- ments b u t businesses have t o pay yearly or half-yearly i n advance. We can now t u r n t o the campaign.

Both the spec ia l i s t l i t e r a tu re (Blank, 1973; Grant and Marsh,

The concentration of

One especially s t r iking

The aim of t h i s a r t i c l e i s t o describe and explain these developments.

Until 1948 occupiers of business pre-

The Businessman's Burden: Rates and the CBI 35

The Rates Campaign

the CBI d i d not campaign on this issue unt i l 1980 (apar t from a local campaign i n Cheshire discussed below). Early i n 1980, as local a u t h o r i t i e s began t o f i x t h e i r r a t e leve ls f o r 1980/1, the CBI's own in-house organ - T h e Members Bulletin - gave increasing space t o pro tes t s about the s i z e of r a t e demands and t o the e f f o r t s of local CBI members t o form ' loca l l i a i son groups'. The aim of t h e ' l a t t e r was t o establish,wi t h the relevant local authori ty some machinery f o r regular consul ta - t ion about i t s f inancial operations. By October 1982 the CBI claimed considerable success i n es tabl ishing these l ia i son groups: i t had talked w i t h 3 5 o f t h e 47 ' s h i r e ' counties and had establ ished ' l e s s formal l inks w i t h l l o f t h e remainder; addition- a l l y there were l inks w i t h the s ix metro-counties and with the G L C ' (CBI News, 1982, 15 October).

The prototype f o r these l ia i son groups was the experience of a group of North West CBI members i n the mid-1970s. The impact of local government re-organisation in Cheshire and a consequential r i s e i n the r a t e s led them t o demand separate business representation on the County Council. This was achieved i n the form of regular consultations between a CBI group and the County Council. I t suffered a p a r t i a l break-down in 1978/9 when the C B I group disagreed w i t h the County's pros- pective r a t e demand. The North West CBI then persuaded a number of i t s members t o finance a 'value f o r money' study of Cheshire's administration. This study establ ished a fur ther important precedent f o r the national campaign when i t got under way.

The next s i g n i f i c a n t development i n the national campaign was the establishment of a Working Party on local government finance i n June 1980. t o the 'deep concern' t h a t had been expressed a t the May 1980 Grand Council meeting on the r a t e s issue. members of the Cheshire C B I group, rapidly produced a working br ief and a more lengthy and de ta i led guide t o local au thor i ty spending ( C B I , 1980). A t th i s time the Government was p i lo t ing i t s Local Government Planning and Land Bill through the Commons. While this Bill proposed action on some matters of concern t o the C B I , they were f a i r l y marginal t o the main thrust of the Confederation's campaign and i n any case d i d not f u l l y meet the case i t was making on those issues . The CBI's campaign was given fur ther impetus i n the f i r s t few months sf1981 by two related developments. The f i r s t of these was the 1981 Budget, described by S i r Terence Beckett as 'such a disappointing one f o r us a l l ' (CBI News, 1981, 27 March). The Confederation a t t r i b u t e d i t s disappointment t o the Government's f a i l u r e t o s u f f i c i e n t l y cut public spend ing i n order t o allow f o r personal and corporate tax r e l i e f . I t consequently decided t o launch i t s own 'Searchlight on S t a t e Spending' thus renewing the focus on the ro le of local a u t h o r i t i e s . development was the prospective r a t e burden f o r 1981/82. Alarm was voiced by the CBI's Deputy Director-General i n January when he protested t h a t the CIPFA forecas t r i s e of 20 per cent was 'completely incompatible' with the Government's Rate Support Grant f o r 1981/2.

t i v e back-benchers through adjournment motions and a Pr ivate Members' B i l l . More s igni f icant ly Michael Heseltine, the Environment Secretary a l s o began t o lean i n the CBI's d i rec t ion : i n the Autumn of 1981 he introduced a Bi l l t o regulate local authori ty f inancial d i s c r e t i o n , one of whose proposals was t o p u t a l imi t on b u s i - ness l i a b i l i t y should a local authori ty levy a supplementary r a t e . Unfortunately f o r the CBI the Bill a l so proposed t h a t supplementary r a t e s should require appro- val by local referenda. highly objectionable, and the Bil l ran i n t o serious trouble. i t s losses and withdrew the proposals, eventually replacing them w i t h a measure which abolished the r i g h t t o levy supplementary r a t e s b u t gave no special protec- t ion t o business.

The post-war his tory of the business r a t e actual ly makes i t surprising t h a t

This was a response

The Working Party, which was chaired by one of the or iginal

The second re la ted

The campaign now began t o have some impact. There was support from Conserva-

A number of Conservative back-benchers found this proposal The Government cut

36 Timothy May

The Confederation meanwhile continued to publicise the work of i t s local l i a i - son groups, claiming tha t their e f for t s had reduced the extent of ra te increases i n a variety of local authori t ies . gave ra te re l ie f a h i g h p r ior i ty i n both 1982 and 1983 b u t the Confederation's pleas met no response . The prospects fo r action d i d not appear t o be improved by the publication of the Government's Green Paper Alternative to Domestic Rates i n December 1981. As the t i t l e indicates, t h i s Paper confined i t s e l f t o the problems of the domestic rate-payer, contrary t o the CBI's u rg ing . indeed feared tha t the Green Paper m i g h t foreshadow plans to help the domestic rate-payers a t the expense of business.

electoral period of April-May 1983. Mrs Thatcher, i t was reported, had returned the d ra f t to Conservative Central Office as i t did not contain suff ic ient ly strong proposals on rate reform. ra tes i t was notable t h a t the Prime Minister actually emphasised the special pro- blems of the business rate-payer. I n r a p i d succession the electoral campaign, the Queen's Speech and a Nhite Paper have elaborated the case for relieving the burden of ra tes on business. proposed tha t upper l imits be fixed fo r a l l local authority ra tes ; that local a u t h - o r i t i e s be required to consult w i t h business on t he i r proposed budgets; t h a t rates should be abolished on empty properties; and tha t business should have the r i g h t to pay rates by instalments. These proposals represent major achievements fo r the CBI on issues w i t h which i t had l i t t l e or no in te res t before 1980. I t is to be an analysis of why local government has become so important fo r the Confederation that we now turn.

I t s pre-Budget representations to the Chancel lor

The Confederation,

No off ic ia l proposals for fundamental reform actually emerged u n t i l the pre-

Although much press speculation concentrated on domestic

Since mid-l983 events have moved quickly.

I t i s now

Aria Zysing the Cdmpaign

Three principal reasons explain the CBI's new in te res t i n local government. The f i r s t i s the s h i f t , documented above i n the burden of the rates from domestic to business rate-payers. The second reason is tha t the recession which intensified i n 1979, p u t pressure on businessmen to cut costs. The final reason is embedded i n the complex relationship between the Conservative Government and organised b u s i - ness. Each of these causes i s here examined i n de ta i l .

major post-war enquiries into rates - the Allen Committee (1965) and the Layfield Committee (1976) both commented on the change. The l a t t e r noted that while ra tes overall rose by 120 per cent between 1966-74 the domestic rate-payers' increase averaged 80 per cent as against 142 per cent f o r industry and commerce. Qf these figures the puzzle i s n o t why protest developed b u t why i t was delayed u n t i l 1980. As we have noted i t was o n l y i n Cheshire tha t any significant cam- p a i g n i n g on the rates issue can be found prior to 1980. T h e importance of tha t experience i s developing such CBI t a c t i c s as the l iaison groups and the 'value for money' study has already been emphasised. I t i s worth underlining the role of the l a t t e r t ac t i c in the CBI's campaign. The 'value for money' concept involves a comprehensive assessment of the whole f i e l d of local authority provision. therefore s ignif ies a broadening of concern from the specif ic issue of ra te levels to a wide ranging interest i n the whole s t ructure and operations o f local govern- ment. 'Value for money' has thus drawn the CBI into issues well beyond the argu- ment about the s ize of ra te demands. T h e Confederation has pressed for an A u d i t Commission, t o broaden the remit and effectiveness of local authority audit; has campaigned for greater use of 'contracting out' of local authority services ( i .e. the chance for private operators t o tender alongside the Councils' own departments fo r the provision of services); has t r ied to persuade local authori t ies t o co-opt local businessmen t o key committees; and has supported the proposed abolition o f the GLC and the metropolitan counties.

The s h i f t i n g burden of the rates b i l l had not gone w i t h o u t notice. The two

I n view

I t

The Businessman's Burden: Rates and the CBI 37

The growing burden of the rates on business made the Confederation sensit ive t o the need for reform; the recession was a d i rec t stimulus t o campaign for change. Rates are a serious problem fo r the recession-hit businessman trying to cut costs, for as long as the business operates a t a l l they have to be p a i d . Though some mar- g i n a l re l ie f was given by the f irst Thatcher administration, ra tes remain almost a fixed cost. empty property and fo r 'mothballing' re l ie f on plant not currently i n use.

The impact o f the recession on individual C B I members i s an important key t o the form of the campaign. I t i s quite clear that i t originated from w i t h i n the r a n k m f i l e membership, not from the C B I leadership. I t was individual members who experienced most direct ly the pressure t o cut costs and i t was the i r pressure t h a t in i t ia ted the local l ia ison groups and , subsequently, the national campaign. klhile there i s no evidence that grass roots agitation was unwelcome to the leader- ship, the establishment of the Working Party in June 1980 d i d indicate a desire t o channel rank and f i l e pressure in a particular direction. There was a worry a t CBI headquarters that local groups, i n the i r anxiety to press a case, would embark on ill-prepared discussions with local authorit ies. A major purpose of the briefing documents produced by the Working Party i n September 1980 was thus t o provide some rapid education in the complexities o f local finanace. As one member of the Working Party p u t i t , the documents were designed t o prevent local authority treasurers 'running rings round the CBI's local groups'. Simultaneously w i t h the appointment of the hlorking Party one of the CBI's Deputy Directors-General assumed responsibility for co-ordinating the evidence from the local campaign and for making the case a t national level.

The t h i r d reason for the CBI's new concern w i t h local government i s t o be found in the relationship between organised business and the Conservative Party. I t i s commonly believed t h a t thetwo have a natural a f f in i ty , b u t most academics have emphasised t h a t a f f in i ty i s n o t the same thing as ident i ty and have drawn attention t o confl ic t i n the past between the Party and business. d i d indeed have d i f f i cu l t i e s w i t h the Conservatives d u r i n g the f i r s t Thatcher administration. The Confederation was dissat isf ied over central issues l ike inter- e s t ra tes and the level of the exchange rate . peak and the recession was biting deeply, relations between the Conservative Government and the Confederation were especially uneasy. Despite i n i t i a l enthus- iasm generated by the Conservatives' abolition of controls on pay and prices, and the cuts i n t a x a t i o n , the Confederation soon bore testimony t o Wyn Grant's obser- vation tha t businessmen r u n for cover when the i r immediate business prospects begin t o deteriorate (Grant , 1980).

because o f the danger of provoking hos t i l i t y bo th from the Government and from some of the Confederation's own members who resent any public cri t icism of a Party w i t h which they sympathise. Annual Conference i n November 1980. The newly appointed Director-General , Sir Terence Beckett, expressed open cr i t ic ism arguing that there was a need for a 'bare knuckle f igh t ' w i t h the Conservatives i n order t o defend industry's interests . A considerable furore ensued w i t h threats of resignation from the C B I . Beckett and the C B I President met Mrs Thatcher shortly afterwards, they emerged from the meeting t o pay her fulsome t r ibu tes , despite the f ac t she had offered them l i t t l e of substance.

T h i s outl ine of some of the problems the CBI faced in i t s relations w i t h the Conservatives bears on i t s decision t o focus on local government. Confederation could n o t persuade central government t o l eg is la te for controls on local authori t ies i n the 1979-83 period, the obvious a l ternat ive was to direct ly pressurise individual local authori t ies . Exercising pressure i n t h i s way was b o t h a more discriminating and a less public strategy. I t could discriminate between Tory authori t ies and what were - not always accurately - perceived t o be the b i g spending Labour councils; and i t was less public because any open confl ic t between

That i s why the Confederation has pressed f o r t he i r abolition on

The Confederation

When in t e re s t ra tes were a t their

Open cr i t ic ism by the CBI of a Conservative Government i s nevertheless risky,

These dangers were clearly demonstrated a t the CBI's

When

Since the

38 T i m 0 t hy May

the CBI and a par t icu lar council would not a t t r a c t the same a t ten t ion as c r i t i c i sm directed a t central government. P u t t i n g pressure on councils a l so allowed the CBI t o do something about what i t believed t o be the biggest f a i l u r e of the Thatcher Government - i t s inab i l i t y or unwillingness t o e f fec t ive ly cut public spending. The local l ia ison groups, i n pa r t i cu la r , were well placed t o both co l lec t information aboutlocal authori ty budgets and t o maintain the case fo r fur - ther economies i n a sector accounting f o r a large amount of t o t a l public expenditure.

Conclusion Since June 1983 the CBI has gained s ign i f i can t concessions on business ra tes .

These concessions represent a c l ea r change of heart by the second Thatcher Govern- ment. Despite the increased emphasis placed by the CBI i n recent years on cul t i - vating l inks w i t h MPs a t Westminster this d i d n o t w i n any major concessions fo r i t s case between 1979-83. Environment Ministers Michael Heseltine and Tom King may have been, such sympathy f a i l ed t o w i n the CBI the major changes i t sought. One can only speculate t ha t other arguments, possible those of c i v i l servants on the complexity of thorough going r a t e reform, and maybe also those of other Ministers on the cost of substan- t i a l business ra te r e l i e f , limited such concessions as were made t o minor ones. The present imperfect evidence suggests t h a t the most important reason f o r the change i n a t t i t u d e since June 1983 was the p r io r i ty Mrs Thatcher herself gave t o the issue.

Even i f the support of the Prime Minister has been crucial i n elevating the importance of business r a t e relief the eventual outcome of the Government's proposed legis la t ion i s f a r from cer ta in , a s the CBI acknowledges. from the White Paper, and the form i n which any such leg is la t ion i s implemented, will be important factors i n shaping the CBI's concern w i t h local government i n the future. The general economic climate wil l a l so c ruc ia l ly a f f e c t behaviour. Even the marginal improvements of recent months have apparently diminished inter- e s t i n public campaigns on the r a t e s issue. B u t the Confederation's more general interest i n local government, once awakened i n unlikely t o subside. The ro l e of audi t , contracting-out, the co-option of businessmen t o local authori ty committees - a l l these will be issues on which the CBI wil l be heard i n the future. The s tory of the Confederation's intervention i n local government is only just beginning. The implications for local government and f o r the local po l i t i ca l economy are considerable.

Equally, however, personally sympathetic the two

What leg is la t ion emerges

* * * The author i s grateful t o Wyn Grant and Michael Moran f o r comments on e a r l i e r versions of the a r t i c l e . References Unattributed quotations a r e from 'CBI News' o r from conversation w i t h CBI members and o f f i c i a l s w i t h whom I have discussed the campaign. Blank, S. (1973) , Government and Industry i n Britain,(Farnborough: Saxon House). Dearlove, J . (1979), The Reorganisation o f British Local Government,(Cambridge: Cambridge University Press. Grant, W.P. (1980), 'Business In te res t s and the Conservative Par ty ' , Government and Opposition, Vol. 15, No.2. Grant, W.P. (1981), 'Representing Capital: The First Fifteen Years of the CBI', Paper t o Annual Conference of the PSA/BSA Pol i t ica l Sociology Group. Grant, W.P. and Marsh, D. (1977), The Confederation of British Industry,(London: Hodder and Stoughton). May, T.C. (1982), 'Managing the Membership: The Regional Structure o f the Confedera- t i o n of British Industry ' , Paper t o Annual Conference of the BSA/PSA Pol i t ica l Sociology Group.