Watch the webinar
On today's webinar, the CBI’s own Deputy Director-General, Josh Hardie, was joined by Rajesh Agrawal, the Deputy Mayor of London for Business, and Councillor Judith Blake, the Leader of Leeds City Council, to discuss how local authorities are working through the pandemic. Here are some of the specific subjects they touched upon:
- Summer challenges – and autumn necessities
- The problem of capacity
- How city centres are managing
- Transport issues
- Business Rate relief.
Summer challenges – and autumn necessities
It’s not just the unusual nature of this year’s school holidays – although that is certainly an issue for employees with children! Businesses also face a number of distinct and difficult challenges over the remaining summer weeks.
Josh identified the “gap” between the Chancellor’s statement earlier in July and the upcoming Budget in autumn. This is a period when work will have to be done to implement and refine the policies that the government has already announced. As Josh put it, “What has worked well so far is when the government has made a welcome announcement, then collaborated with business, the CBI and others to see what’s working, and [then] they’ve evolved those schemes.”
But more will also be needed – certainly in the Autumn Budget, perhaps before. Josh called for a “laser-like focus” on those “good businesses” that will struggle through the next few months. They should, he continued, be the beneficiaries of new measures, such as grants and Business Rate relief.
Thankfully, according to Josh, the political recess isn’t putting a stop to the government’s work. “I get the sense that the government isn’t letting up,” he said. “It won’t be a normal recess.”
The problem of capacity
Judith began her remarks by describing the “four Cs” that were to dominate the discussion: clarity, collaboration, confidence and capacity. It was the last – capacity – that got the most attention.
There is much that local government can do, and is doing, explained Judith. Policy areas such as public health, workplace safety and environmental protection – newly important during the pandemic – are “bread and butter” to local politicians.
They can also work in other important areas such as retraining the workforce. As Judith put it, “There has been an emphasis on young people, quite rightly…. But there needs to be [action] around retraining, reskilling, looking at older people currently in the workforce.”
But this is where we run into the problem of capacity: local government is well placed to achieve many things, but it is not well resourced. “Local government is facing the biggest crisis I’ve ever known,” said Judith. “We thought it was pretty bad ten years ago, at the start of austerity,” but now the demands are greater and the money is tighter.
Judith emphasised that this doesn’t just mean more cash for local and regional authorities – “we’re looking for more flexibility”. She gave the example of national government, which is borrowing its way through the crisis. By contrast, local governments are under a legal obligation to produce annual budgets, “and they have to balance”.
In fact, our speakers agreed that the whole devolution settlement might need rethinking. “I think that devolution in this country, by and large, is a mess – particularly in England,” said Rajesh.
He went on to explain how much control London has over the money that’s put into it, compared to other major cities: “Tokyo has 70 per cent; New York has 50 per cent; London has 7 per cent. We need more devolution.”
How city centres are managing
Businesses may be reopening, but city centres are still much sparser than usual. In Leeds, said Judith, footfall is “about 50 per cent” what it was at the same time last year.
It’s the very centre of London, Zone 1, that is most affected, said Rajesh. “Zone 2 and 3 high streets are doing better than Zone 1 – because Zone 1 relies so heavily on office workers.” There are also sectoral effects, not least because, “if you combine tourism and hospitality, that’s one in five jobs in London.”
However, Rajesh sees this as a chance as well as a challenge. “For too long,” he continued, “London’s economy has been centred on Zone 1.” He described the city’s outer-boroughs as almost “dormitory boroughs,” where people live between their working days in the centre.
“We talk about rejuvenating our high streets. Perhaps this is our opportunity.”
Why aren’t office workers and others flooding back to city centres? It’s not because of their workplaces, revealed Josh: “Businesses have invested massively in Covid-secure workplaces. People feel safe at work. It’s getting to work that’s the problem.”
Which is to say, people are worried about getting on public transport. And this worry isn’t just hollowing out city centres; it’s causing knock-on effects in the transport system. “The message about not using public transport got through to so many people, and that is a real concern for us,” said Judith. “More and more [people] are buying second-hand cars… and we’ll go back to all the problems around congestion and emissions.”
In the capital, said Rajesh, there’s little room for cars to be part of the answer: “traffic on London’s roads is at pre-lockdown levels already.” There needs to be a “green solution”.
Business Rate relief
Of all the measures suggested for supporting businesses, Business Rates came up most frequently. For their part, London’s authorities are trying to “lead by example,” explained Rajesh. The Mayor of London has announced that all SME tenants of Transport for London – many businesses are based in and around stations – will have three months of Rates relief.
The Mayor also wrote to the Arch Company, which manages many of the railway arches occupied by businesses, and they have now implemented the same policy for their tenants. “Not all landlords can do it,” explained Rajesh, “because they also have a debt to service. But landlords must, if possible, try to be flexible and accommodate their clients.”
And central government could do more, too. The Chancellor’s summer statement said that leisure, retail and hospitality businesses with a rateable value of less than £51,000 will be exempted from Business Rates over the next financial year – but that threshold is far too low for many businesses, particularly those based in expensive areas such as the centre of London.
“They should increase the rateable value of £51,000 to £150,000,” urged Rajesh.
Key questions we answered:
- Judith, how are businesses managing in Leeds?
- Leeds is faring similarly to other major cities. Footfall capacity is running at 50% of what it was a year, and there are very few workers in offices. We have the same concerns in the hospitality and leisure sectors.
- Flexibility around skills and training concerns us – there’s potential for a lost generation. So there needs to be collaboration on re-training and re-skilling people.
- Leeds is a resilient city. Our economic diversity has enabled us to be flexible and responsive to this crisis. We have a strong health technology centre of excellence across the city and we are looking at how we advertise jobs digitally. In addition, our strong local leadership and government will be able to convene people to ensure we get the skills agenda right.
- Local government is facing the biggest crisis I have ever known.
- Local authorities are heavily reliant on income generation. If you diminish local capacity to support the business community, I think that would put us in a difficult place.
- Judith, could you give us an idea of the scale of the crisis facing local government?
- £40-50 million will have to come out of the budget this year in Leeds. If this continues, we may only be able to deliver statutory services.
- We are looking for support in the form of capitalisation and the phasing of government support to ensure we do not continue on this trajectory.
- Rajesh, what’s the picture on the ground for businesses in London?
- It is a very tough period for businesses. This is the biggest health and economic emergency we have faced since WWII.
- London is disproportionately hit because a lot of its economy is based in Zone 1.
- Tourism and hospitality alone constitute 20% of jobs in London. We rely on domestic and international tourists, and office workers who live outside of London and commute in.
- In addition, a large proportion of London’s economy is service based – such as technology, financial services and banking – so they have found it easier to adopt working from home.
- There will be knock-on effects for all sectors.
- Rajesh, what about capacity versus usage in London?
- Businesses tell me that we are seeing high streets in Zones 2 and 3 doing better than those in Zone 1, as Zone 1 relies heavily on office workers commuting in.
- Canary Wharf is a clear example. Usually 120,000 people work there – but now there are only 7,000 people returning to the office.
- People need to feel confident to go into the office, and employers need to feel confident that they can ask their staff to come to the office. Track and Trace will make a huge difference here.
- Transport for London have been sharing data with businesses on commuting routes so businesses can plan accordingly.
- Increased demand is key to boost the economy.
- Judith, what’s being done to give staff in Leeds the confidence to return to work?
- We’ve had a massive communications exercise in Leeds with people who work and live in the area. We’ve had good feedback on that campaign.
- However, instilling confidence is tough as a lot of it is dependent on the guidance the government produces.
- The guidance we get around changes to protocols is often confusing or late. This means you get the announcement first and the guidance later. Sometimes it is conflicting, and we have seen changes to previously issued guidance. The guidance and messaging surrounding it needs to be clearer.
- We are beginning to see a lot of younger people who are struggling with working from home. They don’t have the space within their homes to remain separate. They are very isolated and don’t have somewhere secure and private to work. There is a growing trend that more and more young people are keen to get back into an office environment.
- Another concern is that previous messages like not using public transport really cut through. This led to more people buying second-hand cars. So, there is a fear we may go back to issues around emissions and congestion rising again. So, we are trying to encourage active travel, opening cycling routes, making pavements bigger and encouraging businesses to put more cycling storage facilities on site.
- All the staff surveys I see show that a very large percentage of people enjoy the freedom of being able to work from home at least some of the week. So, going forward we need to speak to businesses about what that will mean for office capacity in the city centre.
- Rajesh, do you think high rents and the lack of business rates relief caused the mass exodus we have seen out of central London?
- Rents in London have been high for a long time. It has been out of reach for a lot of businesses – but the pandemic made it worse.
- TfL are a huge SME landlord, so we had to lead by example. When the pandemic started, the Mayor announced a three-month rent relief for all SMEs tenants of TfL.
- The biggest SME landlord in England is The Arch Company. The Mayor wrote to them and they replicated TfL’s policy on rate relief.
- But to be frank, not all landlords have the flexibility to provide this relief as they have debt to service. Landlords must, where possible, be flexible to accommodate their tenants.
- We also encountered an example of how some of the Government’s support is falling through the cracks. If you are a small café in Westminster, you are a very small business. But the government’s grant that the café has applied for is linked to the rateable value of the property. This does not make sense. In many cases, the SMEs do not own the property, they rent it.
- Judith, how important is it that local areas have the power to respond to the crisis themselves?
- You can’t respond to the crisis from central London.
- The command and control model has let us down regionally. This is in relation to the provision of PPE, and Test and Trace. Had we been allowed to control this from a local level, we would have progressed things far more efficiently and quickly.
- We just got additional powers which address this. But there needs to be a recognition of the resource that is needed to go with the additional powers.
- Public health, managing local outbreaks and environmental action is the bread and butter of local government.
- Judith and Rajesh, what is your assessment of the government’s levelling up agenda? Does the reality match the rhetoric?
- Judith – Leeds received the largest growth deal in the early days of the devolution agenda. I was surprised how we were able to deliver tangible and sustainable results on the skills agenda, working on the ground with providers and businesses to deliver those results. But devolution in this country is at its infancy. Our argument is we need fiscal devolution.
- Rajesh – I think devolution in England is a bit of a myth. London is a global city, comparable to cities like Tokyo and New York. But in terms of control over the money that is spent here, we rank poorly. For example, in terms of control, Tokyo has 70%, New York has 50%, London has 7%. We support devolution not just for London but for other parts of the country.