SMALL businesses providing a range of services are set to face stiff new competition this summer - from their local authority.

Peter Pybus, chairman of the Yorkshire Dales branch of the Federation of Small Businesses (FSB), said that businesses specialising in a wide range of services, such as tree surgery and MOT testing, faced the threat from Government plans expected to become law this summer.

Mr Pybus is taking the official view of the Yorkshire and Humber policy unit of the FSB, which represents 12,500 businesses throughout the region.

The threat comes from proposals in the new Local Government Bill, England and Wales, which will allow all "best value" local authorities, including fire brigades and national parks, but excluding the police, to pitch for some business services in direct competition with local firms.

The Bill encourages cash-strapped local authorities to go into business to raise additional revenue through a wide range of activities usually undertaken by local businesses which contribute to the rates.

The services which local authorities will be able to offer also include key holding and alarm monitoring services, vehicle maintenance, joinery, pest control, security, drain clearance, CCTV installation, graffiti removal, landscape maintenance and gritting to private estates and even pet cemeteries.

Local authorities will even be allowed by the legislation to charge for a range of discretionary services, such as gardening for elderly and disabled people, which they are not required by law to provide.

Mr Pybus said: "The public sector has an in-built competitive advantage because it does not need to make a profit. Councils will be able to undercut local firms, forcing small businesses out of the market and giving start-ups little chance of success.

"We are calling for this whole section of the Bill to be withdrawn. The Government cannot know the full scale of the effects of this grossly unfair competition because a study by John Prescott's department has still not been published."

There were also fears that local authority advisory services covering trading standards, environmental health and fire safety, which featured among chargeable services, might run into serious conflicts of interest when enforcing regulations on operations where they have already been paid to advise.

Walter Bratley, owner of WEAB Motors, of Malton, and also FSB North Yorkshire regional treasurer, said: "I object to local councils using my business rates to undercut my business. Local authorities, with overheads covered, will be able to undercut and steal business from me including MOT tests and the repair work that follows."

Updated: 09:41 Tuesday, June 17, 2003