Councils will be allowed to retain a greater proportion of the money they raise from business rates, in plans announced by local government secretary Eric Pickles.
Growth reforms in the Local Government Finance Bill will allow English authorities to keep 50% of their business rates, a move the Government estimates will add an additional £10bn to national Gross Domestic Product over the scheme’s seven year period.
The Bill intends to provide greater financial incentives for councils by directly linking their financial revenue to action they have taken to support local firms and jobs.
Councils will be required to share half of their business rates with Whitehall, the ‘central share’ being returned to authorities through grants.
To avoid disproportionate benefits being gained by councils with exceptionally large business bases relative to their baseline funding, the Government plans to share such gains via a levy aiming to assist vulnerable or less prosperous authorities.
This will provide a ‘safety net’ to guarantee that council incomes do not fall by over 10%.
In addition to these measures, town halls will retain the entirety of business rates from new renewable energy projects.
Mr Pickles suggested the new system sets out to alter the existing council attitude towards Government funding.
‘The current flawed system of Government handouts to local authorities encourages a begging bowl mentality, with each council vying to be more deprived than its neighbour.’
‘Our reforms will allow councils to stand tall. All councils, including the least prosperous, have the opportunity o gain from this system,’ Pickles said.
The Local Government Finance Bill will have its third reading in the House of Commons next week.
(From LocalGov)
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