George Osborne, the chancellor, will unveil a radical shake-up of business rates as part of the government’s “budget for growth” next week.
In an effort to encourage councils to attract more private sector investment, dozens of local authorities will be allowed to retain millions of pounds in business rates. At the moment, the £25 billion raised each year is collected by councils but handed to the Treasury. It is then redistributed to achieve greater equality, as more rates are collected in London, southeast England and big cities.
A Treasury source said last night: “Localisation of rates will give councils more power over spending. It will also incentivise them to do more to attract businesses.”
The measure is one of a number designed to foster economic growth. They will be unveiled by the chancellor in next Wednesday’s budget.
Labour has raised fears that poorer parts of the country will lose out, although this claim is disputed by the Treasury.
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Caroline Flint, the shadow local government secretary, said: “The Tory-led local government finance settlement hit the poorest councils with the worst cuts. The danger is that those councils relying on the redistribution of business rates will end up seeing funding cut again — something that would have dire consequences for jobs and growth as well as frontline services.”
The policy has divided opinions in the coalition government, with Liberal Democrats more enthused by the policy than Eric Pickles, the communities and local government secretary, who has frequently voiced his exasperation at waste in local government.
Alongside the budget, the government will publish its long-awaited growth review. The two main parts of this will be an overhaul of the planning system and a series of measures to ease the regulatory burden on businesses.
Adam Marshall, head of policy at the British Chambers of Commerce, said: “We have heard a lot of talk from the government about cutting red tape. It is time they walked the walk.”
Two-thirds of businessmen polled by BDO Stoy Hayward, the accountant, said that the government should speed up reform of Britain’s tax system.
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Stephen Herring at BDO, said: “Given the difficulties that businesses are facing as a result of rising inflation and the spectre of increasing interest rates, these findings highlight the need for tax reforms to be accelerated to drive growth across businesses.”
Despite Ed Balls’s strong performances since becoming shadow chancellor, only 4% of businessmen polled in the survey said they thought he would make a better chancellor than Osborne.
— The Office for Budget Responsibility is to publish a monthly bulletin assessing the government’s tax receipts and spending. The independent analysis will shed light on whether the government is on track to meet its goal of eliminating the structural deficit in the public finances by 2014-15.