Councils are to be rewarded for boosting economic development in their area. Deputy Prime Minister John Prescott and Chancellor Gordon Brown have launched a consultation paper setting out the broad details of the scheme, which is due to start in April 2005.Councils that currently boost development increase their costs and do not get any reward. There are direct costs in terms of congestion on local transport and impact on the environment. Potentially, development also imposes costs on other local authority services including housing, education and community safety. In contrast, the benefits of economic growth accrue either to individuals, through more and better employment, or, in tax terms, at a national level.
The proposed scheme aims to correct this mismatch between costs and benefits. It will create positive financial incentives for local authorities to work in partnership with business, Regional Development Agencies, Learning and Skills Councils and other key local and regional players to maximise economic growth. Councils meeting specified criteria will be allowed to retain some of the business rate revenues that are associated with growing the business rate tax base at a local level. The funds retained will not be ring fenced.
The consultation paper sets out options for the detailed application of the scheme. Consultation ends in October 2003.