Headlines: December 20th, 2011

Plans to give councils more financial freedom will provide incentives to promote local growth over the long term and reduce dependency on central government. Councils will be able to retain a proportion of business rates which currently are all paid to the Treasury and re-distributed as grants.

Councils will be freed to generate greater levels of income, encouraged to support local firms and jobs and be well placed to reap the rewards of success as a result major reforms to be introduced from April 2013.

Last year £19 billion in business rates collected by councils were recovered by Government and redistributed back out through a complex grant. The Organisation for Economic Co-operation and Development called this one of the most centralised systems in the world.

The reforms will establish a direct link between the effort that councils put into growing local economies, supporting jobs and infrastructure and the amount of money that they have to spend on local services and local people.

Council tax payers and business rate payers stand to benefit from additional income that rate retention could bring authorities, through better services and more investment.

The Government is not proposing to change the way that business rates bills are calculated, the way that properties are valued or the way business rates levels are set. National discounts and rate relief will continue to be supported meaning there will be no adverse change to such groups as charities, amateur sports clubs, voluntary groups, those in hardship and eligible rural or small firms.

The reforms include measures for councils to retain a portion of their business rate growth and will also introduce tax increment financing giving freedom to borrow against future income from business rates to pay for roads and transport projects alongside other local priorities.