06 December 2002
The chancellor's announcement in last week's pre-Budget report caught the Local Government Association unawares, and its leaders are seeking more details from his ministry.
Local government leaders have long nurtured ambitions to gain local tax-raising powers, and earlier this year fought a rearguard action to stop business rates income being absorbed into the revenue support grant. The move would breathe new life into their long-standing campaign.
Neil Kinghan, the LGA's director of economic and environmental policy, told Public Finance that he and other senior officials were keen to find out what exactly was on offer. 'I have written to the Treasury and the Office of the Deputy Prime Minister emphasising our keenness to take part in early discussions,' he said.
The chancellor is considering giving authorities an incentive to boost the local economy by allowing them to keep any extra business rates generated as a result of their efforts.
Details remain sketchy: it is unclear whether councils would be able to keep all, or just a proportion, of the extra income, or whether the rates would be collected and distributed through the national mechanism.
Treasury officials have been charged with producing a consultation paper, but as yet no timetable has been set. A spokesman for the department told PF there would be preliminary consultations so the document would contain meaningful proposals for discussion.
'There will be discussions with other departments, as well as organisations such as the LGA, so a serviceable consultation paper with something to bite into can be drawn up,' he said.
The paper will set out proposals for defining what income is the result of authorities' efforts in encouraging new businesses in their areas. 'Any income kept will have to be clearly attributable to economic growth, so there will have to be discussions about what counts as "additional", and how you decide what is the result of economic growth,' the spokesman explained.
'This proposal will cover all areas, not just the 2,000 disadvantaged areas, and all types of authority.'
Professor Gerry Stoker, chair of the New Local Government Network, told PF the move was 'significant' and illustrated a growing willingness in central government to put more trust in authorities. 'It reflects a shift in thinking within the Treasury in terms of allowing local authorities to raise more funding themselves,' he added.
LGA chair Sir Jeremy Beecham welcomed Brown's announcement. 'This would give councils a financial incentive to work with partners in industry and commerce locally to encourage the development of new businesses,' he said.
PFdec2002
