Manchester and Cambridge to keep 100% of business rate growth

18 Mar 15

Councils in Greater Manchester and around Cambridge are to be allowed to retain all additional business rate growth from next month, Chancellor George Osborne announced in the Budget as he urged other areas to come forward to negotiate similar deals.

Setting out further plans to create what he called a ‘Northern Powerhouse for a truly national recovery’, Osborne also revealed the government had reached an agreement with the West Yorkshire combined authority to take on powers relating to skills, transport, employment, housing and business support.

The chancellor told MPs that his goal was for Britain to become the most prosperous of any major economy in the world, and said action was needed to boost the economy of the North of England to reach this goal.

Under the plans for business rate retention, a pilot scheme covering Greater Manchester and Cheshire East will enable the area to retain ‘100% of any additional business rate growth, starting in April 2015’.

All additional revenue above the forecasts in the nationwide business rate retention and redistribution system will be retained locally, according to the Budget Red Book.

Similar powers will also be given to Cambridgeshire and Peterborough, Osborne added.

He said that the agreement with Greater Manchester built upon the devolution deal agreed to create an elected mayor and to devolve NHS spending.

‘Our agreement with Greater Manchester on an elected mayor is the most exciting development in civic leadership for a generation – with the devolution of power over skills, transport and now health budgets.

‘I can announce today that we have now reached provisional agreement to allow Greater Manchester to keep 100% of the additional growth in local business rates as we build up the Northern Powerhouse.

‘For where cities grow their economies through local initiatives, let me be clear: we will support and reward them.’

He said he would discuss any proposals for other areas for similar agreements, saying his ‘door was open’.

‘Our ambition for a truly national recovery is not limited to building a Northern Powerhouse. We back in full the long-term economic plans we have for every region’.

The announcement comes after Chief Secretary to the Treasury Danny Alexander launched a comprehensive review into business rates earlier this week.

Responding to the announcements, CIPFA chief executive Rob Whiteman said any review into business rates is welcome, especially if it means more support for local economies and communities.

‘However it is concerning that while a review has been announced the government have decided to hand out special concessions through an additional 100% retention rate to a few select local authorities,’ he added.

‘If business rates are to be reformed then it must be done in a thorough, planned and fair way that serves the interest of business, communities and local government. It is an essential tax for local councils and supports the services they provide.'

Local Government Association chair David Sparks said councils have long been calling for reform of out-of-date business rates and for any growth in receipts from this tax to be retained by local government.

‘The announcement of pilots in Greater Manchester, Cheshire East, Cambridgeshire and Peterborough keeping a greater share of this income is a significant step forward, but one which should not just be limited to a handful of areas,’ he added.

‘All parts of the country should be able to reap the benefits of having a thriving local economy. This should be implemented as soon as possible in a way which ensures areas with fewer businesses do not lose out.’

The chancellor also announced that the government would publish later this week a comprehensive transport strategy for the North, which had been developed in partnership with local authorities.

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