Nick Clegg: Councils will retain business rates and borrow against income

New legislation allowing local authorities to retain business rates will encourage economic growth, says deputy prime minister Business rates are to be collected and retained locally, allowing councils to borrow against their future income from the taxation to fund local services. Speaking at the Local Government Association conference in Birmingham this week, deputy prime minister Nick Clegg announced the government would introduce legislation in the current Parliamentary session which would overhaul local government finance. Clegg said the bill would include plans to localise the retention of council tax, providing a “dramatic new incentive” for local authorities to encourage economic growth in their area. The legislation would also introduce tax increment finance, allowing local authorities to borrow against future income from the business rates to meet local priorities which could, the deputy prime minister suggested, include developing new homes. The announcement followed a Local Government Group poll, carried out by YouGov, which revealed that 66% of businesses said they would prefer it if their rates were retained by their council and distributed locally. Clegg reassured the audience that he would ensure the proposals were “fair”, so the poorest boroughs would not find themselves worse off than they are already are under the new system. He also announced the government was looking to set up a series of pilot schemes to test out local community budgeting, including two pilots to try out plans to pool the entire funding pot for local services. He describe the move to localism as a “once in a generation shift from a very centralised lopsided economy to one that’s more balanced”. Delegates roundly welcomed the announcement of new fiscal powers, for councils but a series of simple questions posed by Liberal Democrats among the audience were met with loud jeers. Speaking earlier at the conference, decentralisation minister Greg Clark said he wished to provide councils with an “entrenched right of initiative” allowing them to find their own answers to local problems. “I think we’re getting close to a new constitutional settlement between central government and local government,” he said. Fears were raised about the risk of creating a ‘postcode lottery’ in public service delivery, but Cllr Colin Barrow, leader of the London borough of Westminster, said such accusations were in fact a benchmark of success. “I praise the postcode lottery. I think the more of a postcode lottery we have the better, because we’re local and local means different.” This content is brought to you by Guardian Professional. Join the local government network for more like this direct to your inbox. Policy Finance Localism Service provision Hannah Fearn guardian.co.uk

Posted by on June 29, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.