18th May 2012
Nick Clegg says business rates will be localised
29th Jun 2011
Councils in England will be allowed to keep the business rates they collect rather than paying them into Treasury coffers, under new government plans.
Deputy Prime Minister Nick Clegg will announce the plan in a speech to the Local Government Association (LGA).
He will seek to reassure deprived areas - with fewer businesses to generate money - that no authority will receive less than it does at present.
The LGA has already expressed its enthusiasm for the idea.
Business rates are charged on most non-domestic premises, including shops, offices, pubs, warehouses and factories.
They are calculated and collected by local authorities, and at present are put into a central pool before being redistributed to all councils in the form of a grant.
The grant is used to help fund local services like the police and fire brigade.
'Money talks'
Mr Clegg will tell the LGA conference in Birmingham that councils currently control less than half of their budgets, but with the localisation of business rates, that could rise to 80% or more.
He will also argue that with the power to spend money as they see fit, councils can better address local priorities and offer greater incentives to attract successful firms to their area.
Councils will also have the power to borrow against business rate income to fund local development.
Mr Clegg will say: "Every government preaches localism. This government will practice it. In terms of real decentralisation, money talks.
"We have to create the conditions for communities to invest in their own success.
"That means putting our money where our mouth is to give you proper power over spending as well as more control over the tax you raise and keep so, for example, you can fight for businesses to come to your town."
Poorer areas, particularly in the north, fear that the localisation of business rates could leave them much worse off because they lack a large economic base.
'Economic boost'
But Mr Clegg will insist they need not worry, telling the LGA: "I guarantee any new system will be fair.
"More deprived areas will not lose out. From the start, no authority will receive less funding when the new arrangements are introduced than they would have done previously."
In his speech to the LGA on Tuesday, the body's new chairman, Sir Merrick Cockell, said localising business rates would be "the biggest kick-start to our economies" that the government could give.
He said it would allow communities to benefit directly from their own economic activity and development.
The deputy PM will also unveil plans to roll out so-called community budgets across England after a successful pilot scheme.
The aim of the policy is to help councils manage families with multiple problems who require interventions from a number of different bodies, including the police, social services, doctors and courts.
The government argues that by giving councils one central budget for each of these families, waste can be eliminated and individuals can be cared for better.
