The government will introduce legislation in the current parliament which will allow for the local retention of business rates and the ability to borrow against them, deputy prime minister Nick Clegg has confirmed.
Speaking at the Local Government Association conference in Birmingham today, Mr Clegg said the legislation would provide a “dramatic new incentive” for councils to upgrade their infrastructure and encourage local growth.
The bill will enable councils to borrow against their future tax receipts and could provide a major new source of finance with which to fund construction projects.
It is already widely used in the USA and is still being developed in Scotland.
The speech comes a day after a Local Government Group poll which showed that 66 per cent of businesses say they would prefer rates were retained by their local council.
Mr Clegg 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.
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.