HC Deb 25 February 2003 vol 400 c13WS
The Minister for Local Government and the Regions (Mr. Nick Raynsford)

I have today laid in Parliament new clauses by way of an amendment to the Local Government Bill which will provide for local authorities to retain some or all of growth in business rate revenues.

These proposals will allow us to introduce a scheme, along the lines the Chancellor announced in his 2002 Pre-Budget Report. The scheme will increase the incentives for business and local authorities to work in partnership to maximise local economic growth and regeneration while at the same time generating additional resources to address local priorities.

Any scheme introduced will generate additional revenues from increases in the tax base generated by local authorities successfully encouraging growth, and not from increasing the tax on existing business. The money raised would be genuinely additional to local authorities and they will be free to decide how to spend it.

The scheme will only allow local authorities to keep revenues associated with any growth in the business rate tax base and will not replace the current business rate pooling system. The business rate pool acts to reduce the unfairness of business rates and ensure that revenues are distributed in a more equitable way.

It is not the Government's intention that the new scheme should only serve to reward authorities that are already doing well at the expense of declining areas. We are looking at a range of options to get the best distributional fit, with each local authority receiving an incentive that is relevant to them, whilst keeping the scheme as simple as practical.

We have also been clear that local authorities will not bear the downside risk of a declining business rate tax base. We are considering options that will allow local authorities to benefit from the scheme, even though they are in a situation of economic decline, should they manage to slow the pace of decline.

We will be consulting on the options, including the distributional consequences, in the summer