HC Deb 04 July 2003 vol 408 cc37-8WS
The Minister for Local Government, Regional Governance and Fire (Mr. Nick Raynsford)

The Government have today launched a consultation into how they might use s.71 of the Local Government Bill currently before Parliament to allow local authorities to retain business rates revenues. This consultation is being conducted jointly between the Office of the Deputy Prime Minister and HM Treasury.

The new Local Authority Business Growth Incentives scheme will affect all English local authorities—except fire and police—and will start in April 2005. It will give local authorities an incentive to encourage business in their areas, and will reward their contribution and encourage strong and successful partnerships between local authorities, business and other local and regional players.

The current Local Government finance structure does not fully recognise or reward local authorities' contribution to economic growth. Local authorities bear many of the costs of economic development although they do not benefit from the increased revenues it generates. Since 1990 business rate revenues have been paid into a central pool so that local authorities get no direct individual or local benefit.

This consultation sets out a scheme for reforming this arrangement by allowing local authorities direct retention of some business rate revenues. This scheme introduces incentives for local authorities to lead the economic development of their community by encouraging strong and successful partnerships with business and other local and regional players.

We are convinced that all local authorities irrespective of their economic circumstances, should be able to benefit from the scheme. The proposals therefore balance the need to maintain a strong incentive for existing high growth authorities with the need to provide greater incentives and benefits to deprived and low growth authorities. In particular, the scheme provides local authorities with a clear opportunity to tackle the enterprise gap in their areas and to integrate enterprise with the regeneration of their communities.

The proposals in this consultation provide a real opportunity for authorities to secure additional resources. No authority will lose, and there is no question of extra revenue from this scheme being offset against other income.

We are also committed to devolving more decision making to a local level. Therefore, benefits from the scheme will not be ring fenced and local authorities and their electorate will be free to decide whether and how to respond to the incentives created by the scheme.

The consultation document sets out the principles and concepts that will guide the design of the scheme. Having considered the responses from the consultation the Government will draw up the appropriate secondary legislation and will hold a further consultation on this in 2004. This secondary legislation will then be introduced into Parliament in time for the scheme to be introduced fully from the 1 April 2005.

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