Councils to keep £26bn from business rates in 'devolution revolution'


Councils are to be allowed to keep rates totalling £26 billion which they raise from business, in a "devolution revolution" to shake-up the way local government is funded, Chancellor George Osborne has announced.

The system under which cash raised from rates is sent to Whitehall to be redistributed in grants to town halls around the country is to be abolished, along with the uniform business rate which imposes a single tax rate on every council.

In future, councils will be freed to cut business rates to attract new jobs, and elected mayors in big cities like London, Manchester and Sheffield will be allowed to add a premium to rates to pay for major infrastructure projects.

The reform was announced in the Chancellor's speech to the Conservative annual conference in Manchester, as he claimed the mantle for the Tories as "the builders" with a plan for a prosperous future for working people.

Conservatives were now "the party of work, the only true party of labour", while Jeremy Corbyn's Labour were "wreckers" who had "completely abandoned" working people as they lurched "off to the fringes of the left", he claimed.

Mr Osborne confirmed the establishment of a new National Infrastructure Commission chaired by former Labour cabinet minister Lord Adonis, to drive forward major projects like roads, railways, airports and power stations which require planning and construction over a period of decades.

And he said he would step up asset sales to fund £5 billion of investment, sweep away planning rules delaying home-building on brownfield sites and create British Wealth Funds to encourage local government pension funds to invest in infrastructure.

Mr Osborne said devolving the raising and spending of business rates was one of "the biggest transfer of power to our local government in living memory" and would help restore local government, which had had its wings clipped "again and again" over the past decades by all parties, including the Conservatives.

He said: "It's time to face facts. The way this country is run is broken. People feel remote from decisions that affect them. Initiative is suffocated. Our cities held back.

"There's no incentive to promote local enterprise. It's time we fixed it."

To applause from delegates, the Chancellor said: "This is what our plan means. Attract a business, and you attract more money. Regenerate a high street, and you'll reap the benefits. Grow your area, and you'll grow your revenue too."

Announcing that his plan would mean "money raised locally, spent locally, every council able to cut business taxes, every mayor able to build for their city's future, a new way to govern our country", he declared: "Power to the people. Let the devolution revolution begin."