Balls to promise regions more financial control with business tax plans

In a bid to reclaim ground lost to the Chancellor’s glut of Northern Powerhouse announcements the Shadow Chancellor will outline plans to let city’s keep the extra business rates they generate when growing local economies.

Labour has already promised to devolve £30bn of Whitehall funding to cities and regions if it takes power in May and in a speech today the Yorkshire MP will promise to ensure at least some reduction in the proportion of local tax revenue taken away by central government.

Devolution to English cities and regions has become a divisive issue between Labour and the coalition partners as both compete to show they are prepared to end London’s overpowering grip on local finances.

Chancellor George Osborne has made much of his devolution commitments as part of his Northern Powerhouse project, handing Manchester councils a multi-billion growth deal in exchange for the leaders uniting behind an elected mayor.

In Sheffield Nick Clegg has also secured a growth deal handing the city new influence over transport and housing, while blocking plans to impose an unwanted mayoral system.

So far, though, the main parties have stopped short of handing over significant fund-raising powers, meaning that outside of cash handouts there is little change for local leaders.

Today Mr Balls will edge closer to easing those constraints when he announces that council and business leaders who come together in combined authorities will be allowed to keep 100 per cent of extra business rates revenue generated by additional growth. They will then be able to invest this to support further business growth in their regions.

Mr Balls and Labour leader Ed Miliband will publish details of their plans today at a meeting of Labour’s new English Regional Shadow Cabinet Committee, which includes a group of Labour leaders of local councils and combined authorities from across the country.

Last night Mr Balls said: “The next Labour government and a Labour Treasury will deliver the biggest devolution of economic power and funding to England’s city and county regions for generations. Our plans to devolve £30bn of funding over a Parliament will be at the heart of Labour’s first Spending Review.

“We want to see not just a Northern powerhouse, but Midlands, Eastern and Southern powerhouses too. We will not only back our great cities, but our towns and county regions too. Not just urban areas, but also rural areas.

“Local areas will be in the driving seat on key decisions affecting their local economies – with new powers over back-to-work schemes, to drive house building, and to integrate, invest in and plan transport infrastructure. And we will also let city and county regions keep all the additional business rates revenue generated by growth.”

Mr Balls added that he would continue to oppose plans to force new mayors onto city groups, which has contributed to delays holding back a Leeds and West Yorkshire devolution deal.