City ‘freedom’ could be costly

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LABOUR politicians have called on the coalition government to guarantee that plans to allow cities including Sheffield to keep business rates will not leave the city worse off.

Sheffield collects £180 million in business rates which are paid to the Government. All rates collected nationally are redistributed to councils under an agreed formula.

At present, Sheffield receives £240m back.

Under coalition plans, Sheffield would keep its own rates. Deputy Prime Minister Nick Clegg assured Sheffield Council chief executive John Mothersole that the Government will make up the difference.

Penistone and Stocksbridge Labour MP Angela Smith said: “We need a long term guarantee that this £60m a year difference will be made up, otherwise Sheffield will suffer a further cut in income.”

She welcomed Mr Clegg’s announcement naming Sheffield as one of eight cities chosen to become ‘economic powerhouses’ which will have extra powers and local control over business development, transport and housing.

The city will have a ‘dedicated pot’ of funding for housing and transport projects rather than having to apply to the Government.

Ms Smith said: “The concept of allocating money to cities and being able to spend it is sound but only if it is backed up with resources.”

Sheffield South East Labour MP and former city council leader Clive Betts said: “It’s a good idea to give local authorities more freedom but this is against having less money to spend.”

Mr Betts is concerned that Sheffield would struggle to raise sufficient business rates, even with economic growth, to cover the funding gap between what is collected and what is currently received from the Government, if Mr Clegg’s promised top-up funding ceases.

The coalition hopes its policies to help economic development such as enterprise zones with favourable planning rules and tax relief, plus grants for businesses through the regional growth fund, will lead to a long-term increase in the amount of business rates collected.

Allowing cities to keep their business rates means the onus is on councils to keep local economies buoyant because they will no longer be able to fall back on being subsidised by more prosperous areas.

Sheffield estate agent Nick Riddle said: “With business rates, it’s swings and roundabouts. At the moment, we are better off under the existing system.

“With having dedicated local funding pots for things like transport and housing, there is a danger the money could be spent for the ruling council administration’s priority areas rather than looking at the city overall.”

Nick Clegg’s proposed changes aim to give cities ‘more freedom to do big innovative things to create jobs and prosperity’.