Labour leader Ed Miliband outlined the plan in a speech in Leeds
Labour leader Ed Miliband has set out plans to shift economic power in England from London to the regions.
Under a Labour government councils would be encouraged to
join forces to create regional "economic powerhouses" to attract more
jobs and boost growth, he said in a speech in Leeds.They would be allowed to keep any extra business rates income generated by growth to invest locally.
But they would get their grant from government cut by the same amount.
This means the plan is "revenue neutral" - it would not cost taxpayers anything - but would hand more control over how money raised locally is spent in that area.
At the moment, business rates are collected locally but the money is handed to central government to be redistributed to councils in line with a Whitehall-set formula.
Former Transport Secretary Lord Adonis believes more than £30bn could be freed-up for local authorities to spend how they like on boosting growth in their areas.
Mr Miliband has accepted most of the recommendations of a report by Lord Adonis on how to stimulate business innovation and tackle "chronic regional imbalances" in growth.
Its main proposals include:
- Giving new combined authorities in cities and county regions control over how additional revenue from business rates is spent
- Giving businesses more say over how Local Enterprise Partnerships are run and their priorities
- Releasing up to £30bn in government funding for regional housing, transport and employment schemes
- Creating a new national funding framework for innovation policy
- Setting a target of 25% of all government contracts being awarded to small firms
- Establishing a new small business administration
- Creating a regional network of small business investment companies
- Expanding apprenticeships in science, technology and maths
A future Labour government would
seek to achieve this by reforming the relationship between local and
central government not by big Whitehall spending, he said.
Using tax as a "lever" for raising levels of regional growth,
Mr Miliband cited the Greater Manchester Combined Authority as a model
for how cities and counties can pool their resources and know-how to
make a difference.For the past three years, the 10 councils in Greater Manchester have been co-ordinating their economic development, regeneration and transport functions to try and map out a long-term plan for sustainable, balanced economic growth.
As an incentive to try to encourage similar collaborations, Mr Miliband said new combined authorities established under a Labour government would be free to spend however they choose any extra revenue they generate from business rates as a result of their own efforts.
Lord Adonis was a minister under both Tony Blair and Gordon Brown
The settlement will be "revenue neutral" and any extra revenue raised will be offset by a cut in councils' block grants but Mr Miliband stressed the importance of money raised locally being spent locally.
"The next Labour government will ensure city and country regions, like this powerhouse economy in Leeds, get control of business rates revenues. So that any extra money raised here thanks to the efforts of you and everyone in this great city can be invested here.
"I know the next Labour government cannot solve every problem by pulling levers in Whitehall. We can only do it by working with, harnessing the ideas, energy and the dynamism of great businesses, cities and county regions so you can help build and share in a more successful and prosperous Britain."
Lord Adonis conceded that his proposals were similar to those set out in a recent speech by Chancellor George Osborne and a report last year on boosting growth by former Conservative Deputy Prime Minister Lord Hesesltine, entitled No Stone Unturned.
The Labour peer said he had spoken to Lord Heseltine when putting together his report and broadly agreed with his call for "more powerful cities" but although there was now a political consensus on the need for greater regional devolution only Labour would deliver it.
"Increasingly, I think, the question is who is going to act, rather than just make speeches," he told BBC Radio 4's Today programme.
"And act means really serious devolution of resources and also preparedness to devolve tax resources.... to give really big incentives to the big cities and counties to attract business."
Skills shortages The BBC's political editor Nick Robinson said the economic test of the package was whether it would rebalance the British economy. But he said Labour also knew it needed to answer the charge that it knows how to spend the proceeds of growth but not how to generate it.
The CBI said the report "identifies the right priorities for growth and job creation, and recognises that the benefits of the recovery must be shared across all regions of the UK".
"His report addresses many of the major challenges facing our economy, from skills shortages to strains on infrastructure," said its deputy director general Katja Hall.
"Size matters for local government, and more combined authorities would help create regional economic powerhouses to invest in research and development, support exporters and expand apprenticeships."
Last year, ministers set out plans for councils in England to keep half of any increase in business rates they generate rather than paying them into Treasury coffers.
Business rates are paid into a central pool before being redistributed to all councils in the form of a grant. Councils currently generate less than half of their income but ministers believe this figure could ultimately rise to 80% or more.
