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Business tax freedom push

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Councils could soon be given sweeping new powers to retain the proceeds of economic growth and reinvest it in their local areas, local government minister John Healey said last week.

Speaking to LGC after a keynote speech for an Institute of Public Policy Research local government conference, Mr Healey said he wanted to see US models such as Tax Increment Financing where councils keep and locally reinvest increases in business and property tax revenue trialled in the UK.

“It’s a step I’d like to see in the UK which is something we are saying clearly for the first time,” he said. “I believe we could begin to take that next step without undermining the essential redistribution system that we also have.”

Barnet LBC is currently in talks with the Department for Communities & Local Government and the Treasury about using a similar system to build health and transport infrastructure (LGC, 11 July 2007).

In his speech, Mr Healey defended the government’s policy of sharing out locally raised business taxation and criticised Tory leader David Cameron for apparently endorsing policies that would “devastate the services and strength of local councils across the country”.

In a thinly veiled reference to Mr Cameron’s speech to last year’s Conservative party conference, Mr Healey told Thursday’s audience: “Designing pro-growth policies into the tax system seems to me fairer than simply saying ‘it’s your money, spend it as you choose’. This would remove essential redistribution of resources to recognise need and would devastate the services and strength of local councils across the country.”

Mr Cameron told last year’s Conservative conference: “I think it’s time with local government to tear up rules and all the ring fencing and the auditing and actually say to our local councils, it’s your money, spend it as you choose.”

Mr Healey also used the speech to criticise councils for not taking full advantage of the financial freedoms on offer.

He claimed only 60% of local authorities had used prudential borrowing powers since they were introduced in 2004 and that “half of councils don’t even have a clear policy on charging”.

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