Schools are to be given control over 85% of their funding from next April, but the local government finance green paper tomorrow will signal that the proportion will be raised. 'We believe the optimum
level of delegated funding is around 90%', said a Whitehall source. 'It means that school heads can shop around for best value in their areas'.
The green paper, to be introduced by local government and regions minister Hilary Armstrong, will also propose sweeping changes in councils' funding, including abolition of controls on the money they spend on buildings and large items of equipment.
It could also open the door to councils that want to help the private sector to regenerate urban areas. One council tried to create a project with a firm of private developers, but the company pulled out because of the inflexibility of the capital control regime in the local authority. In another council, attempts to use the income from its swimming pools and sports halls to finance the building of new sports facilities were blocked because it was not allowed under the capital spending controls.
The green paper will propose that councils will be free to spend on capital schemes without interference from Whitehall, provided that they stay within their overall limits for revenue support grant agreed with the DETR.
The government is refusing to back down over its most controversial proposal - to allow local authorities to set a local supplementary council tax on businesses. The green paper will emphasise that local businesses will have a say over how much they are levied.
'It has been alleged that the supplementary business rate will raise an extra£2.75bn without giving commercial companies any say. That is absolutely not true', said a DETR source. 'Councils will have to put in place a partnership with business which the majority of businesses will have to agree to before any additional tax can be levied'.
Under the plans, local authorities will be able to raise 1% of the national business rate, which could add£40 a year to the rate bill for a business with a rateable value of£10,000. Over two to five years, the sum could be raised to betwen two and five per cent of the national rate - equivalent to£200 on small business.