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Councils to be grant free by 2015

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Between a quarter and a third of local authorities will become ‘free councils’, independent of government grant by 2015, under ministers’ proposals to localise business rates, it is reported.

Councils are unlikely, however, to be given the power to vary business rates set in their locality – at this stage – under the plans which are set to be unveiled in the next fortnight, the report in the Guardian said.

One minister said: “There will have to be an element of redistribution between wealthier and poorer councils, but the aim is that between a quarter and a third of councils will be free from central government grant.

“They will be free councils, and the idea is that they have a real incentive for the first time to encourage business in their locality. Up to a third of councils will be freed from dependence on central government. That number will gradually increase.”

Ministers are set to consult on the changes as part of the local government finance review, which is slated to announce its findings in July.

Whether councils should be handed control to vary the business rates set in their area or simply be able to retain the revenue, remains a topic of debate – see today’s LGC for more – with Liberal Democrats favouring more autonomy being handed to councils.

Business Secretary Vince Cable (Lib Dem) is said to have written twice to Mr Pickles calling for councils to be able to set and collect business rates at the local level - despite fierce opposition from business - rather than just retain a larger share of their rate pool.

LGC understands Mr Pickles has submitted the terms of reference for a “phased” resource review to the cabinet for approval, with the first phase to focus on reform to business rates, including Tax Increment Financing.

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