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Hand cities powers to drive growth

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England’s largest cities should be handed significant autonomy over business rates income and a raft of budgets currently controlled by ministers to help them drive growth, an influential commission has reported.     

The City Finance Commission, which consists of public policy and business leaders, has recommended Total Place-style pooled budget arrangements and proposed plans for how business rates could be localised in a way which would incentivise economic development.

The group, chaired by property developer Sir Stuart Lipton and including leading local government expert Tony Travers, made five key recommendations.

  • Create ‘area growth budgets’, single local pots of cash, for delivery of services such as employment, adult education, health and housing.
  • Establish ‘devolution pilots’ to trial change with a small number of high performing city councils, which would minimise the risks associated with policy change on a national scale. 
  • Allow local authorities to retain the growth in their business rate base in order to incentivise growth by keeping rate and council tax generated by extra planning consents.
  • Give tax incremental finance the green light so local authorities can borrow against future revenues to fund capital investment which will further drive growth
  • Establish a new relationship between business, central government and local government by setting up a joint committee with representation from the public, private and voluntary sectors to foster trust and improve relations.

The report, Setting Cities Free’ – Releasing the Potential of Cities to Drive Growth, commissioned by Birmingham, Manchester and Westminster city councils, will be submitted to ministers’ local government resource review, which is due to be published in the summer.

Sir Stuart said: “Pre-war local government was in charge of running roads, health and administration of social assistance while central government managed high politics such as defence and the commonwealth. 

This all changed with the welfare state. The pattern of centralisation continued as successive governments took it upon themselves to control and micro manage every funding stream and every aspect of service delivery. Government needs to break out of its control zone and trust local cities.

“Whitehall has stated its commitment to localism and it wants to drive growth – now is the time to bring these two agendas together. We believe our recommendations will help to deliver real change at a time when government strategy is for local control by way of their policy on localism.”

Experts who sat on the review included former local government minister, Nick Raynsford (Lab), chief executive of Land Securities, Francis Salway, and Chartered Institute of Public Finance & Accountancy chief executive Steve Freer.   

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