The Guardian this morning reports plans for richer local councils to become self financing. The idea is that "between a quarter and a third" of councils would cease to have central Government grants (apart from their schools I would guess). In return they would be able to keep the business rates they collect.
Business rates raise £20 billion a year in England. This money is collected by councils but all handed to central Government where it is redistributed using a complicated formula.
The Guardian quotes a Minister as saying:
"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."
The report adds:
The Liberal Democrats are understood to have given ground by accepting that the review will not, at this stage, look into whether individual councils should have the power to vary the business rate, something the CBI and the British Chambers of Commerce vehemently oppose.
Business organisations want to maintain a nationally set uniform business rate.
I agree with the Lib Dems. Tax competition drives down tax rates and increases tax revenues. It will quickly become obvious that the most effective regeneration scheme is to to set lower business rates than those set in surrounding areas.