Councils and city regions with elected mayors can raise rates in order to invest in infrastructure only, and probably by a maximum of 2p.
Mr Osborne said: “Right now we have the merry go round of clawing back local taxes into the Treasury and handing them out again in the form of a grant”.
More than sixty per cent of IoD members back local politicians being given the power to set business rates.
Meanwhile, ICAEW chief executive Michael Izza said, “Giving councils power to set business rates is a good win for champions of devolution with greater local control on attracting businesses and igniting the local economy”.
The new body will be unveiled in Mr Osborne’s speech to the Conservative Party conference today, in which he is also expected to announce an extra £5bn of funding for major projects.
Councils can increase the amounts they have to spend in future years by attracting more businesses to their areas. “We are keeping business rates arrangements under active review”.
Meanwhile, John Cridland, director-general, of the Confederation of British Industry (CBI), the UK’s biggest business lobby group, said the “devil would be in the detail”.
“Retaining local business rates will better incentivise economic development and enable local voices to define clearly how this should happen. There’s a building not too far from here which reminds us of what local government used to mean”, Osborne added. There’s no incentive to promote local enterprise. A core grant from central government would be phased out and local governments would take on new responsibilities, he said. Regenerate a high street, and you’ll reap the benefits.
During the financial crisis, many thousands of businesses were ultimately pushed into bankruptcy because of business rates bills. “Let the devolution revolution begin”.
But both Liverpool Mayor Joe Anderson and Wirral council leader Phil Davies have called on Mr Osborne to ensure less well off areas – with lower business growth – are not penalised.
The National Infrastructure Commission (NIC), which is to be chaired by former Labour transport secretary Lord Adonis, will develop long-term infrastructure plans by assessing Britain’s needs early in each parliament.
The Chancellor will also use his first conference speech since the election to announce plans to pool local authority pension funds with the goal of boosting investment in infrastructure.