Osborne Gives Local Councils Power to Set and Keep Business Tax

U.K. Chancellor of the Exchequer George Osborne said he’ll give local authorities in England the right to set and spend business taxes raised in their areas.

The move, which will replace a system under which councils pay business rates into central government and receive a grant to cover local services in return, forms part of Osborne’s plan to devolve power to town halls after decades of centralization.

“Today I am embarking on the biggest transfer of power to our local government in living memory -- we’re going to allow local government to keep the rates they collect from business,” Osborne told delegates at the Conservative Party’s annual conference in Manchester, northwest England. “We’re going to abolish the uniform business rate entirely, that’s the single, national tax rate we impose on every council. Any local area will be able to cut business rates as much as they like to win new jobs and generate wealth.”

Osborne acknowledged that too much power had been stripped from local lawmakers, “most especially” by Conservative governments, and pledged to reverse the process. In a sign of the importance of devolved power to his government’s program, Prime Minister David Cameron used the promise of devolution to regional cities as a selling point to foreign investors in a speech in New York last week.

Cities with directly elected mayors will be permitted to increase business rates to pay for infrastructure projects if they are supported by local employers, Osborne said.

“It’s up to them to judge whether they can afford it, it’s called having power and taking responsibility,” Osborne told delegates. “Let the devolution revolution begin.”

About 26 billion pounds ($39 billion) in business rates will be kept by local councils instead of being transferred to the Treasury as a result of the change, Osborne said. Grants to councils will be phased out in return.

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