LABOUR will today (Tuesday, July 1) promise radical tax powers to the region to allow it to “control its destiny”, but many council chiefs are likely to oppose the move.
Councils will retain any increase in business rate revenues, instead of the money flowing to the Treasury for redistribution – a switch worth hundreds of millions of pounds a year, it is argued.
In addition, under Labour’s plans, £30bn of spending – three times the sum planned by the Coalition - will be devolved to local political and business leaders across England, over five years.
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And those local enterprise partnerships (LEPs) will enjoy extra powers over housing, business support, back-to-work schemes and skills, as well as existing plans for transport.
Explaining the plans to The Northern Echo at Westminster, Lord Adonis, the architect of the “growth review”, said: “Areas can take control of their destinies, in a way that’s much harder at present.”
And, vowing to accept the blueprint, Ed Miliband said: “The next Labour Government will ensure city and county regions get control of business rates revenue.
“I know the next Labour Government cannot solve every problem by pulling levers in Whitehall.”
The eye-catching tax plan will expand the limited retention of business rates introduced by the Coalition last year, to cover all - rather than 50 per cent - of any increase in investment.
But the move has long been opposed by the Association of North-East Councils, which fears poorer areas – where fewer firms move in – will lose out heavily.
Last week, Lord Heseltine said varying tax powers was an issue he had “wrestled with for years”, only to conclude poorer areas would inevitably be left with worse services.
But Lord Adonis dismissed those fears, saying: “That’s very, very pessimistic view of how much difference city-regions can make to growth and it’s not one shared by the leader of Newcastle City Council.
“Growth rates do vary widely, but it’s not just London that’s growing. The North-East has done very well in terms of exports over the last ten years and has huge growth potential.”
The extra devolution will only be on offer to areas with “combined authorities”, putting County Durham and Tyne and Wear – but not the Tees Valley - in the fast lane.
Lord Adonis also raised the prospect of a single elected mayor for such areas, saying: “That will be a very big issue once these combined authorities have generated real clout.”
The package comes one week before LEPs learn their allocations from the £2bn of mainly transport spending to be devolved by the Coalition, in 2015-16.
The organisations were required to put in detailed bids, but Lord Adonis said his plan was for funds to be devolved “as of right”, without pitching area against area.
The blueprint could also see the region’s two LEPs – Tees Valley and the North-East (including County Durham) – required to merge, because there are “clearly too many”.
Lord Adonis said: “I think there needs to be an assessment of how many LEPs there should be in the North-East, but I’m not, myself, conducting that.”