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George Osborne: Councils to keep £26bn in business rates George Osborne: Councils to keep £26bn in business rates
(35 minutes later)
Local councils across England will be able to keep all proceeds from business rates raised in their area under new plans unveiled by the chancellor.Local councils across England will be able to keep all proceeds from business rates raised in their area under new plans unveiled by the chancellor.
George Osborne told the Conservative Party conference the move would see £26bn diverted from central government to local government.George Osborne told the Conservative Party conference the move would see £26bn diverted from central government to local government.
He called it the "biggest transfer of power to local government" in recent history.He called it the "biggest transfer of power to local government" in recent history.
Councils will be able to cut the tax as the current uniform rate will be axed.Councils will be able to cut the tax as the current uniform rate will be axed.
But the Government said only councils with elected mayors would be able to raise rates, leading to claims that poorer councils would be worse off.But the Government said only councils with elected mayors would be able to raise rates, leading to claims that poorer councils would be worse off.
'Race to the bottom''Race to the bottom'
Mr Osborne said the change, in place by 2020, would mean cities and communities no longer had to go to the government "with a begging bowl".Mr Osborne said the change, in place by 2020, would mean cities and communities no longer had to go to the government "with a begging bowl".
He said: "All £26bn of business rates will be kept by councils rather than being sent back to Whitehall."He said: "All £26bn of business rates will be kept by councils rather than being sent back to Whitehall."
Shops, offices, factories and other small and medium businesses currently pay a uniform business rate set by central government. Councils and businesses have called for a shake-up to the system, which was introduced in 1990 by Margaret Thatcher to limit the power of local government.
Councils collect the tax and send the funds to central government, although from 2013 they have been able to keep up to half. Shops, offices, factories and businesses currently pay a uniform business rate set by central government.
But Labour warned the change would start a "race to the bottom" with councils competing to cut their rates the most. Councils collect the tax and send the funds to the Treasury, which then redistributes them so that areas with fewer businesses do not lose out.
Shadow chancellor John McDonnell said: "Without the right safeguards in place it'll be the poorest areas that are hit hardest. But Labour warned the planned change would start a "race to the bottom" with councils competing to cut their rates the most.
John McDonnell, the shadow chancellor, said: "Without the right safeguards in place it'll be the poorest areas that are hit hardest.
"We run the real risk of seeing the explosion of Tory tax haven councils, and it'll be consumers and taxpayers who are left to pick up the bill for it in our communities.""We run the real risk of seeing the explosion of Tory tax haven councils, and it'll be consumers and taxpayers who are left to pick up the bill for it in our communities."
'Safety net''Safety net'
A Treasury spokesman said it did not accept that the changes would mean a boom for London and the Southeast of England.A Treasury spokesman said it did not accept that the changes would mean a boom for London and the Southeast of England.
He said latest figures showed the biggest growth in revenue from business rates was in the East Midlands and Yorkshire.He said latest figures showed the biggest growth in revenue from business rates was in the East Midlands and Yorkshire.
The government also plans to introduce a "safety net" for any area where business rate receipts fall by 7.5%.The government also plans to introduce a "safety net" for any area where business rate receipts fall by 7.5%.
Matthew Hancock, a cabinet office minister, said the change was about "making the country work better".Matthew Hancock, a cabinet office minister, said the change was about "making the country work better".
He told the BBC that only cities with elected mayors could raise rates and "with the consent of the local business community".He told the BBC that only cities with elected mayors could raise rates and "with the consent of the local business community".
The Treasury said the current grant, which distributes the rates back to councils from central government, would be scrapped by 2020.The Treasury said the current grant, which distributes the rates back to councils from central government, would be scrapped by 2020.
The government put the business rates regime, which dates back to 1988, under review in December.The government put the business rates regime, which dates back to 1988, under review in December.