Parliament passes business rates retention and TIF legislation

Under the Act, local authorities will receive 50% of locally generated business rates and will get to keep any growth generated on that share for a seven year period. It is estimated that councils will get to keep £11.5 billion this way. The scheme, which will take effect from the financial year beginning 1 April 2013, is aimed at creating an economic incentive for councils to generate greater levels of income, support local businesses and create jobs, the Government has said.

Currently, all business rates generated by councils are centrally collected by the Treasury and then redistributed to councils through a grant system, where councils are invited to bid for grants for different projects.

"The old flawed system of government handouts to local authorities encouraged a begging bowl mentality, with each council vying to be more deprived than its neighbour," said Local Government Secretary Eric Pickles. "This Act allows councils to stand tall, and rewards them for supporting local jobs and local firms. All councils, including the least prosperous, have the opportunity to gain from this system."

"These new laws could deliver over a £10 billion boost to the wider economy, and generate more business rate income for councils to help pay off the deficit and support frontline services that protect vulnerable communities," Pickles said.

The Act also implements TIF, a framework under which Councils are able to generate funding for infrastructure developments by borrowing against predicted increases in business rates.

The Bill was laid before Parliament in December last year. It was introduced to implement proposals contained in the Government's resource review, which was consulted on last summer.