Unveiling Lord Adonis' report, the Labour leader is expected to commit to the "key recommendation" of handing £30bn of funding to cities and counties to boost local economies
Revenue from business rates would be handed to city and county authorities under a Labour government as part of a £30bn “economic devolution” plan to be announced by Ed Miliband.
The Labour leader, who has embarked on a week-long charm offensive on British business, will commit to handing rates revenues to regional authorities as the “key recommendation” of the report he commissioned from Lord Adonis, Mending the Fractured Economy, which he will unveil in Leeds.
Mr Miliband is expected to say his plans to boost the UK economy outside London beat the Government’s efforts because they are backed by tax incentives.
Under the plans, the rates revenues will be used to invest in local business support units, such as the Local Enterprise Partnerships. Lord Adonis, the former Transport Secretary, has identified £30bn of Whitehall funding that could be funnelled to local authorities to pay for housing, transport, business support, education and adult skills.
Announcing the plans, Mr Miliband is expected to say that the funding will ensure that the government does not just back plans for regional development of infrastructure and skills but are given the “power to make it happen.”
Labour’s business charm offensive got off to a rocky start as experts warned that Ed Balls’ tax reforms could threaten disruption and economic uncertainty.
The shadow Chancellor promised to “redress the systematic bias in favour of debt finance”. He announced a consultation into introducing a so-called Allowance for Corporate Equity (ACE) which would give tax relief on equity investments to match the deductibility of interest payments on debt.
Business groups, including the CBI, welcomed the proposals to broaden the range of financing options, particularly for small firms. However, experts warned that such a radical change of tax concept could cause uncertainty.
“Introducing a relief to replace all this would require a fundamental re-writing of a lot of tax law which would cause considerable disruption,” said Richard Rose of BDO. “Business likes stability. For a long time now, debt has been tax deductible and equity has not been - and to introduce a whole new concept could create a lot of economic uncertainty.”
Matthew Fell, director of Competitive Markets at the CBI, said: “The broader tax environment matters to business. Although we welcome the idea of broadening the sources of finance available, particularly to SMEs, the changes shouldn’t be at the expense of the wider tax environment. On the face of it, an ACE is a good idea. But if that’s at the expense of the headline rate of corporation tax then businesses would probably prefer to leave it.”