All business rates paid by local businesses will now go to the local authority and not straight to central government, chancellor George Osborne announced today.

In his speech to the Conservative Party Conference, Osborne told delegates the move would devolve £26bn of income from Westminster to local councils.

As part of the change the uniform national business rates will no longer exist and local authorities will have devolved powers set their own rates. The chancellor also confirmed that all councils would have the ability to cut business rates but only towns with elected mayors would have the power to raise them.

The full relevant section of Osborne’s speech read:

“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.

That’s right, all £26bn of business rates will be kept by councils instead of being sent up to Whitehall. Right now, we collect much more in business rates than we give back in the main grant.So we will phase out this local government grant altogether. But we will also give councils extra power and responsibilities for running their communities.

The established transfers will be there on day one, but thereafter, all the real growth in revenue will be yours to keep. So this is what our plan means. Attract a business, and you attract more money.

Regenerate a high street, and you’ll reap the benefits. Grow your area, and you’ll grow your revenue too. And to help local people do that I want to make another announcement today.

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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.It’s up to them to judge whether they can afford it. It’s called having power and taking responsibility.

And for those big cities with elected mayors, like London, Manchester and now Sheffield, I will go even further. Provided they have the support of the local business community, these mayors will be able to add a premium to the rates to pay for new infrastructure and build for their cities’ future.”

Reaction to the move has largely been positive. Local Government Authority chairman Cllr Gary Porter called it “great news for councils” and also expressed the view that it would benefit local small business communities.

“The LGA has long-argued that the current system of business rates needed reform so councils could effectively support small businesses and boost high streets,” he continued.

“Councils have been hugely restricted in their ability to introduce local discounts with government setting the charge and keeping half of business rates income. With greater local control, councils will have flexibility to reduce business rates for the types of shops and businesses that residents want in their high streets and neighbourhoods.

“Councils and businesses both agree that business rates should be a local tax set by local areas. It is right that all of the money which a business pays is retained by local government and this will be a vital boost to investment in infrastructure and public services.”

CBI director-general John Cridland was also largely receptive to the changes but added the proviso “as long as they don’t push up costs for businesses”.

“If this bold announcement on business rates is a way to cut them, then it will spur councils to take a pro-growth approach, and has the CBI’s support. But this must not be a way to increase rates without the consent of the local business community,” he said.

“Businesses wants to boost training and see sustainable wage growth based on real rises in productivity, and lower taxes support that aim. But the National Living Wage is a gamble and together with the apprenticeship levy will add significant costs to business and make creating jobs harder.

“Updating the UK’s infrastructure is critical to sustainable growth and productivity, and we’ve long called for an independent body to assess our long-term needs.”

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