Councils are to receive cash rewards for helping local businesses succeed, ministers have announced.
Authorities in the West Midlands conurbation are on course to receive extra funding of £4 million under proposals announced by Local Government Minister John Healey.
But the amount would go up if they managed to increase the business rates they collected by attracting new firms to the area.
The proposal is part of the Government’s efforts to encourage “city regions”, in which local councils work closely together to improve their local economies.
This usually means councils signing area agreements, in which they pledge to co-operate to meet targets, with the promise of extra funding if they are successful.
Ministers have also tried to encourage authorities to consider more formal partnerships, perhaps with common leadership such as a city-region mayor, but there appears to be little enthusiasm for this within the West Midlands itself.
Councils can already receive rewards if they increase business rate collection in their area. But under the new scheme, more money will be available and the funding will be allocated according to the success of the West Midlands conurbation as a whole, including Birmingham, Solihull, Coventry and the Black Country.
It means local authorities have a direct financial incentive to help neighbouring councils succeed in attracting employers.
The Government plans to allocate £150 million across the country over the next two years.
Local Government Minister John Healey said: “Councils can and should play a greater role in boosting the economic prospects of their local areas. They know the challenges their communities face, and how best to deal with them.”
He added: “Councils working closer together can achieve more for local people and businesses. So I want an incentive scheme that goes further, encouraging and rewarding greater collaboration between councils and better reflects the local economy, which rarely fits with local authority boundaries.”
The Local Government Association, which represents councils across the country, has urged the Government to take a different approach and allow councils to set their own business rates.
This would allow them to raise extra money by taxing businesses to pay for specific projects.