Birmingham City Council was placed on the front line of the fight to protect the city’s economy, as the Queen’s Speech made local authorities responsible for beating the recession.
Council leader Mike Whitby and colleagues in neighbouring authorities will be asked to draw up an economic strategy for the West Midlands – helping decide how regeneration funding of £400million a year is spent. They will form a Leader’s Forum, to give a single voice to local authorities in the area.
Councils will have to draw up economic strategies with Regional Development Agencies – unelected quangos, whose managers are appointed by Peter Mandelson, the business secretary.
A new Local Democracy, Economic Development and Construction Bill will allow councils to seize control of transport policy.
Authorities will be encouraged to create partnerships called Economic Prosperity Boards, to apply to Whitehall for money and authority.
While the Leaders Forum will be a regional body, covering counties such as Shropshire and Worcestershire as well as the West Midlands, the Prosperity Board will be “sub-regional”, probably covering Birmingham, Solihull, Coventry and the Black Country, and possibly Telford.
And authorities will gain the right to levy extra taxes on employers, with the introduction of supplementary business rates as part of a Business Rate Supplements Bill. Businesses pay 44 per cent of the rental value of properties in business rates, but councils will be allowed to add an extra two per cent.
Studies estimate a 2p top-up in Birmingham would yield £15.4million per year, to support a ten-year loan of £118million.
Authorities will only be allowed to impose the extra tax after consulting business leaders, and only to pay for schemes which promote economic development.
The measure will be deeply unpopular with industry, lobbying the government to scrap the policy.
Birmingham council backed the idea of supplementary business rates for years – but a council source said the authority would not consider raising taxes on employers in the current economic climate.
Retailers lined up to condemn the proposal. Alex Gourlay, managing director Boots UK, said: “This is the wrong tax at the wrong time.
“It will simply lead to increased costs for retailers at a time when the sector’s margins are already being squeezed by a wide range of additional property costs and trading conditions are challenging for the sector.”
Councils will also take over responsibility for skills training with the abolition of learning and skills councils.
This will place local authorities in charge of all children’s services from birth to the age of 19.