Birmingham should be allowed to pay for the redevelopment of New Street from local taxes, according to MPs.
They warned that plans for the #500 million Birmingham Gateway refurbishment of New Street were being stifled by excessive centralisation.
Their proposals include allowing councils to set their own business rates – which would mean local shops and employers help pay for the rebuild.
Alternatively, they said the council should be allowed to borrow money against the expected increase in tax revenue in the area around New Street once the work was completed.
The proposals were put forward by the All Party Urban Development Group, which includes former Local Government Minister Nick Raynsford.The Birmingham Post yesterday highlighted broad details of the findings prior to the publication of the full report.
Plans for the Birmingham Gateway were first revealed a year ago. The #500 million scheme was a response to decades of congestion problems at Birmingham's outdated New Street Station.
The Group called on a review led by Sir Michael Lyons, former chief executive of Birmingham City Council, to devolve funding and financial powers to Britain’s cities and towns.
The report noted that: "Of the #340 million in public-sector funding required for the project to go ahead, a gap of #140 million remains to be filled despite the station’s central position on the national rail network – and the efforts of Birmingham City Council, Advantage West Midlands, and local private-sector stakeholders."
It said councils should be allowed to adopt a system already used in the US called Tax Increment Financing, in which they were allowed to pay for capital projects which were expected to increase property prices, using the projected increase in tax revenues the project would generate.
They should also be allowed to introduce Supplementary Business Rates which could be used to ring-fence money for transport improvements.
MP Clive Betts, the group's chairman, said: "Britain’s cities are being held back by our centralised funding system. Our report recommends some new local financial powers, for cities to fund more of their own transport systems. Our message is clear – greater devolution is essential for the future success of our cities."