The West Midlands could generate an extra £6.8 billion a year with a radical overhaul of business rates, a new report states.
A Policy Network report calls for councils to have full powers to set business rate levels, working alongside combined authorities – alongside a new system for determining what businesses pay.
Full fiscal control could unlock an extra the next 25 years in the West Midlands, or Greater Birmingham, it claims.
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Until now, funds from business rates have been funnelled to Whitehall, but has shown a keenness to change this and rates are central to a new push for devolution.
However, co-authors Alastair Reed and Thomas Aubrey said Mr Osborne needed to go further to unlock growth potential in areas like Greater Birmingham.
They state: “The Chancellor’s decision to devolve the full revenues from business rates to local areas is a radical step forward for England’s regions.
“But for local leaders to increase investment in infrastructure, they need to be able to set rates locally and borrow against these revenues.
“Without this flexibility there will be only minimal increases in investment.
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“Full fiscal devolution to local authority partnerships that reflect local economies, if done after resolving longstanding flaws with the tax itself, could enable areas to generate up to an extra one per cent of revenues above their current trend rates.
“This would enable councils in London to finance large-scale projects such as Crossrail 2 or those in Manchester to fund a major regional transport hub.”
Reforms proposed by Policy Network could see city regions generate an above their trend rates of growth.
Only in Greater London would there be a larger financial boost than in the area covered by the West Midlands Combined Authority (WMCA).
Policy Network says regions have been constrained by “Britain’s political culture of centralisation” – a major reason why growth has been so imbalanced over the last few decades.
It said Mr Osborne appears to have recognised the merits of business rates reform.
In his party conference speech, he announced plans to devolve the revenues from business rates to local government so that extra income can incentivise investment to drive growth.
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Last week, the Post reported the expansion of the city centre enterprise zone, along with the ability to borrow more against the future uplift in business rates, would be worth up to £1 billion for the region.
The authors said the generated elsewhere to address “woeful levels of investment”.
The report states: “The devolution of business rates will start to transform England’s political and economic landscape more than anything proposed so far in the name of the ‘Northern Powerhouse’. But this needs to be accompanied by a major shift in the way local economies finance investment if they are to have anything like the economic levers used by their competitors across Europe and the US.”