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Local authorities have a crucial role to play in supporting housing and wider economic growth, but the local government finance system historically failed to reward housing and other growth. The coalition Government has put in place structural reforms to change the incentives for local authorities. From April 2013, local authorities in England are retaining half of the business rates that are raised locally, and the New Homes Bonus also provides funding for local authorities based on the homes that are built in their area.
The Government's response to the Heseltine review (Cm 8587, March 2013) outlined our plans to empower local enterprise partnership to drive forward locally-led growth and enterprise. It also recommended the pooling of more financial resources to strengthen incentives for local enterprise partnerships and their partners to generate growth. In the spirit of joint working and greater collaboration, we believe that there is scope for pooling of resources from central and local government.
As announced in ‘Investing in Britain's future’ (Cm 8669, June 2013), we intend that in 2015-16 £400 million from the New Homes Bonus will be pooled within local enterprise partnership areas to support strategic, locally-led housing and economic development priorities.
Councils' local plans will remain as the focus for where development should and should not go. The pooling complements the duty to co-operate and the abolition of regional strategies introduced through the Localism Act. In particular, we hope it will encourage local authorities to work together on new developments which might cross council boundaries, and to help unlock the provision of cross-local authority infrastructure. It also gives local authorities an indirect financial stake in new housing build near but outside their council boundaries; whereas before, there was no mitigation for developments which placed strains or pressures on neighbouring councils.
We will consult shortly on the mechanism to deliver the pooling arrangements.