Clegg loosens purse strings to boost Yorkshire's revival

Deputy Prime Minister Nick Clegg's announcement could allow councils around Leeds to borrow up to 250m for a major regeneration scheme in the Aire Valley which would create 15,000 homes and thousands of new jobs.

The policy – which could also finance a multi-million pound regeneration project in South Yorkshire by allowing local authorities more freedom to borrow money – came as Mr Clegg used his conference speech to plead with jittery party members to be patient during looming spending cuts.

Hours earlier, party activists defeated the leadership in a conference vote over whether to support new free schools – a flagship policy for their Conservative coalition partners.

He sought to allay the concerns of party members uneasy over the coalition with the Conservatives as he urged them to "stick with us" in a speech brought forward to allow him to fly to New York to represent the Government at the United Nations.

Reminding the party it was tasting power for the first time in 65 years, he urged activists to "hold our nerve" and concentrate on the party's achievements as he ruled out any electoral pact with the Tories at the next general election, describing the coalition as "the right Government for right now".

The Sheffield Hallam MP, who has faced anxious questions from delegates about the price of signing up to the coalition, promised he would "not repeat the mistakes of the 1980s in which whole communities were hollowed out" and denied looming spending cuts would lead to a "slash and burn" policy to balance the budget.

The only policy announcement in the speech was the change in rules for town halls to raise money, allowing them to borrow cash against future business rates to fund major schemes.

Mr Clegg hailed it as an example of Lib Dem commitment to devolving power to local communities.

Business leaders and councils welcomed the proposal – which offers hope of raising serious sums of money at a time when Government funding is being slashed – although it is bound to raise concerns about town halls taking on so much extra debt.

Labour had toyed with the idea of introducing Tax Incremental Financing – also known as Accelerated Development Zones and tested in the United States – but failed to back a proposal from Leeds City Region to borrow 250m to turn a 1,000-acre site in the Aire Valley into an eco-settlement. Now councillors are keen to revive the proposal.

Stewart Golton, leader of Leeds Lib Dems, said: "Today Nick Clegg has given Leeds the green light to move forward with its long-held plans for the Aire Valley."

Sheffield City Council leader Paul Scriven said the shift was a "tremendous boost" which could be used to help finance a multi-million pound scheme creating hundreds of jobs in Attercliffe and the lower Don Valley, a corridor into the city.

Baroness Margaret Eaton, chairman of the Local Government Association, said: "It is good news the Government has listened to the calls from local government for the power to turn local tax revenue into investment that will keep our roads free from potholes, fund better public transport and make sure schools and community centres do not crumble."

MAIN POINTS FROM CLEGG'S SPEECH

The immediate future will not be easy, but the long term prize is great.

Hold our nerve and we will have changed British politics for good.

We will take risks in government. But we will never lose our soul. We haven't changed our liberal values.

We have done more in five months than Labour ever did to sort out the greed and the recklessness of the banks.

We will not repeat the mistakes of the 1980s in which whole communities were hollowed out.

The Spending Review is about balance and responsibility not slash and burn.

Imagine if we had turned away. How could we ever again have asked the voters to take us seriously?