Boris Johnson ‘tax grab’ stirs fears for Yorkshire cities

The London Mayor’s call has raised fears that poorer parts of this region would lose out if Ministers buckle to his demands.

“What you need is a greater share – for mayoralties in the big cities – of the tax that’s raised locally,” said the Mayor. “It’s absolutely crazy that here in London we spend such a small proportion of the tax which is raised locally.

“When you look at other big cities around the world, their mayoralties have a far bigger share of local business rate or equivalent and we will be working to do that.”

Business rates are currently sent to the Treasury and distributed according to a formula to protect areas with struggling economies. While Westminster receives just 12 per cent of the £1.2bn it collects in business rates, Bradford gets back nearly double the £130m it collects.

Ministers are already planning to change the system to allow councils to keep a bigger proportion of their rates, but despite assurances that no authority will lose out in the first year and a continuing element of redistribution, critics claim deprived areas will still lose out in subsequent years.

A spokesman for the Mayor accepted that his call would mean less money for the rest of the country but said: “The argument is we always give more back to the rest of the country in tax revenues than we take out.”

But Sheffield South East Labour MP Clive Betts, chairman of the Communities and Local Government Select Committee, said: “In principle I’m not against the aim of more taxes staying locally but the idea London should simply keep what it raises is ridiculous.”

And Barnsley Council’s Labour leader Steve Houghton said: “The localisation of business rates creates two-tier local government. Ones with the strong economies do well, those with weak economies do poorly. Substantially the weak economies are in the North.”

The growing influence of the Mayor has prompted Tory grandee Lord Heseltine to warn cities outside London they face losing out as they are “sandwiched” between him and Scottish First Minister Alex Salmond unless they install their own elected mayors.

Political and business leaders in Yorkshire have looked on nervously as the Mayor is handed extra regeneration and housing powers, as well as controlling the city’s transport system, while Scottish First Minister Alex Salmond has extra finance powers.

Lord Hesletine, who has advised David Cameron on cities policy, said it would be “extraordinarily uncomfortable” for provincial cities and that they currently lack high profile leadership to fight their corner as he appeared alongside Mr Johnson at an Institute for Government debate on elected mayors yesterday.

He said growing powers granted to London and Scotland are an “absolutely clinching argument” for other cities to back an elected mayor when referenda are held in Leeds, Sheffield, Wakefield, Bradford and seven other English cities next year – and said yes votes could spark a “domino” effect with other cities wanting to follow suit.

“If you are an English provincial city you will find yourself in the extraordinarily uncomfortable place of being sandwiched between the two of them,” he said.

Lord Heseltine also appeared to caution against the Mayor’s grab for more tax, saying: “London is very rich, and part of the redistribution process takes money from high growth areas of London and redistributes it to provincial England and the rest of the UK, and that appears to me an absolutely vital part of the mechanism of government.”