Exclusive:Budget 2025: Rachel Reeves to hand business rates retention for new Leeds City Fund
The Chancellor is set to allow local leaders in Leeds to keep more of their business rates in next week’s Budget to invest in housing, roads and public transport, The Yorkshire Post understands.
Rachel Reeves is expected to announce a new Leeds City Fund on Wednesday to try and boost growth in the North.
The Chancellor is grappling with a multi-billion pound hole in the public finances, and she is hoping to revive a stagnating economy.
This would be funded through a business rates retention zone, allowing Leeds City Council to keep all of the business rates collected over a certain threshold.
Normally half of all business rates - the tax on UK business properties - are sent back to Whitehall.
However, this would enable more money collected in Leeds to stay in the city through the council and the West Yorkshire Combined Authority.
A Treasury source said: “Local leaders know the needs of their communities best, and they know what’s necessary to make their economy grow.
“That’s why we are giving Leeds more funding and more control over how that cash is used - so economic growth is fired up in the high street, investment in local services is delivered and, most importantly, more money is put in people’s pockets.”
The Chancellor, who is also the MP for Leeds West and Pudsey, hopes the money will go into building new homes around the city, and giving streets and parks a facelift.
It comes after Ms Reeves allocated more than £2bn in the Spending Review in June to go towards the tram system linking Leeds and Bradford.
The new zone – which subject to agreement on the council’s business case - is designed to boost the impact of other major regional investment, such as the expansion of the Royal Armouries Museum.
Regional leaders have long called for greater powers over taxes raised in Yorkshire, from business rates to visitor levies.
West Yorkshire Mayor Tracy Brabin said: “We’ve long made the case for local leaders to have more financial freedoms and flexibilities to drive forward our economy and this announcement is welcome.
“Alongside handing further spending power to West Yorkshire with a single funding settlement, it shows the confidence this Government has in our region.”
Leeds City Council leader Coun James Lewis said the additional funding “will provide us with a significant and sustainable tool to accelerate our ambitions for transformative regeneration and supporting business and building on our record of lifting neighbourhoods out of poverty”.
The Yorkshire mayors have also been pushing Ms Reeves to hand over powers to allow them to impose a European-style tourism tax.
This week, ahead of the Budget, York and North Yorkshire Mayor David Skaith met with the Chancellor in Downing Street to show research which found a £2-a-night visitor levy could raise £52m for his region.
Ms Reeves previously appeared reluctant to hand over tax raising powers to mayors, however the business rates retention zone could be an indicator of things to come in Wednesday’s Budget.
Mr Skaith said: “A visitor levy in York and North Yorkshire would be a total gamechanger for our region. We’re home to beautiful towns, villages and cities and receive 41m visitors a year as a result.
“A small charge on overnight stays could revolutionise how we deliver transport, support businesses, invest in infrastructure and the visitor economy.”