Ed Miliband to hand business rates revenues to local authorities

Under the plans, the rates revenues will be used to invest in local business support units, such as the Local Enterprise Partnerships. Lord Adonis, the former Transport Secretary, has identified £30bn of Whitehall funding that could be funnelled to local authorities to pay for housing, transport, business support, education and adult skills.

Lord Adonis' review also lays out plans for support for innovation, R&D and skills. The trade body, the EEF, welcomed the ideas but added: "There will also be a financial impact and business will want to know whether it will be targeted to raise some of this revenue through additional taxation. Above all else businesses want consistency and certainty, so that current policies to promote growth and investment such as export support from UKTI, R&D tax credits and support for innovation through the TSB are not reduced.”

Labour’s business charm offensive got off to a rocky start as experts warned that Ed Balls’ tax reforms could threaten disruption and economic uncertainty.

The shadow Chancellor promised to “redress the systematic bias in favour of debt finance”. He announced a consultation into introducing a so-called Allowance for Corporate Equity (ACE) which would give tax relief on equity investments to match the deductibility of interest payments on debt.

Business groups, including the CBI, welcomed the proposals to broaden the range of financing options, particularly for small firms. However, experts warned that such a radical change of tax concept could cause uncertainty.

“Introducing a relief to replace all this would require a fundamental re-writing of a lot of tax law which would cause considerable disruption,” said Richard Rose of BDO. “Business likes stability. For a long time now, debt has been tax deductible and equity has not been - and to introduce a whole new concept could create a lot of economic uncertainty.”

Matthew Fell, director of Competitive Markets at the CBI, said: “The broader tax environment matters to business. Although we welcome the idea of broadening the sources of finance available, particularly to SMEs, the changes shouldn’t be at the expense of the wider tax environment. On the face of it, an ACE is a good idea. But if that’s at the expense of the headline rate of corporation tax then businesses would probably prefer to leave it.”

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