A group of city councils has warned that Government plans to ‘localise’ business rates risk entrenching economic imbalances between the North and South.

Sigoma, representing 45 city authorities including Birmingham, Manchester, Sheffield and Leeds, has warned the policy, set to start in April 2013, could widen the economic gap between local authorities.

The group has outlined several areas of concern in response to the policy and has suggested several areas for improvements.

It has suggested the whole system, including Council Tax, should be re-equalised every three years, and any ‘set aside’ monies should be retained for local authorities ‘with a significant element of this being used to support economic regeneration in those places with vulnerable communities and weak economies’.

Sigoma’s response says: ‘We believe that if these proposals are not acted upon many of our members will not be able to meet local needs and the consequences will be a postcode lottery in vital services such as adult and children’s services.’

The policy does include a ‘hardship fund’ to help authorities suffering knock-backs such as factory closures, although exact details of how it will operate have yet to be revealed.

Sigoma is a special interest group within the Local Government Association (LGA). The LGA itself has been supportive of the policy.

However, Frances Foster, chief policy and research officer at Sigoma, said: ‘Our concern is that rather than an equalisation system, which may not be perfect, we are going to move to a polarity (between councils) going forward. It won’t be overnight but over a period of time.’

‘We are not opposed to helping incentivise growth,’ Ms Foster said, ‘but a lot of local authorities would say how much more can you incentivise growth. We have high unemployment and we need jobs, and it’s the job of local authorities to help produce growth…. But most of the decisions that have a big impact are taken by central government.’