Councils have been urged to ‘shape their financial future’ as communities secretary Greg Clark launches a consultation into the retention of business rates.

Speaking at the LGA annual conference in Bournemouth, the minister set out his Fair Funding Review looking at what financial freedoms and extra responsibilities could be transferred to councils.

Mr Clark said: ‘Today, we set out the first steps towards making that ambition a reality, transforming the relationship between Whitehall and town halls and putting local government at the heart of delivering strong economic growth for their communities.

‘These next few weeks offer councils an historic opportunity to play their part in these radical reforms and to shape their financial futures for decades to come.’

However, he also set out what element of the current system of local government funding are expected to remain, such as the New Burdens Doctrine, protections for significant reductions in income and a level of redistribution between councils.

In response, the LGA said the new system must reward councils for growing their local economies without penalising those areas less able to generate business rate income.

Cllr Nick Forbes, senior vice chair of the LGA, said: ‘Decisions over which grants and responsibilities councils will have to pay for from any extra business rates income are also crucial. As well as consideration of the grants and services listed in this consultation, councils are keen that any new responsibility they agree to take should support their vital role in driving economic growth.

‘Handing over responsibility for skills and transport services is the most logical fit as it would allow local areas to close skills gaps, improve public transport and boost local economies.’

Cllr Forbes added that council do not want responsibility for demand-led services such as the Attendance Allowance benefit for older people.

‘That is because cost pressures and applications for demand-led services like Attendance Allowance can go up very quickly whereas it can take much longer for local areas to generate business rates income,’ he said.