Portsmouth, Southampton, and the Isle of Wight will have more control of their own financial futures, with all three councils being allowed to keep 100% of business rates collected in their areas as part of a national trial.
If the local economy grows and more business rates come in, the councils will be able use the extra money to offset recent spending cuts, and invest in areas such as transport, housing, and flood defences.
Sajid Javid, Secretary of State for Communities and Local Government, announced that the three Solent councils will be part of the year-long trial, alongside nine other areas in the country.
Areas involved in the trial will keep 100% of their business rates — the money companies pay instead of council tax. At the moment, local areas keep only half, with the rest of the money going to central government.
In return for the extra funding from business rates, the councils will each give up an equivalent amount of funding received annually from central government. But they will keep all growth in business rates.
These changes give councils greater control of their own finances by having the opportunity to generate more income through growing their local economy. This could help reduce the impact of reductions in government funding to local councils.
The government has pledged that no council will be worse off through these arrangements. But there is the potential for areas to be better off as they can keep any extra money generated through business growth.
Business rates across Portsmouth, Southampton, and the Isle of Wight are currently worth £220 million per year. The amount businesses pay will continue to be set nationally by central government.
Councillor Donna Jones, Leader of Portsmouth City Council, said: “This is fantastic news for residents and businesses in the Solent area, including the Isle of Wight. The announcement by the Secretary of State to include the Solent area in the trial is testament to our unique and growing economic area. It was a very strong joint bid.
“The government have given assurances that no area will be worse off under the new scheme, but in fact better off, as we will keep 100% of the business rate growth.
“Across the Isle of Wight and the two cities we have some brilliant business explosion programmes and now local people will directly benefit from more of the money being paid being kept in the local area.
“The extra money could be used to invest in local services and major infrastructure projects such as roads and public transport.”
The trial will initially last for a year, starting in April 2018.