Labour plan to give economic power to English cities

Labour leader Ed Miliband has promised to devolve £30bn of spending to the English regions to boost economic growth outside London.

He wants local authorities in major cities to band together to create regional economic "powerhouses" to rival the capital in creating jobs.

They would have more control over money for big projects currently run from Whitehall.

The Tories said Labour was "playing catch-up" with the government.

Mr Miliband is attempting to hit back at critics who claim Labour is anti-business and devoid of big ideas to sell to the electorate at next year's general election.

All the main parties agree that the English regions need an economic boost - and there is also broad agreement on what needs to be done to bring that about.

'Harnessing ideas'

But, Mr Miliband argues, only Labour recognises the true scale of the problem and has the will to do anything about it.

In a speech in Leeds, he insisted he did not want regional assemblies - Labour's last major attempt to devolve power in England, which was rejected by voters in the North-East in 2004.

Manchester is seen by Labour as a blueprint for other English cities

Instead, a Labour government would transfer powers to existing councils and encourage them to pool their resources to create "combined authorities" - like those which already exist in Greater Manchester.

This would give them the economic clout to close the "vast" differences in prosperity and growth that exist across England, argued the Labour leader.

He said: "The next Labour government will ensure city and country regions, like this powerhouse economy in Leeds, get control of business rates revenues. So that any extra money raised here thanks to the efforts of you and everyone in this great city can be invested here.

"I know the next Labour government cannot solve every problem by pulling levers in Whitehall. We can only do it by working with, harnessing the ideas, energy and the dynamism of great businesses, cities and county regions so you can help build and share in a more successful and prosperous Britain."

'Shared prosperity'

Mr Miliband has accepted most of the recommendations in a report by former Transport Secretary Lord Adonis on how to stimulate business innovation and tackle "chronic regional imbalances" in growth.

His main proposals include:

• Giving new combined authorities in cities and county regions control over how additional revenue from business rates is spent

• Giving businesses more say over how Local Enterprise Partnerships are run and their priorities

• Releasing up to £30bn in government funding for regional housing, transport and employment schemes

• Creating a new national funding framework for innovation policy

• Setting a target of 25% of all government contracts being awarded to small firms

• Establishing a new small business administration

• Creating a regional network of small business investment companies

• Expanding apprenticeships in science, technology and maths

Mr Miliband said job creation in the private sector has been too concentrated in London since 2010 and that he wants to see every part of Britain contribute to a new "era of shared prosperity".

But the Conservative Treasury Minister Nicky Morgan said Mr Miliband was "playing catch-up" with the coalition, which was boosting regional development through policies like City Deals, which hand control of budgets to local authorities for specific projects.

Lord Adonis was a minister under both Tony Blair and Gordon Brown

"The job is not yet done, there is much more to be done, but job creation is happening right across the United Kingdom and that is due, in part, to the City Deals that have been negotiated by this coalition government," she told the BBC News Channel.

Lord Adonis conceded that his proposals were similar to those set out in a recent speech by Chancellor George Osborne and a report last year on boosting growth by former Conservative Deputy Prime Minister Lord Hesesltine, entitled No Stone Unturned.

The Labour peer said he had spoken to Lord Heseltine when putting together his report and broadly agreed with his call for "more powerful cities" but although there was now a political consensus on the need for greater regional devolution only Labour would deliver it.

"Increasingly, I think, the question is who is going to act, rather than just make speeches," he told BBC Radio 4's Today programme.

'Revenue neutral'

For the past three years, the 10 councils in Greater Manchester have been co-ordinating their economic development, regeneration and transport functions to try and map out a long-term plan for sustainable, balanced economic growth.

As an incentive to try to encourage similar collaborations, Mr Miliband said new combined authorities established under a Labour government would be free to spend however they choose any extra revenue they generate from business rates as a result of their own efforts.

The plan is "revenue neutral" - it would not cost taxpayers anything - and any money gained from business rates would be offset by cuts to other grants.

Labour leader Ed Miliband outlined the plan in a speech in Leeds

But, Labour argues, it would hand more control over how money raised locally is spent in that area.

At the moment, business rates are collected locally but the money is handed to central government to be redistributed to councils in line with a Whitehall-set formula.

The coalition has allowed councils control of 50% of the revenue, but Lord Adonis said this does not go far enough.

He says local authorities have long outgrown their boundaries and they should have the power to push through big infrastructure projects such as Crossrail 2 in London or the transport improvements at Manchester's Piccadilly station.

In addition, the new authorities would be handed control of as much as £30bn of funding from different Whitehall departments, over the course of a Parliament.

The CBI said the Adonis report "identifies the right priorities for growth and job creation, and recognises that the benefits of the recovery must be shared across all regions of the UK".

"His report addresses many of the major challenges facing our economy, from skills shortages to strains on infrastructure," said its deputy director general Katja Hall.

"Size matters for local government, and more combined authorities would help create regional economic powerhouses to invest in research and development, support exporters and expand apprenticeships."