YORK and Selby councils have had their hopes dashed of increasing budgets by millions of pounds through the localisation of business rates.

Coun James Alexander, leader of City of York Council, said they had hoped that the Government’s plans to localise business rates would mean the council would keep rates collected from businesses in York, making them £45 million better off.

However, it still hoped to receive more money than it did currently after the Government announced new plans to reward councils with a percentage of new business rates growth.

Under the current system, business rates are paid to central Government and redistributed by way of allocating local authorities a formula grant, equalising income from richer authorities across more deprived areas.

But Coun Alexander, speaking from the Local Government conference in Birmingham yesterday, said Deputy Prime Minister Nick Clegg’s announcement meant the council would receive about 80 per cent of business rates from new businesses that set up in York or relocate to the city.

“Hopefully it will mean a little bit more. It all depends on the economic growth. I would be keen for the localisation of business rates to be used for things to create value to the local economy - things for businesses as well as local residents, such as the transport infrastructure and looking at our bus services,” he said.

Coun Steve Shaw-Wright, Labour for Selby District Council, said the new plan was a blow to Selby.“At a time of economic decline, it’s like saying you can have a free ice cream, but we’ve run out.”

He said the localisation of business rates would have made a £20 million difference to Selby.