George Osborne’s major announcement on business rates – pledging localisation of business rates by 2020 – is not an original Tory government idea. Neither is it a Labour opposition idea – we only promised to give back the proceeds of growth.

It is a big Labour local government idea that Labour in Westminster should not equivocate on.

For years many Labour councils have been arguing the case for decentralisation of taxation. It is not just about the money, although connecting money raised to the areas raised helps. Control over rates mean a much greater link between businesses and taxation locally and more flexibility for local government to innovate. This is fundamental for councils to show leadership and to effectively champion growth and jobs.

Calls have been growing louder for years: the real question is why it has not happened sooner. The uniform business rate was ostensibly introduced in 1990 to give businesses a greater sense of certainty for larger businesses with operations spanning several authorities. Not knowing the multipliers each property paid was seen as burdensome to business. Today technology means that excuse is no longer a reasonable justification.

In reality uniform business rates were introduced by the Conservatives to muzzle local government autonomy – by and large a view accepted later by the Labour party centrally, if for slightly different reasons.

The system the UBR created is deeply unsatisfactory for growth – under the central-grant system councils of all hues pay less attention to local economic growth – as the proceeds go straight to the Treasury rather than to them. At worst it allowed many councils to withdraw from active approaches to economic development or support for the labour market. For many others this meant growth was not seen as ‘core business.’

It is time to end this three decade long consensus and go even further.

If implemented correctly – and it is a big ‘if’ – relocalising rates could create a much more dynamic understanding between democratically elected councils, enterprise and growth and transform local economies.

Labour councils should lead this and shape the new agenda. Of the 20 biggest rate-collectors 14 are Labour-run or -led. These councils and many others are already crucibles of innovation with inward investment agencies, apprenticeship brokering, new digital infrastructure, modern business spaces and more.

Jeremy Corbyn and John McDonnell should see this as the start of a much wider discussion about the decentralisation of power in England. Already the Greater Manchester councils have called for a further £6bn in further devolution to help expand the Metrolink network, create jobs and take over skills. They also want to decentralise council tax, stamp duty and air passenger duty from Whitehall.

Other English cities and regions are making their case or joining together to press the case for powers they need. In London a settlement between boroughs – each equivalent to a middle-sized city outside of the capital – the mayor, and Whitehall is being pursued looking at skills and welfare. London should have a visitor levy and use the proceeds to promote London for tourists and establish global trade shows to open international markets for our businesses to grow more wealth.

This is not to say that the rates proposal is not without difficulties or hard choices and there will inevitably be a Tory and a Labour way of doing this.

Clearly for the new system to function it will have to develop a new redistribution mechanism from richer councils to councils in poorer areas with lower rateable values. This remains unsaid by the government, but fairness and practicability of the new regime dictate this and is something all Labour councils should agree with. It also needs a capital investment model for infrastructure where it is needed.

Yes, there are legitimate fears that control over local business rates will create a Dutch auction between authorities (or business leverage) to provide lower rates to firms seemingly at the expense of funding for public services. Maybe it will: business rates represent a big fixed cost to some businesses and lower rates would no doubt be attractive to some. However, moving or locating is a big thing and firms also make decisions using a range of other factors: like transport links, travel to work, clustering of similar or supply-chain businesses, broadband, housing and supply of talent.

It is certainly problematic that business rate rules will still be controlled by the Treasury and national (Conservative) policy, and this could have an impact on revenues if there are future changes (such as broad or complex exemption rules and changes to planning, like office-to-residential changes which erodes the base).

There is a danger, as rates grow and are collected and the central grant is finally eliminated (the aim by 2020), that local authorities will be given more powers without the full Whitehall funding necessary to deliver them – adding further pressures to budgets cut for a decade. But give us the tools, we will do the job: council leaderships are more aware of this than anyone. But they also demand further flexibility to work collectively together, shake things up and solve common problems faced by our communities however hard these problems initially appear.

Although it will be challenging to the dominant austerity narrative, over the next five years it is inevitable that Labour will have had to evolve its economic and spending case to the British people. Local budgets being used on the ground to supercharge growth, skills and jobs is fundamental to explaining Labour’s purpose.

The leadership in Westminster should not just dismiss this as a Tory plot to ‘localise the pain’ of tough spending decisions – although many difficult discussions are to be had – but the start of a wider discussion about English local government we should have been having long ago.

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Theo Blackwell is cabinet member for finance and technology policy at Camden council, the highest Labour-run business rate-collecting authority in the country. He is also a member of the Progress strategy board and tweets @camdentheo

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Photo: Russell Davies