Bradford could suffer disproportionately to the south of England with changes to the way business rates are allocated, the council has warned.

Under plans announced by Communities Secretary Eric Pickles, a former Bradford Council leader, councils will be able to keep any business rates it collects from new businesses to spend on services instead of handing cash to the Treasury for redistribution from a central pot.

But Bradford Council leader Ian Greenwood fears Government changes could mean London and the South East would benefit given the scope for new business growth, whereas Bradford and the North will be hit.

He said: “The real issue is the ongoing business rates which will benefit the south as there will inevitably be more growth there.

“We are extremely worried that equalisation will not be beneficial to the North as the South has considerably more potential for growth. We really need to study the detail of this as it could mean we are £100,000 down.”

Communities Secretary and former Bradford Council leader Eric Pickles said his ‘local government resource review’ would end councils’ “dependence on Government handouts and finally start rewarding economic growth”.

Under the current system of the way business rates are collected and distributed, Bradford received £237.4 million in 2010-11, despite collecting just £130.4 million.

The tax applies to business premises and is collected by local authorities before being submitted to central government where it is redistributed to ensure less affluent areas do not miss out.

Mr Pickles said the shake-up will not touch existing allocations but a new baseline created to ensure councils do not miss out, but rates from new businesses will then be retained by the individual councils.

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