London's local authorities have devised a plan to keep more income from business rates to reinvest in the capital.

The Mayor of London was challenged to create a scheme, approved by all of London's boroughs, on the retention and spending of business rates under former Prime Minister David Cameron.

If agreed by the government, the new scheme will see London retain more of the estimated £8 billion in business rates from as early as April 2018.

Sadiq Khan and the elected mayors and leaders of all London boroughs and the City of London corporation agreed in principal to the proposal, which would mean that additional commercial property tax would stay in the capital.

London would not, however, be able to retain any additional revenue generated by the 2017 reevaluation, which saw rates for many businesses in the capital increase disproportionately compared with elsewhere in the country.

The devolution would bring London in line with many other global cities, resulting in more autonomy while lowering central government grants.

Currently £2 billion leaves London every year to fund local government elsewhere in the UK, while £4.3 billion stays in London and £1.7billion is paid back to London by the government through specific grants.

However, even if approved by the government, the agreement will still see London contribute £2 billion to fund local services elewhere.

Sadiq Khan, the Mayor of London, said in a statement on Thursday (October 12): "Today's agreement highlights how London boroughs of different political colours, in both inner and outer London, can join forces to act in the best interests of the whole city.

"We will now have more control to spend more money on the things that matter most to Londoners, including social care, affordable housing, infrastructure investment and support for businesses.

"This is an important step in devolving more control over the use of the capital's tax revenues to London government.

"But it is only a first step as the Government will still retain control of business rates tax policy, revaluations and the business rates appeals system.

"What we really need is for the Government to agree to full devolution of business rates to London, combined with genuine protection for business, so that we, like the devolved administrations of Scotland, Wales and Northern Ireland, can act in the interests of Londoners and their businesses."

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