Government's Lyons Inquiry says local business levies could fund big infrastructure projects such as Crossrail

Large-scale infrastructure projects such as Crossrail could receive extra funding from local businesses, under the terms of a new government report.

The Lyons Inquiry says that supplementary business rates could be levied by local government to fund transport schemes in Britain’s major cities.

The report by Sir Michael Lyons is the conclusion of his inquiry into the future, function and funding of local government.

Since the national business rate system was introduced in 1990, the percentage of local government revenue from business rates has fallen from 29% to 20%, according to the report.

Rather than increasing business rates, Lyons recommends introducing a power for local authorities to levy a supplement on the national business rate within their area: “A supplement would provide local authorities with a more limited flexibility to raise revenues for new investment, but it would also have a more limited impact on businesses,” he said.

The report found that a 4p supplement in London, borrowed over a ten year period, could raise up to £3.3bn, with the same levy in Manchester raising £622m. It said that such revenue could be of vital assistance to infrastructure schemes such as the £10bn Crossrail line.

Mayor of London Ken Livingstone said: “Sir Michael's statement is an extremely positive step towards securing funding for Crossrail, which is a vital part of the capital’s overall economic strategy. I look forward to further substantive discussions with the government and business on Crossrail's funding.’

Local government should also be the main beneficiary of planning gain supplements if they are introduced, says the report.

He said: “It is imperative that a transparent and predictable link between local development and local resourcing exists if development is to take place.”

The Lyons Inquiry also recommended dropping business relief on empty property, which was taken up by the Chancellor in yesterday’s Budget.