BUSINESSES in South Lakeland, Furness and north Lancashire could face higher rates bills in the future to help fund local economic development initiatives.

Firms at present pay a national rate of 41.6p in the pound for the rateable value of their business, with rises pegged to no more than the rate of inflation.

The government is considering allowing local authorities to introduce a supplementary rate, with the cash generated ring-fenced for locally agreed projects.

In return for the extra fund-raising powers, councils would be expected to forge closer links with local businesses and take greater account of their views.

Under the proposals, contained in a government green paper, local authorities could introduce an additional tax of up five per cent of the national business rate.

Councils could phase the tax in at one per cent a year, over a five year period.

The paper states the initiative would "promote continuous improvement in service delivery, as councils will be better able to take account of the needs of their ratepayers.

The supplementary rate will also encourage partnership, as councils and businesses work together on the projects funded by it."

Cumbria County Council corporate finance director Bob Mather said the supplementary business rate formed only part of the government's plans for local authority funding reform.

"It will allow some extra flexibility for local authorities and local businesses to work closely together to raise extra funding for mutually beneficial projects.

But, of course, there would be an extra cost to businesses," he said.

Local authorities already have a statutory duty to consult business ratepayers on their budget plans but in practice few firms take up the offer, partly because their cash goes into a national 'pot' before being allocated to individual councils.

The idea of higher rates bills has failed to win much support from local business leaders.

Lancaster Chamber of Commerce warned the proposals could cost businesses in England an extra £2.75 billion in the next five years.

The chamber said while local authorities would have to agree with their business communities how the money was spent, the obligation to do so followed only after the tax had been imposed.

Chamber chief executive Adrian Wilkinson said: "We support the government's wish to see local authorities and their business communities working together because we believe local communities gain.

However, increasing the tax burden on business will help no-one.

"At present the government's proposals put the cart before the horse, by giving local authorities the power to impose an additional levy without first agreeing with business the purpose for which it will be used.

"Unless businesses have the right to refuse a local rate where they do not think it adds value, these proposals will be seen for what they are - yet another new tax on business."

Kendal Partnership has ruled out the idea of a local business rate - at least for the time being.

Town centre manager Maria Appleton said: "Our businesses pay such high rates already that it was felt to be unviable."

It could be some time before legislation made it possible, she added.

Kendal and South Lakeland Chamber of Commerce members were due to consider the issue at a council meeting yesterday (Thursday).