Councils receiving more money from economic growth should be giving more of it to local businesses, according to a small business pressure group.

Government figures suggest that a new scheme has enabled 250 local authorities in England to increase their fund base by more £105 million in 2005-06. The figure is expected to increase to almost £1 billion by 2007-08.

The Local Authority Business Growth Incentives (LABGI) allow local authorities to keep a percentage of any increase in the annual rental value of council properties (rateable value), thus providing them with an incentive to grow.

The Federation of Small Businesses (FSB) is urging local authorities to spend the new money in supporting the development of local business, reports News on Business.

Roger Culcheth, local government spokesman for the FSB, said because LABGI funding is largely derived from the success of local businesses it should be reinvested in them.

"We therefore call on local authorities to ring fence this grant money to support the success of businesses in their area. Diverting this money to other council services will send the wrong message to local businesses," he told them.

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