LABOUR will today promise radical tax powers to Southampton to allow it to “control its destiny” – but only if it joins forces with neighbouring councils.

Town halls would retain any increase in business rate revenues, instead of the money flowing to the Treasury for redistribution – a switch worth many hundreds of millions of pounds a year.

However, the devolution will only be offered to areas with “combined authorities”, which would mean Southampton agreeing to share responsibilities with nearby councils.

So far only England’s biggest metropolitan areas have taken the step, with no combined authorities among smaller cities or rural areas.

In addition, under Labour’s plans, £30 billion of spending – three times the sum planned by the Coalition – will be devolved to local political and business leaders across England, over five years.

And local enterprise partnerships (LEPs) will enjoy extra powers over housing, business support, back-to-work schemes and skills, as well as existing plans for transport.

Explaining the plans to the Daily Echo at Westminster, Lord Adonis, the architect of the “growth review”, said: “Areas can take control of their destinies in a way that’s much harder at present.”

And, vowing to accept the blueprint, Ed Miliband said: “The next Labour Government will ensure city and county regions get control of business rates revenue.

“I know the next Labour Government cannot solve every problem by pulling levers in Whitehall.”

The eye-catching tax plan will expand the limited retention of business rates introduced by the Coalition last year, to cover all – rather than 50 per cent – of any increase in investment.

Lord Adonis said: “Giving local economic, business and political leaders a strong incentive to attract businesses into their areas must be a positive step forward.

“But you need credible political and economic institutions. With these kind of incentives, I think we will see a lot of combined authorities established quite rapidly.

“This would be a bottom-up development – not the centre imposing new institutions.”

Lord Adonis also raised the prospect of a single elected mayor for such areas, saying: “That will be a very big issue once these combined authorities have generated real clout.”

The blueprint could also see Hampshire’s two LEPs – the Solent and Enterprise M3 – required to merge, because there are “clearly too many”.

The package comes one week before the LEPs learn their allocations from the £2bn of mainly transport spending to be devolved by the Coalition, in 2015-16.

The organisations were required to put in detailed bids, but Lord Adonis said his plan was for funds to be devolved “as of right”, without pitching area against area.