In recent years, many local transport projects – Metrolink, New Street Station, Leeds Supertram – have become watch-words for protracted funding battles between central and local government. The process is invariably the same. With councils unable to fund the capital costs of schemes themselves, they march cap-in-hand to Whitehall, where their priorities rarely receive more than a sympathetic hearing from Ministers.

Now, however, the political consensus has shifted in favour of greater financial devolution – and there’s a window of opportunity for new revenue-raising powers to support capital investment in our cities and towns. The Comprehensive Spending Review has just set out a new White Paper on Supplementary Business Rates (SBRs), signalling the Government’s intention to enable cities and city-regions to invest in key economic development projects.

As the Crossrail financial settlement shows, hypothecated SBRs can fund substantial new investment in local transport. A small top-up on the business rate, committed over the medium-to-long term, could erase the funding gaps faced by many big-city schemes. In turn, smart transport investments would help local businesses to grow – creating a ‘virtuous circle’ within the local economy.

So SBRs could play an important role in financing local growth in Britain’s cities. Now, with central government on board, it’s time to finalise the detailed arrangements, and for cities and business leaders to sit down and decide whether to use the new powers to invest in transport infrastructure.

The SBR debate is usually portrayed as a fundamental disagreement between business and local government. But surprisingly, councils and business leaders agree on many of the principles. All agree that there is a need for greater financial devolution, stronger local decision-making, and better business-council relationships. And they also agree that ring-fenced, time-limited SBRs – with appropriate reliefs and exemptions for small businesses – could generate new resources for transport investment in England’s major cities.

Many business groups have argued that SBRs would be impossible without a business vote. But ‘business’ is not monolithic. Some local business leaders have stated that they are less concerned about a formal vote than about clear ring-fencing, joint working with councils, and an on-going role in monitoring how SBR funds are used.

The Centre for Cities has found a spectrum of views within the business community – both nationally and locally – as part of its research on SBR. In some English cities and towns, the need for to improve local transport infrastructure is so great that business leaders prefer an SBR, even without a vote, to a missed investment opportunity. But in areas where business-council relationships are weaker, a vote is seen as a necessary check on local authority spending.

The arguments around a business vote have been finely balanced. But Ministers made the right choice in the CSR when they resisted demands for an automatic business vote on all schemes. By limiting a business vote to schemes where SBR would pay more than 1/3 the total cost, the Government has provided an important safeguard while simultaneously giving local authorities important new investment powers.

As they finalise arrangements for SBR, we’d like Ministers to draw up flexible legislation that allows cities and towns to tailor SBR to address key local infrastructure needs. Three key principles should be considered:

• A permissive national framework. Whitehall has acknowledged that it cannot set prescriptive, top-down legislative conditions for SBRs. Government’s job is to set basic standards, and allow exact rates and other details to be negotiated in town halls. The national framework should require SBR proposals to be clear, time-limited, and ring-fenced. Councils should be required to protect SBR ratepayers from cost overruns, create appropriate governance arrangements, and address the particular circumstances of small businesses in their areas.

• An emergency brake. Additionally, Government should set clear minimum standards for engagement between councils and businesses affected by an SBR. If a local authority imposed an SBR without adequate local consultation, businesses would have the right to bring legal action against the council – though not without considering the political and financial implications of doing so.

• The option to hold a business vote. The Government has accepted our argument that a business vote is not needed on most SBR proposals. But some local authorities may favour a vote on SBR proposals of any size – and should be allowed to hold one if they wish to do so.

Unlike Business Improvement Districts, which are small and often business-led, SBR is a tax. And in the UK tax system, no affected party holds an automatic, direct vote. A permissive national framework – as set out in the Government’s new White Paper – is the best way to build on the emerging consensus between business and local authorities on SBRs.

Supplementary Business Rates are the first step in a wider process of greater financial devolution to local authorities. More radical change will depend on SBR’s success – so it’s crucial to get the policy right in the coming weeks. Future investment in local transport depends on it.