Croydon Council will be allowed to keep 50 per cent of all town-centre business rates under a new Government deal to drive regeneration of the borough.

Whitehall has also handed the council a £7m grant as part of the devolution deal to create a Croydon "growth zone", hoped to be worth £5.25bn to the local economy.

The cash will go towards a £350m programme of infrastructure projects "vital" the anticipated growth in the borough, Croydon Council said.

Greg Clark, secretary for local government and communities, announced the deal yesterday, exactly a year after Chancellor George Osborne first promised the £7m funding boost.

Croydon Council first asked for devolved powers over business rates in 2014.

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It hopes the growth zone project, which includes the £1 billion redevelopment of the Whitgift shopping centre by Westfield and Hammerson, will lead to the creation of 23,500 new jobs and 8,000 homes in the borough.

Welcoming yesterday's announcement, council leader Tony Newman expressed his oft-repeated mantra that support for regeneration projects would help "transform Croydon into a modern European city".

He said: “Croydon is changing. This vital backing from central government shows the importance of Croydon to London and the south east, and supports this administration's plans to transform our borough.

“Giving us the power to keep some of our business rates and £7m of grant funding will help us fund a multi-million pound infrastructure programme, which is essential to supporting the regeneration and growth of the borough."

Cllr Newman has been a vocal critic of the council's Government funding deal, which will see grants for the authority slashed by £44.7m by 2020 - from £132m in 2015/2016 to £87.3m in 2019/2020.

In October the Labour leader warned that Government plans to devolve full control over business rates to councils to plug funding gaps could leave the council "hopping around on one leg with our hands tied behind our back". 

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The £350m infrastructure programme, being delivered jointly by the council and the Mayor of London’s office, is said to be made up of 39 key projects, including transport, schools and community infrastructure, regeneration and public realm improvements, and support for small businesses.

Sir Edward Lister, deputy London mayor for planning and policy, said he was "delighted to hear" of the latest funding boost, adding: "It is important that retail and social hubs are welcoming, attractive and reflect the upsurge in confidence in the town.

"This programme is just one of a number of projects that we are working on as we regenerate Croydon to make it a major driver of our economy.”

Some may see the decision to give Croydon Council powers over some of its business rates as a trial run for the planned handover to councils of full control over tax receipts by 2020.

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Mr Clark, the Local government secretary said: “We’re devolving powers from Whitehall to Town Halls across the country, putting power directly in the hands of communities to shape the future development of their area.

"I look forward to seeing for myself how this important investment can make a real difference to Croydon and the lives of local residents.”

John Burton of the Croydon Partnership, which represents the joint interests of Westfield and Hammerson, described the funding announcement as a "vote of confidence" in Croydon.

He said: “The backing will help deliver the much needed infrastructure which is required for the £5.25bn regeneration projects planned for the town centre.”

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