Chancellor Sajid Javid slammed for axing rates deal worth £1.6m to Portsmouth

The special measure allowed cash-strapped councils to keep more of the money collected from local companies through business rates.

Portsmouth had been among the first in the UK to join the pilot back in 2018 before it was renewed this year. It was expected to be fully rolled out in 2020/21.

But instead Mr Javid abruptly ended the arrangement meaning the council will only be allowed to keep the standard amount of money raised through rates. The rest goes to the government.

Seething city leaders have said the move will ultimately cost Portsmouth £1.6m – money councillors insisted could have been spent on new facilities for children with special needs.

Stephen Morgan, Portsmouth South MP and shadow communities minister, said the scheme’s loss was a ‘demonstration of what little respect they have for the vital work conducted by our councils’.

The city Labour leader added: ‘Government should be judged on how it treats the next generation and how it looks after those in need. In both these regards it is failing the people of Portsmouth.’

Councillor Gerald Vernon-Jackson, Portsmouth City Council leader, claimed the deal was scrapped because ‘the government’s finances were in a mess’ amid all the chaos over Brexit.

He said: ‘I’m not quite sure what Portsmouth has done so wrong to this government for them to take this out on the city like this. It seems they’re taking money from Portsmouth every other day of the week.

‘What’s frustrating is this is money that could have been put towards a special school in the city. Now that money’s been taken away from us.’

The pilot was introduced to give councils more freedom to decide how they spend money. Cash generated from it was earmarked to head back into funding city developments like schools and leisure facilities.

It was hoped this would encourage councils to invest in their local economies to boost growth, so more business rates come in, helping them to protect council services.

However, support for the scheme waned, with the amount councils were able to keep dropping from almost 100 per cent in 2018-19 to 75 per cent in 2019-20. Now from 2020-21, it will only be able to keep 50 per cent of this growth.

Cllr Suzy Horton, Portsmouth’s education chief, said: ‘This is a real blow, as the extra money would have been extremely useful.

‘It's very disappointing that the rules have changed and more business rates will be kept by the government, instead of staying in the city for the benefit of local people.’

Since 2010, austerity measures have seen grants to local councils nationwide slashed by £10bn.