Top-up transport tax?

A think tank close to the Government said a 'supplementary business rate' could provide significant funds for major transport improvements in the city.

The left-leaning Institute for Public Policy Research calculated how much money would be raised if Sheffield businesses were asked to cough up an extra 10 per cent in business rates – taking the tax from the current 40p-in-the pound to 44p-in the pound.

It claims the top-up tax would also raise 15.9 million each year to be ploughed into bus and train services and road improvements. It would also help underpin a 30-year-loan of 230 million – enough to help bankroll a major new scheme.

Ministers are currently considering the possibility of introducing a supplementary business rate and more details will be published later this year.

But business leaders have demanded the extra tax should only be introduced after a referendum of local companies, warning it could harm competitiveness.

David Frost, director general of the British Chambers of Commerce, said: "There must be a business vote and the money raised needs to be hypothecated towards major transport schemes."

The report admits a four pence hike may be "unrealistic" and that a two pence increase "may be more achievable in the short term", which would raise an extra 8.1 million a year and help lever in a 30-year loan to the city of 120 million.

Supplementary Business Rates were supported by Sir Michael Lyons in his report into local government earlier this year and they have also been backed by the House of Commons Communities and Local Government Committee.

A Treasury spokesperson said: "A Supplementary Business Rate offers real potential to support authorities, businesses and their wider communities by creating additional funding to support economic development."