WORCESTER has been promised a £597,000 windfall under Government plans to encourage new businesses to set up in the city.

Council chiefs will be allowed to keep the cash raised from extra business rates as a reward for attracting firms to rundown areas.

At present, all business rates are automatically handed to central government, which redistributes some of the money to town halls under a set formula.

The shake-up is expected to hand Worcester City Council £597,000 over three years, based on past growth figures, with no constraints on how the money is spent.

Business groups and developers have long argued that the existing system has held back regeneration in less prosperous areas.

Simon Geraghty, deputy leader of Worcester City Council, said that while any moves to give the authority more control over business rates was welcomed, the worry was that the money would be taken from other sources of funding.

"I'm wary the Government is giving with one hand and taking away with the other," said Councillor Geraghty.

"For example, it could reduce funding from other sources, so there is no net benefit. The question is, how are they going to redistribute funding - the pot's only so big. The devil's in the detail, but we look forward to having a closer look at it."

Christopher Harvey, of the Chamber of Commerce, Herefordshire and Worcestershire, said the move would give Worcester a welcome boost, but agreed it was necessary to see the detail.

"It is vital that this is additional money, and is not offset against any changes in any other part of the council's budget," he said.

Public consultation on the plan will end in October, with the changes expected to take effect in April 2005.