SURREY County Council stands to swell its coffers by ‘more than £180 million’ should its request to be included in the Government’s new business rates retention scheme be accepted, The Herald understands.

Numerous Government cabinet ministers were moved to deny accusations that Number 10 struck a ‘sweetheart deal’ with Surrey last week after the Tory-run county council cancelled a divisive referendum on a proposed 15 per cent council tax hike at the 11th hour.

However, in a statement Local Government Secretary Sajid Javid did reveal Surrey has been in talks with the Government about taking part in a pilot scheme that would see local authorities in the county retain 100 per cent of business rates.

This corresponds with Surrey leader David Hodge’s budget statement last Tuesday, in which he told councillors: “The Government thinking is that a refreshed system based on business rates retention will be the cornerstone for a fairer funding system for local government. I agree.”

Surrey County Council currently takes just a 10 per cent share of the business rates collected, with district and borough councils taking 40 per cent and central government 50 per cent.

However, if accepted on the scheme, which will not run until 2018/19, Surrey would instead split business rates 50/50 with its district and borough counterparts - potentially increasing its share from a projected £45.9 million this financial year to around £230m.

A council spokesman cautioned that the final sum would likely incorporate some of the government grants Surrey currently receives, and would also be subject to tariffs and other means “to make sure all parties get the right amount”.

However, on face value it has the potential to more than eradicate the £32m budget shortfall Mr Hodge warned the council was facing this year, rising to £46m in 2019/20 as Surrey struggles with spiralling demand for adult social care.

It comes after the council leader dramatically scrapped plans to hold a referendum, as required by law, on a 14.99 per cent increase to the county council’s share of the council tax bill at last Tuesday’s council meeting, in favour of a more modest 4.99 per cent rise.

Explaining his decision, Mr Hodge told councillors he believed the Government now “understands” Surrey’s predicament and as such the council was prepared to “take a risk” by adopting the lower tax hike.

However, Mr Hodge’s motives faced intense scrutiny by political opponents both at County Hall and in Westminster in the days following the meeting, after the leak of three text messages Mr Hodge intended for a Department for Communities and Local Government (DCLG) official called ‘Nick’.

In the texts, Mr Hodge stated: “Nick, I am advised that DCLG officials and my director of finance/[chief executive] have been working on a solution and that you would be contacting me to agree [a memorandum of understanding].”

He added in a later message: “The numbers you indicated are the numbers I understand are acceptable for me to accept and call off the R [referendum]”, and finally, “[I] really want to kill this off”.

Ambushing the Prime Minister Theresa May with the texts at PMQs last Wednesday, Labour leader Jeremy Corbyn accused the Government of giving preferential treatment to a council in a Conservative party stronghold and called on Number 10 to publish its ‘memorandum of understanding’ with Surrey.

He added: “How much did the government offer Surrey to ‘kill this off’ and is the same sweetheart deal on offer to every council facing the social care crisis created by this.”

Responding in a statement, Local Government Secretary Mr Javid said Surrey County Council’s budget and council tax “is a matter for the council”, adding the Government “is not proposing extra funding to Surrey County Council that is not otherwise provided or offered to other councils generally”.

He also denied a ‘memorandum of understanding’ between the DCLG and Surrey, but did confirm the council had asked to take part in the pilot of a new business rates scheme, which he said other councils could also apply to take part.

Closer to home, Surrey’s independent group also penned an open letter to Mr Hodge this week asking for clarification on the content of the leaked texts.

Co-signatories, county councillors Eber Kington (Ewell) and Nikki Barton (Haslemere), said: “At the council budget meeting you stated that there was no plan agreed with the Government.

“However, the Government has since admitted you had asked to take part in the pilot of a new business rates scheme and has also stated that all conversations between the government and Surrey had been ‘entirely appropriate’.

“Given that you were in discussions and these were apparently ‘appropriate’ why did you refuse several times to confirm the details of your discussions with the DCLG when asked at the budget meeting?”

Responding, Mr Hodge wrote: “Dear Eber, you will no doubt have seen the statement released by the DCLG last week. This makes it clear that the Government is not proposing extra funding for Surrey County Council and there is no proposed [memorandum of understanding].

“They have indicated that [Surrey] could be a pilot on business rates retention in 2018/19 but I have no further details at present.”