Wealthy councils could be allowed to keep business rates raised in their areas and become independent of central government funding, under plans being drawn up by ministers.
Up to one-third of local authorities could become "free councils" within five years under the plans which, according to one report, are close to being agreed by the Conservative and Liberal Democrat leaderships.
"The idea is that they have a real incentive for the first time to encourage business in their locality," an anonymous minister was quoted in The Guardian as saying.
Authorities signing up to the scheme may have to contribute some funds to be redistributed to poorer areas. Currently, revenue from business rates is sent to central government by local authorities, then redistributed across the country.