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Infrastructure grants bring TIF one step closer

The government has set out plans to see if funding new infrastructure in high growth areas levies an increase in business rate receipts.

 
The £120m capital funding pot will look to unlock growth in business rate revenues in high growth areas.

A pot of £120m has been earmarked for Accelerated Development Zones (ADZs) which could eventually allow local authorities to capture increases in business rate revenues through the much talked-up Tax Infrastructure Financing (TIF) route, which has been used in the USA for decades.

The BPF understands that a relatively small number of bids will be taken forward to trial. The pilots will work via capital grants from the £120m pot going to schemes which show the best chance of success. While there will be no minimum requirements for private funding, we would expect those schemes with some solid funding streams partly in place to be prioritised.

The criteria for selection is still being worked up but will be unlikely to fall in areas that do not already have a positive growth outlook.

Liz Peace, chief executive of the BPF, said:

“This is a welcome move given that lobbying for TIFs has been at the top of our agenda for some time now. But we would question what difference £120m will make and the length of time it will now take for TIFs to actually come forward. TIFs are widely used across the USA and now Scotland is introducing three of its own, defying the government’s claim that this requires primary legislation. Clearly we need action rather endless assessment if we want to usher in new investment and many will question why Scotland can TIFs and the rest of the UK cannot. Obviously the whole point of TIF is to unlock otherwise unviable schemes, so it is essential any trials examine this fundamental premise.”

TIFS/ADZ: para 4.66
The Government will support investment in infrastructure in our cities and other
centres of growth through an Accelerated Development Zone (ADZ) pilot programme. The
pilot schemes will be introduced in locations across England in 2011-12. Combined
authorities, as they are agreed, and selected local authorities, will receive capital grant
funding to a total of £120 million to help support projects that deliver key infrastructure and
commercial development to unlock growth. The Government will assess the impact of the
investment on business rates growth within the defined ADZ area to further understand the
case for introducing Tax Increment Financing.

Reforming the regional tier: para 4.64
To better align investment in growth at the regional level, this Budget announces an
enhanced role for Regional Ministers to promote growth and inclusion and champion
public service reform. To support this new role, the Regional Funding Allocation process will
be aligned with the Spending Review cycle, and Regional Ministers will recommend flexing
funding to meet regional priorities as they emerge. A regional growth fund will be
established by the Regional Development Agences (RDAs) within their capital budgets for
2011-12, to promote high-value investment in support of regional and national growth and
industrial policy. To simplify the regional tier, the Government will also act to co-locate the
RDAs, Homes and Communities Agency and Government Offices, saving £255 million from
2012-13.

For more information and all PR and media queries, please contact Andrew Teacher, Head of Media, on 020 7802 0113 or ateacher@bpf.org.uk.