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Industry welcomes financial freedom for local authorities

The property industry has welcomed the launch of radical new borrowing powers aimed at funding local investment and economic growth.

The powers, announced by deputy prime minister Nick Clegg at the Liberal Democrat Autumn conference in Liverpool today, will pave the way for councils to use Tax Increment Financing (TIF) – a method of forwarding funding infrastructure seen as vital to unlocking new development.

Today’s announcement came after more than three years of lobbying, led by industry groups including the British Property Federation (BPF).

TIF funding allows local authorities to borrow against the predicted growth in their locally raised business rates. They can use that borrowing to fund key infrastructure and other capital projects, which will support locally driven economic development.

More information on how TIF will operate will be set out alongside next month’s Spending Review.

BPF chief executive Liz Peace said: “We are delighted that government has taken such a far-sighted step to ensure that new infrastructure - which will be vital to rebuild the UK economy - can be delivered, even at a time when public funding is scarce.

“Ministers should be congratulated for offering industry what would appear to be absolutely brilliant news, although obviously the devil will be in the detail.

“A huge amount of work and expertise has gone into lobbying for TIFs, over a campaign lasting many years. We look forward to working further with government to ensure that the emerging TIF regime is workable and effective.”

For more information contact Patrick Clift, Media and Public Affairs Manager, at pclift@bpf.org.uk, or on 07834 439 505.

See below for Treasury announcement

 
20 September 2010
More financial freedom for local authorities
The Deputy Prime Minister announced today that Local Authorities in England will be granted new borrowing powers aimed at driving local investment and economic growth.
These new borrowing powers, known as Tax Increment Financing (TIF), will allow Local Authorities to borrow against predicted growth in their locally raised business rates. They can use that borrowing to fund key infrastructure and other capital projects, which will support locally driven economic development and growth.
TIF will operate within a carefully designed framework of rules, which the Government will work closely with Local Authorities to design. More information on how TIF will operate will be set out alongside the Spending Review.  
Notes for editors
1.Under existing legislation, Local Authorities can borrow against their overall revenue stream. This does not include business rates. TIF will enable them to borrow against future additional uplift within their business rates base. Local authorities will need to manage the costs and risk of this borrowing alongside wider borrowing under the prudential code
2. Introducing TIF will require legislation. More information on how TIF will operate, and on the timeline for introducing legislation will be set out in the Government’s White Paper on sub-national growth, around the time of the Spending Review.
3. TIF has long been employed in other countries, including the United States.
4. The Government has already announced several measures aimed at driving economic growth, including a £1bn regional growth fund and Local Enterprise Partnerships. In this respect TIF will form part of a wider package of measures to support economic growth at a local authority level.    
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