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Property industry welcomes changes to local government financing, but warns of infrastructure missed opportunity

The British Property Federation (BPF) has said that proposals to financially reward councils that adopt a more proactive approach to generating economic growth could help cure the UK’s employment and economic woes, but warned infrastructure goals could be missed unless tax increment financing (TIF) plans are sped up.

Responding to the Local Government Resource Review consultation into proposals that would see local authorities keep a proportion of their business rate rather than having it siphoned off by Treasury, the BPF stressed the changes would give local authorities a strong incentive to promote economic growth as, crucially, they would  receive a direct financial benefit from doing so.

Liz Peace, chief executive of the British Property Federation, said: “With figures showing a flat lining of the UK economy and unemployment figures at a 17 year high, it’s absolutely vital local authorities adopt a more pro-growth approach.

“Allowing them to keep a substantial amount of the business rate revenue arising from new development will finally see local authorities benefit from new business rather than watching it go straight into central government coffers.

“Local authorities could then use the extra money to help fund projects that would otherwise be out of reach, such as a town centre improvement scheme, or could pass on benefits to council tax payers.”

However, the BPF expressed concern that government is dragging its feet on implementing TIF. It is now a year since the government committed itself to introducing TIF but, quite unnecessarily, TIF is caught up in the government’s wider plans to reform business rates. Many in the industry feel that the government seems to have lost sight of TIF’s potential to stimulate growth by funding the infrastructure needed to unlock stalled regeneration projects up and down the country.

The Institute of Civil Engineers estimates that £200bn needs to be invested in the UK’s infrastructure over the next five years. TIF could help meet this challenge as it allows the ring-fencing of anticipated future business rates to provide the upfront infrastructure investment needed to kick-start a development.

Peace added: “The consultation offers two options for TIF but the first option cannot be properly described as TIF at all. It simply describes the use of prudential borrowing powers in a local rate retention environment, which we do not consider to be TIF at all, and will not achieve what TIF could achieve. The government needs to make it clear that it will be supporting the second option, which would enable a ‘proper’ TIF scheme to be introduced. This is what bodies representing the development sector, business and local authorities have been consistently pressing for.

“It is disappointing that at a time when economic growth is the country’s number one objective, the government cannot rapidly take forward an initiative like TIF, which commands near universal backing and is already up and running in Scotland.”

ENDs

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

Paul Sweeney, Media Officer, on 07841 732 194 or at psweeney@bpf.org.uk

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