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What we do

Tax increment financing

After two years of intensive lobbying by the BPF alongside the Core Cities Group and others, the government finally announced in autumn 2010 that tax increment financing will be introduced in England. Since then, TIF has unfortunately got rather swallowed up by in the government’s broader plans for local government finance reform – the government aims to introduce both from April 2013.

TIF has been a popular form of regeneration funding in the United States for decades, and the Scottish Executive has already approved Scotland’s first scheme and is considering a number of others. We are very pleased that the UK government has seen the light as well.

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What's the issue

In the UK context, TIF can offer a solution for regeneration projects which depend on the delivery of a piece of infrastructure for which funding cannot be found from other, public or private, sources. TIF allows more upfront money to be raised by committing incremental business rates – i.e. revenues which would not have arisen but for the project going ahead – to be used to repay that initial investment. It isn’t going to help every worthwhile project, but it will allow some stalled schemes to go ahead. These might range from the very large (like Battersea in London, which requires a new extension to the Northern Line to go ahead), to much more modest projects all over the country.

Despite our urging that TIF is a growth policy that should be implemented as a matter of urgency, the government focused on the rate retention mechanism on which it relies and opted to wrap it into the reform of local government finance – which is all about greater local retention of business rates. TIF formed part of the summer 2011 Local Government Resource Review consultation with a more detailed technical paper promised towards the end of 2011.

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Why is it important

TIF is particularly important in the current austerity climate, because public funds for capital investment have dried up, and private sector uncertainty about the strength of the occupier market and wider economy mean that the developer contributions available (for example through section 106), are also much more modest than they were a few years ago. We would therefore like to see the impetus for jobs and investment that TIF could deliver sooner rather than later.

The other key issue is flexibility. There is a broad range of schemes which TIF could unlock, and different schemes will almost certainly need different solutions – as regards the allocation of risk (between central government, local government and the private sector), the source of upfront funding (from the Public Works Loan Board, the debt markets or a developer’s existing resources), and other aspects. It is vital that the way TIF is implemented does not limit what is possible in a way that prevents the use of TIF for schemes where it would make sense – and the sooner the government sets out its developing thinking in some detail, the better.

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What we're doing about it

In London, we were part of the Core Group formed by the last government in 2009 to explore the scope for UK TIF, bringing together officials from the Department for Communities and Local Government and the Treasury, the Core Cities Group and ourselves. We have been at the heart of discussions with the coalition government following the 2010 announcement that UK TIF would be taken forward, and worked alongside the Local Government Association, the British Chambers of Commerce, London First and the Core Cities to help shape the approach to TIF.

We also provide secretariat services to the All Party Parliamentary Urban Development Group, which produced a report – Regeneration and the recession - which called on the government to introduce TIF pilots as soon as possible. Further details about the group's activities are available on its website. We have also developed relationships with Transport for London and the Mayor’s Office, given their interest in the Battersea project.

Through the Scottish Property Federation, we have promoted TIF with the Scottish government, building strong links with the Scottish Futures Trust.

Throughout, we consult regularly with those of our members who have been working on TIF and the scope for TIF to unlock infrastructure investment and stalled regeneration schemes. We often speak about TIF at seminars, conferences and other events, whether aimed at business or local government, to help people understand both the exciting opportunities of TIF and its limitations.

TIF contacts