Council funding reforms must give real incentives for local growth

19 Jul 2011

Commenting on new local government financing proposals to allow the local retention of business rates by councils and to let them borrow against future rate income, Liz Peace, chief executive of the British Property Federation, said:

“The property industry strongly supports Government plans to allow local authorities to retain a share of the growth in business rates in their area. This should give councils a greater incentive to promote local business growth.  Indeed, developers see it as one of the most positive steps that Government could take to back sustainable development.

“However it will only work if the system gives local authorities long-term certainty about the additional income they will receive. If those who achieve growth see their rewards watered down too much as a result of Government caution then this could end up as nothing more than a damp squib.

The BPF also welcomed Government’s commitment to introduce Tax Increment Finance, but repeated its call for the policy to be introduced as a matter of urgency rather than through the Local Government Resource Review, which will not come into effect for several years.

“Government could get TIF underway much more rapidly than the current target date of 2013. It is perhaps inevitable that the benefits of local retention generally will take many years to percolate through, but if the Government wants to see growth happening it should  grasp the nettle and authorise TIF schemes to get underway now – not in two years’ time.

“To make TIF work we believe Government should ensure that the business rate growth in TIF areas could be used to service debt and would not be reduced by any clawback associated with broader local rate retention. 

“Without such an approach both developers and the banks are likely to be wary of becoming involved in TIF schemes.”