IRRV Alert - week ending 29th May 2009

News

Reports

Regeneration funds scheme proposed

 

 

 

Four of Britain’s biggest city councils - Newcastle, Liverpool, Manchester and Birmingham - have called on the government to introduce a new scheme that would let them raise billions of pounds for regeneration schemes on the back of future tax revenue.  This type of scheme was pioneered in the US where it is known as "tax increment financing" or TIF.

The British Property Federation, an industry group, is leading the calls for a new TIF scheme as the only way to finance crucial infrastructure projects in the current financial markets.

Under the plans, local authorities would be able to issue bonds that could be paid back using the increased tax base that – it is assumed – would be the direct result of improved infrastructure.  The issue could be complicated, however, by the fact that at present many taxes go directly to Whitehall coffers rather than those of the councils, which would have to pay income on the bonds.

TIF can also be controversial because it involves complex decisions about calibrating the impact of specific regeneration schemes.

However, Richard Leese, leader of Manchester city council, said the government had to explore ways for cities to raise the money to pay for redevelopment projects. "Mechanisms such as tax increment financing have proved to be successful in many other cities around the world," he said.

John Shipley, leader of Newcastle city council, said the group of cities was "pushing government to agree this" because it was crucial to unlock regeneration schemes.

It is understood that the Homes and Communities Agency is taking the proposals seriously.

"No one expects councils to conjure up money they don’t have, which is why our proposals look at making the best of what we’ve got through a number of innovations," said Ken Dytor, chairman of the BPF’s regeneration committee.

The proposal is one of several regeneration measures to be put forward on Wednesday by the BPF, whose Regeneration Manifesto sets out five measures to get Britain building. The BPF wants to see better use made of public building schemes such as school building. Developers want the public sector to be more innovative in how they spend cash and also in how they use their land.

The manifesto is also backed by the government ‘super agency’ the Homes and Communities Agency which has an £18bn budget to rebuild Britain. Major retailers like Tesco and John Lewis have also come out in support.

The five suggestions in the report are:

• Pay for infrastructure by using the American TIF model
• Expand equity sharing – encouraging councils donate land to make development viable
• Use funding for school and hospital building to lever in more investment
• Reform EU red tape which means councils waste time and money ticking boxes to appear ‘democratic’ when selecting a developer
• Encourage a professional rented housing sector


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