MPs call for local government bonds to fund regeneration
Published: 30 June, 2009
LONDON: Regeneration will stall for many years unless councils are allowed new ways to raise money to kick-start development, a new report claims today.
It calls on Government to introduce a new funding method based on the successful tax increment financing model used across the USA.
Without such intervention, the recession will severely damage regeneration prospects for years to come.
The report is the result of a Parliamentary inquiry by the All Party Urban Development Group, which received evidence from both public and private sector representatives.
Tax increment financing (TIF) is used in areas where the lack of infrastructure is holding back redevelopment. It allows councils to borrow money to provide the infrastructure and to pay it back from the increase in future business rates revenue that will come from the redeveloped area, effectively local government-backed bonds.
At the moment, business rates are paid directly to the Treasury. Legislation is needed to allow the extra rates income generated by TIF regeneration schemes to be ring-fenced and fed back to the local area. At the same time, public backing for TIF schemes is essential if the bonds are to be attractive to investors.
TIF schemes have been massively successful across the USA and are being mooted in the UK for a variety of high profile sites, including Battersea Power Station in south London.
Councils including Manchester, Birmingham, Edinburgh, Liverpool and Newcastle are also backing the proposals and provided evidence for today's report. The Homes and Communities Agency (HCA), the government's ‘super quango' responsible for £18bn in house building over three years, has also taken part, along with property giants such as Grosvenor, Land Securities and Westfield.
Inquiry evidence proves conclusively that both public and private sectors are willing to work more closely together to ensure that the nation's towns and cities continue to see regeneration.
In addition to TIF pilots the report calls for:
- local authorities to take on more risk in regeneration schemes;
- private developers to think more strategically in their future schemes; and
- greater use of public and private sector partnerships .
This report follows on from a letter sent by London Mayor Boris Johnson, Transport for London, Lambeth and Wandsworth councils to the government urging TIF pilots, specifically to fund the Northern Line extension proposed in the redevelopment of Battersea Power Station.