Time for TIF

Giving local communities they tools they need to thrive is something which many of us have championed for a number of years. In my previous column, I discussed the benefits which enterprise zones can bring to areas of the country needing regeneration.

Similarly, I have also touched upon the merits of a new system for business rates, which will offer localities a financial incentive to encourage economic growth in their area. This approach is something which the think tank Localis championed at its report launch last month.

However, local authorities also need a mechanism to allow them to fund substantial infrastructure projects – key to regeneration, jobs and moving the economy forward.

No doubt PFI (public finance initiative) immediately comes to mind when considering a mechanism for this.  However, PFI has become heavily discredited due to the mismanagement of it by the previous Labour government.

A campaign to urge PFI creditors to offer governmental bodies a rebate is under way and is backed by many MPs, including myself.

This is why we need an alternative which local communities can use to leverage funding to create new infrastructure. This is where TIF – tax increment financing – comes in.

TIF essentially allows public bodies to deliver a large scale project and then use the additional business rates collected resulting from that project to pay off the original debt which was incurred.

This may not sound exciting. Indeed, the deputy prime minister himself said last year that “this may not make the pulses race”.  However many, including the DPM, the mayor of London and Treasury, are now strong supporters of TIF, with Boris Johnson describing it as a “beautiful idea”.

TIF is not a new idea. Indeed it has been used in the United States for around 40 years, with Chicago being prevalent in its use.

TIF is now also used in Scotland, with the Scottish Government recently approving an £84m redevelopment of Leith Docks by Edinburgh City Council.

Lessons from the US suggest that TIF schemes can be successful if they are properly managed and designed in such a way that the taxpayer can keep some of the financial benefits of a project, in order to offset the additional expenses resulting from them.

TIF is being considered for use as part of the government’s review of local government finance, which is likely to report in July. However, given the backing from The Treasury, local authorities and organisations such as Core Cities and the British Property Federation, you should expect to see TIF in use sooner rather than later.

PFI was poorly utilised by the previous government and it is now time to bring in TIF, a readymade replacement. This will create jobs and investment in areas of the country, such as the Black Country, which need it most.