The Need For TIF Legislation

Introduction

TIF has been the great hope of the regeneration industry for almost as long as people can remember. Under Labour, expressions of interest were invited, only for progress to stall after 84 local authorities had submitted 124 bids. Birmingham, Leeds, London (for the Northern Line Extension) and Sheffield submitted the largest pilot proposals. The total funding sought ran to £2.33bn, with the highest bid being for £400m and the lowest for £750000.

Once the Coalition came into power, the prospects for TIF at first looked bleak until Nick Clegg's announcement of 20 September 2010 at the Liberal Democrat Party Conference, "[And] I can announce today that we will be giving local authorities the freedom to borrow against those extra business rates to help pay for additional new developments."

Nick Clegg's announcement was followed in October's Comprehensive Spending Review with statements to the effect that, "New Powers to implement Tax Increment Financing will also be detailed in the coming white paper on local regional growth" (Para 1.81 at page 33) and "Further detail on Tax Increment Financing and the future incentives and planning powers open to local authorities to support growth will be provided in a White Paper on local growth later this year"(Para 2.39 at page 50).

The Local Growth White Paper expanded on the CSR stating, at paras 3.38 - 3.41,"3.39 We will introduce new borrowing powers to enable authorities to carry out Tax Increment Financing. This will require legislation. In determining the affordability of borrowing for capital purposes, local authorities take account of their current income streams and forecast future income. Currently, this does not factor in the full benefit of growth in local business rates income. TIF will enable them to borrow against future additional uplift within their business rates base. Councils can use that borrowing to fund key infrastructure and other capital projects, which will further support locally driven economic development and growth. They will need to manage the costs and risk of this borrowing alongside wider borrowing under the prudential code.

"3.40... We anticipate that TIF would, at least initially, be introduced under a bid-based process. Lessons from an initial set of projects will inform future use of the power."

It is understood that HM Treasury, while warming to the idea of TIF notwithstanding its effect on the balance sheet as a form of Government borrowing, is more focussed on the wider issues of the Local Government Resource Review, which will provide the opportunity to look at TIF and also to bring about the repatriation of business rate receipts to local authorities, which for many is a bigger prize. Both HM Treasury and CLG believe legislation is required.

Meanwhile in Scotland

While English Ministers were simply talking about TIF, on 5 November 2010, the Scottish Government published its Tax Incremental Finance Administration Pilot Scheme document and shortly afterwards approved the first scheme in Leith where £84m will be borrowed under a TIF. The document describes how the Scottish Government will allow up to six TIF pilots and the basis on which they will proceed. In the Scottish scheme local authorities take the risk of any...