Cambs behind move to ease council cash-for-infrastructure pressure
THE Government may have closed the door on councils’ current account spending but it has opened a new window on funding capital projects, particularly in growth areas such as Huntingdonshire.
THE Government may have closed the door on councils’ current account spending but, thanks in great measure to Cambridgeshire Horizons’ chief executive, it has opened a new window on funding capital projects, particularly in growth areas such as Huntingdonshire.
Although it is not yet clear how Tax Increment Funding (TIF), announced by Deputy Prime Minister Nick Clegg at the Lib-Dem conference will work, it is expected to be something like this: if a medium-sized capital scheme costing, say, �25million would bring additional business rates to a defined area, the local authority will now be allowed to borrow the cash to fund it.
Then over the next perhaps 20 years it will use additional revenue generated from rates paid by new or expanded businesses to pay off the debt.
It is probably the first time since business rates started being collected for HM Treasury instead of local councils in 1990 that a way has been found to localise an element of business rates.
Although he says he was ‘only one’ of those who has been pressing Whitehall to introduce such a scheme, Horizons’ top official Alex Plant was enthused by the idea on a visit to Portland, Oregon, a few years ago. The city funded its new transport system through a form of TIF.
The former Treasury high-flier told The Hunts Post: “I’ve been arguing for three or four years with anyone who would listen that we should have this tool to allow us to have the infrastructure in advance of growth.
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“If we get it right, it’s a virtuous circle – but it’s not a panacea for all infrastructure purposes. Nonetheless, it’s a firm statement of intent, which is brilliant news. And it’s not a bad thing that the Treasury needs to give approval for individual schemes, provided there’s a sensible degree of oversight and a little bit of leeway.”
Mr Plant envisages that borrowing could be through local infrastructure bonds, though the detail is yet to be worked out.
Horizons, the not-for-profit company set up by Cambridgeshire’s six principal councils to deliver growth infrastructure, has been looking for new funding vehicles since it became clear that the national deficit would impact severely on traditional funding.
What sort of projects could qualify? “If you build a bridge, almost certainly you will see business rates increase on either side of it. But there might be a whole lot of other things happening that you couldn’t necessarily attribute to the bridge, so there needs to be flexibility.”
The economic benefits of the A14 improvements accrue too broadly, but the new station planned for Chesterton, north of Cambridge, could be a prime candidate.
“I’m hoping we can get one or two schemes in the county up and running quite quickly,” Mr Plant said.