The BPF has said that proposals to financially reward councils that adopt a more proactive approach to generating economic growth could help solve some of the UK’s employment and economic problems, but warned that infrastructure goals could be missed unless TIF plans are sped up.
Responding to the Local Government Resource Review, the BPF stressed the changes would give local authorities an incentive to promote economic growth, as they would receive a direct financial benefit from doing so.
The Resource Review proposes to allow local authorities to keep a proportion of the income generated by growth in business rates, rather than the Treasury collecting all business rates income and redistributing it. The consultation also proposed to introduce TIF, which would allow local authorities to borrow against anticipated future gains in business rates.
Figures show that the UK economy is not growing and that unemployment is at a 17 year high. "It's absolutely vital local authorities adopt a more pro-growth approach," said Liz Peace, chief executive of the British Property Federation.
“Allowing them to keep a substantial amount of the business rate revenue arising from new development will finally see local authorities benefit from new business rather than watching it go straight into central government coffers," said Peace. "Local authorities could then use the extra money to help fund projects that would otherwise be out of reach, such as a town centre improvement scheme, or could pass on benefits to council tax payers."
“Local retention of business rates is a key part of the jigsaw about incentivising development," said Richard Ford, a planning law expert at Pinsent Masons, the law firm behind Out-Law.com "The cap on windfall receipts ought to be a generous one for it to have most effect. The position of LEPs [Local Enterprise Partnerships] as bodies who could potentially redistribute windfall amounts above the threshold also needs further clarity. Authorities which have smaller LEPs potentially have most to gain as any redistribution would be across a tighter geographical area.”
The BPF's response to the consultation criticised what it said were the Government’s slow actions on TIF. The Government committed itself to introduce TIF a year ago but has included these plans along with the overarching business rates review, slowing the implementation of TIF.
The Institute of Civil Engineers estimates that £200 billion needs to be invested in the UK’s infrastructure over the next five years and the BPF has said that TIF could help meet this challenge as it allows the ring-fencing of anticipated future business rates to provide the upfront infrastructure investment needed to kick-start a development.
“It is disappointing that at a time when economic growth is the country’s number one objective, the Government cannot rapidly take forward an initiative like TIF, which commands near universal backing and is already up and running in Scotland,” Peace said.
