Chancellor George Osborne’s commitment to introducing Tax Incremental Financing as part of the Comprehensive Spending Review has raised interesting questions over the shape of the regime in the UK., says Andrew Yates, commercial real estate partner at Berwin Leighton Paisner.
We need an understanding of exactly what type of Tax Incremental Financing (TIF) regime we are going to see in the UK.
TIF could certainly have a key part to play in the promised shift in power from central to local government, but the main issue is just how much flexibility local authorities will have and how wide their “universal power of competence” will be.
The property industry wants to see some TIF projects being brought forward as soon as possible. The Comprehensive Spending Review provides a great opportunity but we will have to see whether the promised White Paper will bring in the changes needed for TIF potential to be fulfilled.
Will this be local authority led or will it allow for developer led solutions where the developer secures private sector finance on the back of a commitment by a local authority to refund future business rates generated by a successful scheme?
Some TIF variants could remove virtually all risk from the public sector while allowing the private sector to plug the viability gaps caused by prohibitive infrastructure costs. There are a number of “oven ready” schemes around the country where developers and local authorities are waiting to press ahead once TIF finance can be confirmed. This seems to be a great opportunity for private sector funding to take forward new initiatives for the public sector without creating a new tax burden.