By David Scott in Edinburgh
6 October 2010
Councils in Scotland are to pioneer Tax Increment Financing to fund infrastructure schemes aimed at encouraging economic development.
Edinburgh and Aberdeen city councils have agreed to use the system, which allows local authorities to borrow for projects associated with commercial developments and pay the money back from the additional tax revenues raised from businesses.
Deputy Prime Minister Nick Clegg announced at the Liberal Democrat conference on September 21 that the government would bring in Tif powers to allow councils in England to borrow against future gains in business rate income.
The Scottish Futures Trust, a body set up by the Scottish Government to investigate innovative funding schemes, has already developed Tif for use in Scotland and is working with councils to set up pilot projects.
The Edinburgh scheme involves an £84m waterfront development, including a new cruise liner terminal, lock gates, esplanade and link roads. It is thought to be the most advanced project and the city council believes it will be the first local authority in the UK to use Tif, which originated in the US. Finance Secretary John Swinney has provisionally approved the scheme.
He said: ‘Westminster cuts to the Scottish budget have emphasised the importance of finding new funding models to deliver crucial infrastructure projects, such as the Edinburgh waterfront, that can unlock further economic development, whilst ensuring maximum value for the public purse.’
City council leader Jenny Dawe said Edinburgh had produced a clear and compelling business case for the use of Tif to help transform its waterfront into a more attractive area for living, working and leisure.
She added: ‘Our aim is to kick-start growth, which will protect and create jobs now, rather than waiting until the economy recovers.’
Aberdeen has drawn up plans to use Tif to finance a £200m development scheme.
The original proposal was for a commercial development in the city centre gardens but councillors plan to expand it to pay for new link routes, the extension of an art gallery and the redevelopment of a car park.
A timetable for the scheme was discussed at a city council meeting on October 6.
City officials said its business case would ensure there would be no revenue or capital implications for the council or any financial risk arising from the project.
