Councils will be able to borrow to invest, says Clegg

20 Sep 10
Councils in England are to be given new borrowing powers to finance growth in towns and cities, Deputy Prime Minister Nick Clegg announced today
By David Williams in Liverpool

20 September 2010

Councils in England are to be given new borrowing powers to finance growth in towns and cities, Deputy Prime Minister Nick Clegg announced today.

In his address to the Liberal Democrat conference, Clegg said the government would introduce Tax Increment Financing powers, which will allow local authorities to invest in infrastructure and capital projects. Councils would borrow against the increase in business rate revenues expected as a result of the projects. More details will be set out in the  sub-national growth white paper, due to be published next month.

‘Labour rattled on about decentralisation, but they held the purse strings tight,’ the LibDem leader said.

‘We are different; we are liberal – because we will put local government back in charge of the money it raises and spends.’

Clegg acknowledged that the announcement on Tax Increment Financing, ‘may not make the pulses race’ but added: ‘I assure you it is the first step to breathing life back into our greatest cities.

‘Our leaders in Sheffield say it could allow the redevelopment of derelict mines in the Don Valley; our leaders in Newcastle believe this could help them create a new science park; in Leeds they argue the Aire Valley could be transformed… What matters most is that finally, they will be in the driving seat, instead of waiting for a handout from Whitehall.’

Responding to the announcement, Local Government Association chair Baroness Margaret Eaton said: 'It is good news the government has listened to the calls from local government for the power to turn local tax revenue into investment that will keep our roads free from potholes, fund better public transport and make sure schools and community centres do not crumble.  
'This is a recognition that local investment creates economic growth, and it recreates long-abolished incentives for councils to invest in projects to promote local jobs and businesses.'

On the issue of next month’s Comprehensive Spending Review, Clegg said it would not be ‘an ideological attack on the state’.

‘As [former chief secretary to the Treasury] Liam Byrne said in that infamous letter: there isn’t any money left.

‘It’s not smaller government I believe in. It’s a different kind of government: a liberating government. The government will transform the state, reversing generations of centralisation.’

He also echoed remarks on tax avoidance made to the conference yesterday by Chief Secretary to the Treasury Danny Alexander, saying those who dodge their tax bills were ’just as bad’ as benefit cheats.

‘We will prosecute five times as many tax cases as Labour ever did,’ Clegg said.

The Association of Revenue and Customs union, which represents senior tax officials, gave a cautious welcome to the LibDems' emphasis on tax evasion.

ARC president Graham Black said: 'It is good to see the government picking up the ARC campaign message about closing the tax gap as a way of defeating the deficit. But this needs to be additionalinvestment and not just government spin.

The ARC last month called for greater investment in revenue collection and a crackdown on tax avoidance.

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