DCLG has published what is probably one of the most significant consultation papers in many years. Today we had our first sight of the proposals for business rate retention, including how Tax Increment Financing fits into the picture.
The consultation runs until 24 October - just as well since, during August, we are to expect 8 technical papers giving more detail on the components of the proposal.
There is no proposal to change the setting of the rate nor the revaluation process - so this is all about the ability of local authorities to retain rates, and how they should utilise them. The paper recognises the important role local authorities can and should play in promoting economic growth and retaining business rates is an added incentive.
The starting point baseline (from April 2013) will be funding at current levels - so no losers at the start. After that, a significant proportion of growth in rates will be retained, but revenues could fall if rates decline. Rate revenues from renewable energy projects are treated more favourably and are to be retained in full.
TIF will play a part - but it may be no more than part of the familiar prudential borrowing code. At this level, central Government would play no part in TIF (indeed we would hardly need a special name for the borrowing), but authorities would need to judge the level of anticipated revenues as they do currently. A second (and possibly additional) option is set out however and this would put the Government into a postion of exerting more control - but the trade off could be an guarantee of revenues in the TIF scheme. Now that the Government has the taste of national competitions, (as in the Enterprise Zone bidding round), there must be at least a fair chance that this would be the way forward for these "super TIF" schemes - but still leaving authorities able to use TIF (standard but with more risk) as part of prudential borrowing.
Authorities would be encouraged to pool rates and decision making about spending the revenues (including borrowing) - and the LEP would be the logical "home" for pooling decisions to be facilitated.
All great stuff - will it work? That must be the big question. New Homes Bonus did not seem to get many of us excited about the power of that incentive - let us all hope that busines rate retention will be quite a different story.