At the Scottish Futures Trust's Annual Conference this week, John Swinney, the Scottish Government's Cabinet Secretary for Finance, announced that the Scottish Government has granted provisional approval to the first Tax Incremental Financing (TIF) pilot scheme in the UK; the City of Edinburgh Council's regeneration of Edinburgh Waterfront.
TIF is a mechanism that allows a local authority to utilise future increases in tax revenues (such as increases in Business Rates) to finance current improvements that are expected to generate those increased revenues. Effectively it enables a local authority to raise finance for a development against the increase in taxes that that commercial development will produce.
This announcement follows a similar announcement from HM Treasury last week that Local Authorities in England will also be granted new borrowing powers to enable the use of TIF schemes to fund regeneration projects.
In addition to the regeneration of Edinburgh Waterfront, two other pathfinder projects have already been identified with an indication that the Scottish Government is also looking to proceed with further three pathfinder projects bringing the total number of six pathfinder projects.
Although new to the UK, TIF itself is not a new concept. It has been used successfully in the United States for some time and John Swinney's announcement will be a welcome one - TIF schemes could well represent a significant new tool in plugging the funding gap left by UK Government's public sector spending review.