Scotland's tax incremental financing (TIF) projects took a step forward in March.  John Swinney, the Cabinet Secretary for Finance, granted provisional approval to North Lanarkshire Council to use TIF for phase two of the Ravenscraig regeneration project.  The £73 million investment could unlock £425 million of private investment.  Edinburgh City Council's pathfinder TIF project has also been formally agreed with Ministers. 

The Treasury announcment that Local Authorities in England are to be granted powers to use TIF schemes to fund regeneration projects is likely to raise interest in these projects across the UK.

The TIF mechanism allows local authorities to utilise future increases in tax revenues (such as increases in non-domestic rates) to finance improvements  to infrastructure, which should stimulate planned regeneration development within a defined boundary.  The mechanism enables local authorities to raise finance for a development against the incremental increase in taxes that commercial development will produce. 

As well as the Edinburgh and Ravenscraig Projects, Scottish Futures Trust has indicated that one other pathfinder project is being undertaken by Glasgow City Council; a further three pathfinder projects could go ahead. 

In order to utilise TIF, a local authority must be able to demonstrate that the scheme will unlock regeneration and that the enabling infrastructure cannot be delivered in any other way.  If, therefore, the infrastructure could be delivered by means of private finance or an alternative source of funding, TIF may not be suitable.

Although TIF is not a silver bullet, it does provide local authorities a new tool with which to plug the funding gap that many are now facing in the wake of the coalition's public sector spending review.

Back to Search