Commission calls for TIF powers for London
Thu 23rd May 2013, 4:50 pm
A heavyweight commission appointed by London mayor Boris Johnson has called on the government to loosen regulations around tax increment financing to boost regeneration in London.
A report by the London Finance Commission said that structural problems with infrastructure finance must be addressed to cope with predicted growth, as existing funding models for basic infrastructure such as schools and housing are inadequate, complicated and protracted.
It said that both the mayor and London’s councils, rather than Whitehall, should determine which TIF schemes to progress with.
Commission chairman Tony Travers said: “As the city population grows to nine million and then 10 million people by 2030, there will need to be massive investment in enabling infrastructure simply to accommodate these new residents and, indeed, commuters.
"Beyond this investment to keep pace with the population, the commission is convinced that London would be better able to prioritise decisions about investment.
“If London had enhanced fiscal capacity to back such investment, there could be an enhanced level of capital spending which would, in turn, produce additional growth and tax yield.
"London government could then re-invest higher tax revenues in more infrastructure; a virtuous circle would be created.”
The commission also recommended that property taxes – including business rates, stamp duty, land tax and capital gains property disposal tax – should be devolved to London authorities.
It said: “The yields of these taxes should be offset through corresponding reductions in grant to ensure a fiscally neutral position for the Exchequer, at the outset."
The commission also said that London government should be able to introduce new, smaller taxes to promote economic development or other aims, and that the mayor should work with boroughs and groups of boroughs to create ‘city deal’-type initiatives..
Borrowing limits for housing should also be relaxed or removed, it said, as long as prudential borrowing rules still applied.
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