A taxing time for our cities,
A taxing time for our cities, ,
By Chris Murray, Director, Core Cities Group
There's nothing as certain as death and taxes, so the saying goes. Well, we're facing one of those rare situations where the creative use of one (taxes that is) might help us to avoid the other. Not complete demise exactly, but a backsliding, through a failure to take the opportunity that is in front of us.
The eight Core Cities have achieved fantastic gains through regeneration, literally being reborn, redefined. With their city regions, these places now produce more wealth than London and contain a third of England's population; they make our economy viable.
But there is another certainty in dealing with any sticky situation: if we fail to prepare, we prepare to fail. Have our great cities got the tools they need to lay new economic foundations and put the building blocks of recovery in place?
Essentially, the opportunity is one of decentralisation; of increased local control over areas like skills and employment, business support, innovation, but also for the financial freedoms that many cities abroad enjoy, the lack of which constricts our competitiveness.
So back to taxes. Top of my list for financial freedoms would be Tax Increment Financing, a way of paying for big, transformational projects by borrowing against future increases in tax growth, from business and other sources. The model reaches a hand into the future, to bring back some of the dividend of growth into the present. This is not about additional taxation, just the ability to use existing tax systems more creatively, to build infrastructure, transform urban areas, deliver new housing and last but not least, create jobs.
This approach has been used widely in the US for decades, delivering massive schemes like Millennium Park in Chicago, and completely turning around once ailing cities like Pittsburgh. It is an idea whose time has come, there is an inevitability about it, and it could help to pave the way for recovery.
We have developed a UK version of this model with PricewaterhouseCoopers, ‘Accelerated Development Zones’, that we believe will work well for our needs in our cities. Early work shows increases in jobs, business and homes of 50-80% beyond what would otherwise be achieved.
But there are objections. It is a difficult time, it is borrowing, are local authorities up to the task?
It is the right time: we must begin to prepare now for medium and long term recovery. Big infrastructure schemes will not appear overnight and if we wait for recovery to begin, the moment will have been missed.
It is borrowing: but not to prop up failure or with an uncertain outcome. It is specific to schemes that will deliver growth and create revenue to pay it back.
Some Core Cities authorities are multi-billion pound organisations the size of FTSE 100 companies, used to calculating risk and delivering on a massive scale. Some are discussing setting up banks, providing lending, filling the gap a discredited financial sector has left. There is no question that they are up to the task; if you can’t do business with these places, who can you do it with?
Like many others I used to think tax was a dull subject, but now I’m passionate about it. Its not just interesting, its essential to the future success of our cities and, to put it bluntly, if our cities fail, so will we all.