Tax Increment Finance

Tax Increment Finance is a method of borrowing funds to pay for infrastructure, on the basis that additional housing requiring that infrastructure will increase tax revenues.

Although this system is widely used in America, it has not been tried yet in the UK, in part because the US has a wider range of local tax instruments, such as property tax, whereas the UK system is more centralised. However, Nick Clegg's announcement seems to suggest that local areas will now have the opportunity to implement TIF, providing a vital new means of delivering vital infrastructure to support growth.

In June 2009 Cambridgeshire County Council, Cambridge City Council and Cambridgeshire Horizons jointly submitted a bid to Communities and Local Government in response to an invitation for pilot schemes in the Budget.

Following on from this, at the Liberal Democrat conference in September 2010 the Deputy Prime Minister Nick Clegg announced that councils will be allowed to implement Tax Increment Financing.