Businesses warm to Osborne’s HS2 and TIF pledges

BUSINESS leaders in the West Midlands have broadly welcomed the £80bn savings packages introduced by Chancellor George Osborne as part of the Comprehensive Spending Review.

Most said the cuts, especially the resulting loss of almost 500,000 public sector jobs, would be tough but were necessary if the region’s economy was to recovery.

In among the many cutbacks there was some good news for the region. The Chancellor confirmed the extension of the Midland Metro in Birmingham and reaffirmed the decision by the previous labour Government to complete the £600m redevelopment of New Street Station.

Confusion surrounded the anticipated fate of the HS2 high speed rail link. Mr Osborne omitted any mention of the project in his hour-long speech but a Treasury press release issued afterwards confirmed that support for the project had been agreed.

The Chancellor also pledged that the £1bn Regional Growth Fund, set up to help areas most likely to suffer from the cutbacks, would be extended by a year and its funding increased by £400m.

Mr Osborne said he was also freeing up the administrative burden on local authorities, allowing them greater flexibility on budgets and decision making. However, he countered this by saying he expected them to make cuts of 7.1%.

Spending review at-a-glance: click here

He also confirmed the Treasury would introduce a new way for towns and cities to fund major capital projects in the future. Tax Incremental Finance (TIF) – through which the Government lends to councils against the promise of increased revenue from future business – would go ahead, despite initial opposition from the Treasury.

Birmingham Chamber of Commerce Group welcomed these moves. The chamber has been calling for the TIF schemes to be introduced because of the boost they would provide the new Local Enterprise Partnerships.

Local authorities will look to link up with private investment to create schemes that use TIFs to leverage major funds from government.

Katie Teasdale, policy advisor to the BCCG, said: “The CSR has confirmed the government’s commitment to expanding the freedoms and flexibilities on budgets and decision making of local authorities.

“Most importantly, this will include Tax Increment Financing (TIF) for which the BCCG has been campaigning for some time because they will allow proper long-term infrastructure investment and the accompanying increase in business and employment.

“We welcome the Chancellor’s commitment to making a further £0.5bn available for the Regional Growth Fund in its third year- which provides some certainty for businesses and local authorities who would bid into it.”

However, she warned the amount of funding available to support enterprise through the Department for Business would fall dramatically and the review had made it clear that LEPs would operate in a very different financial environment to Regional Development Agencies such as Advantage West Midlands.
 
She said businesses would also have been disappointed not to have heard anymore about Regional Growth Hubs.

“We urge the government to provide greater clarity about this area of policy in the near future as part of the anticipated sub-regional economic White Paper. It’s key we avoid limbo at this point in the recovery cycle,” she added.