The construction industry has probably been hit harder than any other by the credit crunch and the ensuing recession. And there seems to be no end to it, for any recovery in private sector contracts is likely to be offset by reduced work from the public sector. The cancellation of Building Schools for the Future projects is no doubt just the start. In advance of the spending review announcement due on October the 20th, we ask if the UK government is offering any schemes or incentives to give a life-line to the industry.
One of the latest incentives to be announced, by Deputy Prime Minister Nick Clegg at the recent Liberal Democrat conference, is Tax Increment Financing (TIF). This, he said, will "breathe life back into our greatest cities".
Tax Increment Financing from across the pond...
Under TIF, councils will be allowed to borrow money to fund new developments. This money will then be repaid from the additional business rate receipts that will result when the developments are complete. The main aim of the scheme is to provide up-front funding for regeneration schemes that will not be able to get underway without it.
TIF has been running for a considerable number of years in the US and there have been many attempts to persuade the Treasury to agree to its use here. The previous Labour government did consider the scheme and even launched a £120 million pilot programme. However, this never got to the stage of actually spending any money and was put in doubt when Labour lost the election. There is some relief, therefore, that TIF is now likely to go ahead and hope that it will enable some major regeneration schemes to get started. Among these are Birmingham's £82 million Eastside area, the £250 million Aire Valley scheme in Leeds, and the £600 million Northern tube line extension in London.
New Homes Bonus receives mixed reviews...
Another scheme that has been around for a while is the proposed New Homes Bonus that is intended to encourage local councils to build more houses. The proposal is that councils will be able to keep for a period of six years the council tax income for all homes that they build rather than handing it directly to the government. This is reckoned to be worth £8,500, on average over the six years, for each band D home. The intention is, apparently, to backdate the payments to building schemes that start before legislation comes into effect.
Full details of the scheme are due to be published with the Comprehensive Spending Review. However, former Housing Minister John Healey has alleged that the Communities Department does not know how to implement the scheme. This claim was quickly refuted by the current Housing Minister, Grant Shapps, who said there was no truth in the statement.
Relaxing of planing law for rural communities...
In a further move to encourage house building, the government is proposing that local people in rural communities are able to avoid the need for planning permission. But this does not appear to be that straightforward since it only applies for so-called 'affordable' housing and requires a local referendum to be held, which will need to be supported by 80-90% of the community. How practical this is to achieve and whether it will actually save any time when compared to going through the planning process will only be proved if it eventually gets off the ground. There are also concerns that building houses without planning permission may result in un-coordinated development and adverse effects on local transport. Regardless, additional building in rural areas will not offset the damage done by the
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