Innovative Finance

Innovative Finance – a possible approach

In the wake of the most dramatic cuts to local government finance in a generation, public services are facing increasingly complex demands with fewer funds to tackle them. Incremental improvements to services will not be enough.

If we are to overcome these challenges, we need to rethink how we function, including considering a range of non-traditional mechanisms to raise additional funds for development through “innovative” projects.

The role of Key Cities

The Key Cities Group does not attempt to replicate work undertaken by the LGA in lobbying for greater freedoms (through Rewiring Public Services and the recent Autumn Statement Submission), although the group will be keen to consider and support those elements which would be most beneficial to Key Cities.

The innovative finance priority will primarily respond to the priority on the Future of City Centres with practical proposals. However, it is felt that it should be possible to examine whether there are broader benefits from sharing best practice across the Key Cities Group.

Key Cities proposals

Key Cities recognise the importance of investment to promote growth, regeneration and economic development which will in turn enable us to maximise the future funding opportunities through the new government funding arrangements. The new funding arrangements for councils are predominantly based on business property growth and new housing development.

Options include:

  • Considering what forms of innovative finance, including but also beyond ‘Tax Increment Financing’, could result from the localisation of business rates.
  • Drawing on the Council’s Financial covenant and borrowing strength.
  • Utilising land holdings as part of a potential joint venture with investors.
  • Considering multi-use of assets to attract mixed funding schemes.
  • Partnership with other Councils.
  • Testing the more innovate approaches within local growth deals.

Whilst there are benefits of growth, cities are also conscious of the need to manage the financial pressures arising from the growth, such as waste management.

Some areas where we could attempt to mitigate these are:

  • Developing innovative waste technology solutions to cope with rising waste volumes.
  • Looking at more imaginative use of Section 106 and Community Infrastructure Levies with wider rules.
  • Considering whether cost burdens should primarily be borne by those generating the pressure in a way that permits growth, but shares the burden more equitably.