Higher land values could fund utilities, says water company

Increased land and property values should be used to fund infrastructure at major housing projects such as the Thames Gateway, the government has been told.

The rise in land value after infrastructure is promised could be harnessed to pay for the installation of utilities and other services, according to Anglian Water, one of the UK’s largest water companies.

In addition, council tax and business rates would rise as a result of the new infrastructure.

This increase could pay for the rest of the installation costs and the upkeep of the facilities, the company said.

The proposals aim to end deadlock between developers and utility firms on large projects.

Often, developers will not start work on a scheme until the infrastructure is in place and infrastructure firms are unwilling to commit until development begins.

Phil Butler, head of commercial consultancy at Anglian Water, said: “We’re trying to open up the debate and free up major projects, particularly on brownfield sites.”

He said about one-third of the budget on a large project is spent on infrastructure and, of that, one-quarter comes from rising land values and one-quarter from the revenue raised through tax increases.

We're trying to open up the debate and free up projects – especially brownfield ones

Phil Butler, Anglian Water

Taxes would be used to repay money, which could then be borrowed again, so a £1bn infrastructure project could be paid for with £70m of borrowing.

He estimated that, over the next 30 years, about £600bn of development would take place, requiring infrastructure costing between £250bn and £300bn.

Anglian Water has also proposed that councils be allowed to raise extra money for infrastructure facilities by issuing bonds, as happens in the USA.

There, the money is repaid by raising property taxes once infrastructure is installed.

Local authorities could also set up business improvement districts where taxes could be levied to raise money for infrastructure.

An ODPM spokesman said: “[Anglian’s proposal] is one of a number of ideas we are considering at the moment.”