Budget deal will see city region recoup up to £30m per year from national tax take
Greater Manchester has set out the details of the innovative finance mechanism agreed with Treasury which will see the city region invest £1.2bn upfront in infrastructure and claw back up to £30m per year from the national tax pot.
The ‘earn back’ mechanism, confirmed in last week’s Budget, is based on the tax increment financing model, which enables the ten councils that comprise Greater Manchester to borrow against future business rates revenues to raise finance to invest in infrastructure across the city region.
This will be supplemented by a levy on the local authorities, which will bring the total investment pot to £1.2bn.
The councils said this investment could attract further private sector investment to create a “short-term” economic impact in excess of £2bn by 2016, the councils said. Over the long term, the investment fund is estimated to produce economic impacts of £1bn per annum by 2025.
Investment will be prioritised on the basis of net GVA impacts across the city region, with a pipeline of projects to be identified that could include the Metrolink extension to Trafford Park and the south-east Manchester relief road scheme.
The deal will also see the city region claw back up to £30m per year between 2015-16 and 2020-21 from Treasury, in the form of a proportion of the national tax take that will be calculated on the basis of the level of GVA growth the city region achieves through its infrastructure investment.
Under the terms of the deal, the government will review the £30m cap in 2020 and depending on the city region’s performance either raise it or maintain it at that level.
The deal states that the ‘earn back’ mechanism will run for 30 years, creating a revolving infrastructure investment fund for the city region, the first if its kind in England.
Lord Peter Smith, chair of the Greater Manchester Combined Authority, said: “Our innovative new funding model has challenged orthodox thinking and means we can press forward with much-needed investment in transport infrastructure, which will play a vital role in helping our economy realise its potential.”