More than £500 million could be raised to pay for a series of ambitious transport schemes in the West Midlands after Deputy Prime Minister Nick Clegg announced radical reforms to rules on council borrowing.
Projects lined up include a new public transport service between Birmingham Airport and the city centre, a new railway station in Wolverhampton and the long-awaited extension of the Midland Metro to Brierley Hill in the Black Country.
But residents in the West Midlands may be reticent to believe the proposals as the Birmingham Post reported near-identical aspirations two years ago when the seven metropolitan councils called for similar Accelerated Development Zones which never came to fruition.
It follows Mr Clegg’s announcement at the Liberal Democrat conference in Liverpool that councils will be free to borrow cash to pay for major infrastructure projects designed to boost the local economy.
Loans will be repaid from the increase in business rates councils can expect to receive once the infrastructure is in place.
The scheme, known as Tax Increment Financing, will be one of a range of policies included in a new policy paper setting out measures to improve the economy in the English regions outside London and the south east.
Authorities in the West Midlands have been calling for the policy for many years and Birmingham City Council’s deputy leader Paul Tilsley (Lib Dem Sheldon) said he had been lobbying Lib Dem ministers in government, including Mr Clegg and Danny Alexander, the Chief Secretary to the Treasury, to introduce the measure.
A range of projects are already lined up to take advantage of the scheme, although the Government has not yet announced when it will be up and running.
They include a £425 million rapid transit system between Birmingham city centre and the airport, of which £295 million will be funded by Tax Increment Financing borrowing. Details of the system have not been decided but it could involve a new light rail scheme.
More than £173 million could be borrowed to fund the £292 million Wednesbury to Brierley Hill Rapid Metro extension.
Councils also want to raise £19 million to help pay for Wolverhampton Interchange Railway Station, £19 million for transport improvements at Longbridge, Birmingham, and £29.4 million towards the i54 business park on the outskirts of Wolverhampton.
But Coun Tilsley said the new freedoms for local councils to raise funding could allow Birmingham to pursue a range of other projects, such as introducing high speed broadband in the city.
He said: “I was extremely pleased with the announcement. It is something I have been working on for a long time.
“It could be that when we look at our transport infrastructure, it would give us the opportunity to improve that. It could let us make up in any shortfall in funding for the Metro extension.
“It could give us the opportunity of investing in super broadband, which would give us a competitive edge on other cities in the UK.”
Announcing the policy in Liverpool, Mr Clegg said: “It is the first step to breathing life back into our greatest cities.”
The new Government scheme can only be used to pay for infrastructure, such as major buildings. It will also require councils to find a lender, such as a bank, willing to share the risk of the project failing to bring in the expected increase in business taxes.
It will also add to Britain’s debts – at a time when the Government says cutting the budget deficit is a top priority.
Mr Clegg said: “We will put local government back in charge of the money it raises and spends.
“That’s why in our first budget we unlocked more than a billion pounds of ring-fenced grants.
“That’s why we will end central capping of council tax. That’s why we will allow councils to keep some of the extra business rates and council tax they raise when they enable new developments to go ahead.
“And I can announce we will be giving local authorities the freedom to borrow against those extra business rates to help pay for additional new developments.”
He added: “In every city in the UK, what matters most is that finally, they will be in the driving seat, instead of waiting for a handout from Whitehall. Local people, local power, local change.”
Councillor Mike Whitby, Chair of the City Region Board and Leader of Birmingham City Council, said: “City Region council and business leaders have been at the forefront of a national campaign to persuade Government to allow us to use tax increment financing to boost competitiveness and jobs.”
He added: “Working with partners in southern Staffordshire and north Worcestershire we have five ready to go major transport investment projects which if supported by £536 million of TIF funding would create over 20,000 new jobs.’’
Councillor Neville Patten, leader of Wolverhampton City Council which is directly involved in two of the five schemes added: “Our fully costed and detailed calculations show that tax increment financed borrowing of £38 million would support the development of Wolverhampton railway station and the i54 site creating up to 7,700 new jobs.”