City bids for extra funds to help troubled trams project

Published on Monday 26 January 2009 09:10

COUNCIL chiefs are in talks with the Scottish Government over new ways of raising cash which could help provide extra funding for the Capital's troubled trams project.

The idea is to borrow against the projected increase in business rates from future developments like the Waterfront to obtain much-needed money now.

The move could raise millions of pounds despite the present economic downturn.

Meanwhile, the latest phase of construction work got underway this morning with the closure of The Mound junction. No major traffic problems were reported.

Labour's Edinburgh North & Leith MSP Malcolm Chisholm said the cash could be used to help fund Phase 1b of the tram scheme, the spur from Haymarket to Granton, which is currently in doubt because of a 50 million shortfall. And Finance Secretary John Swinney said the Government was "happy to consider" the issue.

The proposal – known as "tax increment financing" – has featured in correspondence between Mr Swinney and independent Lothians MSP Margo MacDonald over how to help Edinburgh weather the economic downturn.

The Capital has argued in the past it should be allowed to keep at least some of the 100m a year collected in business rates in the city, which is currently redistributed across the country.

Mr Swinney argued against such a move, but indicated some sympathy for the idea of councils retaining extra business rate income which comes from investment in regeneration.

Mr Swinney told Ms MacDonald the idea was being considered, adding: "Edinburgh is working up just such an option as part of its plans for regenerating Leith Waterfront. We expect to hear more from the council shortly about this."

Edinburgh finance convener Gordon Mackenzie said he had held talks with ministers and hoped Craigmillar and the Waterfront could be used as pilot schemes for the new system.

He said: "This is not the Scottish Government giving us money – it's about them saying 'You can improve these areas and keep the extra business rates that generates'. The way forward is to set up a number of pilot schemes."

Councillor Mackenzie said for every 100,000 in projected revenue from business rates, the scheme would allow borrowing of up to 1.5m. He said: "We are talking about raising millions of pounds for investment if the Scottish Government is prepared to take this further.

"You are talking about borrowing over 20 years. Over that timescale, I don't have concerns about being able to repay the money. This is about accessing funding to kick-start work that needs to be done now.

"I don't know if it could generate enough for Phase 1b, but it could be part of the package."