Non-domestic rating contributions amendment regulations 2023: executive note

SSI 2023/288

The above instrument was made in exercise of the powers conferred by paragraphs 10 and 11(5) of schedule 12 of the Local Government Finance Act 1992.  The instrument is subject to negative procedure.

Summary

Tax Incremental Finance (TIF) is a funding model that allows local authorities (LAs) to invest in enabling public infrastructure that would otherwise not be delivered through private or public sector funding. The new infrastructure will enable additional local economic activity, with a view to meeting the financing costs using the anticipated uplift in future Non-Domestic Rates (NDR) resulting from the investment. Each TIF project is based on a legal agreement between the Scottish Government and the relevant LA. The Scottish Government is required to agree that the LA can retain additional NDR income generated within a defined physical zone linked to the TIF investment.

The original TIF legislation was agreed in 2010. The Scottish Government has supported six pilot projects: Argyll and Bute, Falkirk, Fife (two schemes), Glasgow and North Ayrshire.

As the pilot scheme has progressed, and economic and policy conditions have changed, it has become apparent that greater flexibility is needed to ensure that the mechanics of TIF reflect the needs of the projects and the conditions they have faced. This change to the Tax Incremental Financing legislation is intended to provide the greater flexibility required.

Policy objectives

Currently, Tax Incremental Financing (TIF) legislation references a publication on gov.scot which outlines how TIF agreements operate. This SSI (Scottish Statutory Instruments) will refer to a revised administration document which redefines what a TIF project is.

There are four main changes to the original TIF administration document:

• the “TIF Pilot Scheme” section acknowledges that greater flexibility in TIF agreements is needed to ensure that the scheme remains fit for purpose
• the “TIF Pilot Scheme” section now includes a paragraph outlining that LAs can submit a revised business case, and it identifies areas of the original business case that they can request changes to
• where the document refers to TIF projects, it now explicitly says “new or revised” to cover revised business cases
• LAs will also be able to include analysis of wider zones of influence to assess the economic impact of the TIF project

Read the updated TIF administration document.

The revised TIF administration document allows Local Authorities (LAs) to submit a revised business case for Scottish Ministers to consider. LAs will be able to request changes to: 

• the length of their TIF agreement
• the timescale for the TIF investment period and when the investment is expected to be completed by
• the cost and benefits of the TIF enabling infrastructure
• the proposed TIF assets
• the defined TIF area

The revised guidance has sufficient flexibility to capture other requests LAs may have for their TIF agreements.

EU alignment consideration

This instrument is not relevant to the Scottish Government’s policy to maintain alignment with the EU.

Consultation

The local authorities involved in the five active TIF pilot schemes have been consulted and support changes to TIF legislation to provide greater flexibility in their proposals. 

Impact assessments

The change to TIF legislation provides greater flexibility for Local Authorities and should not impact wider than the Local Authorities who are actively progressing with TIF pilots. We do not believe Impact Assessments are required on that basis.

Financial effects 

The Deputy First Minister confirms that no BRIA is necessary as the instrument has no financial effects on the Scottish Government, local government or on business. 

Scottish Government
Budget and Public Spending Directorate
17 October 2023