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New report – Unlocking capital investment in local economic development

An extensive and significant new report from TRL Insight, Unlocking capital investment in local economic development.

This was completed and soft-launched in February 2025.

It considers what is needed to create sustainable communities, focusing on the infrastructure provided by local authorities. This is viewed as a long-term investment. The potential returns on investment in growing communities are identified, including growth in tax collected by local and central government and savings on public expenditure.

It proposes a raft of measures to ensure that councils recoup the initial borrowing needed to pay for necessary infrastructure.

The most eye-catching of these is for councils to designate areas in which all growth in business rates and/or council tax would be retained for a period of decades, at least until an agreed level of initial borrowing is paid off. Such guaranteed retention of business rates for specific sites has been a feature of previous programmes, the most relevant of which were the three ‘New Development Deals’ agreed in 2012. The report provides a case study of the NDD developments
in Newcastle Upon Tyne, where around £1bn of investment has been unlocked and dozens of spectacular and sometimes award-winning office blocks, hotels, science buildings, accommodation blocks and other buildings have been built. So far, this has secured around 12,000 jobs and increased economic output by about £450m.

The 2026 reset of the business rate retention system (and the accompanying overhaul of New Homes Bonus) provides an opportunity for a fresh round of agreements. By including council tax retention, the benefits can be extended to residential and mixed areas as well. The report also proposes changes to the structure of the retention system which could extend some of these benefits to the whole of England.

The forthcoming creation/designation of a network of Strategic Authorities across England also provides an opportunity – for a much more collaborative, strategic approach to planning the growth of communities and supporting infrastructure. This would provide developers and other key partners with the certainty necessary to unlock many sites and inject greater capital into them.

Finally, the report discusses other changes to local taxation and grant funding which would share the gains from developments between central and local government, provide a fairer and more flexible local tax base and unblock stuck sites.


Representation to Spending Review 2025

On 9 February, TRL Insight made a representation to the Spending Review 2025. The Spending Review will be announced on 11 June 2025. The representation covers:

  • Return on investment – recommending that the Treasury becomes systematic in using existing analyses to identify public spending which will provide a return on investment, perhaps by bringing in experts on this topic;
  • Investment in social care and public health – this summarises the case made in my LinkedIn article Why putting money into fixing the NHS is wrong (see below);
  • Policies to reduce offending and reoffending – this points out that in the Government’s Plan for Change, the Safer Streets mission fails to mention the benefits in cutting crime flowing from policies in the other missions. This suggests a lack of coordination between departments. The representation recommends building up an evidence base on what works to cut crime and basing policy on this;
  • A toolkit for carbon reduction – recommending a focus on publicly recognising the need for a balanced toolkit of solutions to reach net zero. The representation lists six examples and also urges the Government to consider how it can support the UK’s green export economy;
  • Putting people in charge – points out that taking planning powers away from local communities and pushing local government into unitarization could both be false economies;
  • Local authority finances and property taxes – creating a fresh round of Tax Increment Financing, broadening the tax base for local government, creating partnership arrangements with local authorities to invest in prevention and early intervention and share the savings or income generated, and extending the Prudential System for capital finance to cover investment in prevention and early intervention;
  • Public finance reforms and metrics for improvement – this summarises my letter to the Chancellor and Chief Secretary to the Treasury and the report Building Freedom (see below). It also recommends that the two economic measures in the Government’s milestone of higher living standards are supplemented with a measure of quality of life/satisfaction, based on polling.

 


Submissions on Local Government Finance, January-February 2025

In the first two months of this year, TRL Insight made submissions to both of the following:

  • An inquiry “The Funding and Sustainability of Local Government Finance” by the Housing, Communities and Local Government (HCLG) Committee of the House of Commons;
  • The Government consultation “Local authority funding reform: objectives and principles”.

TRL Insight’s submissions can be read by clicking on the titles below.

TRL Insight evidence to HCLG Select Committee inquiry “The Funding and Sustainability of Local Government Finance” (27 January)

This evidence covers issues such as:

  • The limited base of taxation for local government, with the Government controlling many key parameters and frequently “tinkering” with the system;
  • Grant funding – local government’s over-reliance on it, the way it has fragmented over recent years and the current Government’s proposed consolidation of grants;
  • Problems with the Business Rate Retention (BRR) system: its outdated needs assessment (topped up by grants), and its complexity and inconsistency, in particular in the way it treats equalisation for ability to raise council tax and business rates differently;
  • Problems caused by this lack of financial autonomy: constraining local authorities’ ability to put together a financing package that is suited to their local circumstances, and causing difficulties for budgeting for the long-term and investing in service transformation;
  • How devolution and the Prudential System are welcome and can be most helpfully expanded;
  • The need to replace the use of capital receipts for revenue purposes with a much more flexible capitalisation regime for unavoidable and otherwise unaffordable costs and for upfront investment in service transformation;
  • The importance of MHCLG being involved in policies led by other departments which affect local authorities.

Prior to writing this submission, I gave a preview of the subjects to be covered in it, in my LinkedIn article Thoughts on HCLG Committee inquiry on “The Funding and Sustainability of Local Government Finance”, which was published on 24 January.

 

TRL Insight response to the Government consultation “Local authority funding reform: objectives and principles” (12 February)

This response covers issues such as:

  • Equalising for council tax and business rates at same stage of BRR calculation
  • A fresh round of Tax Increment Financing schemes, where growth would be excluded from this equalisation
  • Avoiding use of taxbase projections, as this bakes in an assumed minimum level of taxbase growth – and modelling the use of historic/lagged taxbase data
  • Taking advantage of the greater retention of council tax from these measures to refocus New Homes Bonus – providing a top-up for retained council tax from lower band properties and, if necessary, supporting affordable housing
  • Modelling the options of partial and rolling resets of business rate growth and rolling resets of the needs assessment
  • Urging the Government to start to look into broadening the local government tax base now, and how new taxes may be equalised for (so that this could be implemented not in the 2026 reset, but in the one after) – then use this in preference to New Burdens grant funding in future
  • Not being over-zealous in simplifying the need assessment
  • Improving the assessment of differences in unit cost of providing services, for example greater spend on fuel and vehicle maintenance where rounds are longer
  • Suggested improvements to the Community Infrastructure Levy – clarity about its purpose,, removing the legal restriction from borrowing against it and consulting on greater local flexibility
  • Increasing the financial autonomy of local government, including over sales, fees and charges policies
  • Ditching the patronising language of “rewarding” councils for growth

Prior to writing this submission, I previewed many of these points for the benefit of other respondents in a LinkedIn article, Local authority funding reform consultation – some points to consider, which was published on 10 February.

 


Letter to the Chancellor and Chief Secretary to the Treasury

In advance of the Autumn 2024 Budget, TRL Insight wrote to the Chancellor, Rt. Hon. Rachel Reeves MP, and the Chief Secretary to the Treasury, Rt. Hon. Darren Jones MP. This letter put directly to them the points made in my LinkedIn article How to “recognise the benefits of investment” and unlock local growth (see below). Namely, that the Government should look at fiscal reporting in the round and implement more comprehensive reforms based on its vision for the future of the UK, reflecting: the need for greater investment in early intervention and preventing future costs, and the growing financial autonomy of local government.

Read the letter here.


LinkedIn articles June-November 2024

During the second half of 2024, I published four articles on LinkedIn. These can be read by clicking on the titles below.

Why putting money into fixing the NHS is wrong (28 June)

This points out that the biggest problems facing the NHS cannot be fixed by putting money into it. Rather, they can only be solved by investing further upstream: in public health and in social care – crucially, including respite care.

Why increasing tax bases is the key to fulfilling manifesto pledges (1 July)

This article accompanies the report Tax Receipts and Government Spending – see below. It challenges the narrative which dominated the media at that time, and has held sway ever since, particularly pushed by the IFS, that the only way to pay for increased public spending is through increasing tax rates. It points out that the Government can take many actions which will stimulate the growth in tax bases. In the absence of external shocks to the economy, these could provide far higher increases in tax receipts than tinkering with rates. On the other hand, should such shocks occur, the public services will be in a far better shape to weather them.

How to “recognise the benefits of investment” and unlock local growth (30 September)

This was written in response to reports that the Treasury was intending to change the primary measure of public sector debt. Much of it was based on TRL Insight’s 2018 report Building Freedom. In this article, I argue that the Government should avoid making a simple technocratic change to this measure, as discussed by the IFS and in the media at the time. Instead, the Government should look at fiscal reporting in the round and implement more comprehensive reforms based on its vision for the future of the UK. These should reflect: the need for greater investment in early intervention and preventing future costs; the growing financial autonomy of local government.

Helping people to realise the benefits of work (26 November)

This was published to coincide with the Get Britain Working white paper and it tackled the discussion of “carrots” and “sticks” for getting people off benefits and into work. The Budget had announced that the white paper would include “trailblazers” to bring together services to support people with health issues into work. The article drew on TRL Insight’s case studies for the LGA to show how local authorities were already doing this. It explained the barriers to work facing people with poor health and how these programmes tackled these barriers. It also argued that the “sticks” of benefit sanctions and browbeating by the Government were counter-productive – these could cause stress and exacerbate people’s health problems.


New report – Tax Receipts and Government Spending

A new report from TRL Insight, Tax Receipts and Government Spending.

It looks at spending on services and goods by central government over recent decades, particularly since 1997 as consistent datasets are available for this whole period. Other than the exceptional Covid year of 2020-21, it identifies the early 2000s as the only period in which there was particularly strong growth in spending on services and goods. It shows that this was mostly affordable because of rising tax bases and shrinking bills for other expenditure. The contribution from rising tax rates was at most a small part of the mix and there wasn’t any net borrowing in real terms over the period 1997-98 to 2005-06.

It is argued that putting in place conditions conducive to growing tax bases is the key to implementing manifesto spending pledges. This runs directly counter to a prevailing narrative that putting up burdensome taxes on citizens who are already struggling is the only way to fund improvements in public services.