Business leaders in the north-east were yesterday urged to pay an extra 1% in rates to help trigger a quarter of a billion pounds of new investment in the region’s future growth.
Aberdeen City and Shire Economic Future (ACSEF) chairman Tom Smith told 200 delegates at the organisation’s annual forum the proposal offered them the opportunity to make up for the failure to secure a North Sea oil fund in the 1970s.
A top-up of just 1% on their business rates could generate £25million over five years, allowing the area to attract an additional £220million from other funding sources.
The money would be ring-fenced and used to fund ACSEF priorities such as the Energetica project, which aims to create a corridor of energy firms between Aberdeen and Peterhead, and the £140million Aberdeen civic square at Union Terrace Gardens.
Mr Smith said: “If we want Europe, and indeed the world, on whose stage many of our businesses compete, to sit up and take notice of our region, we need to make things happen.
“The way in which projects are funded has changed and we cannot rely entirely on the public sector. It is testament to the partnership approach in our region that so much has been achieved to date. To do more requires action and money from the private sector. We need to make sure that game-changing projects, like Energetica and a new civic square, are more than just pipe dreams.”
Mr Smith insisted the 1% figure was merely a starting point. He invited delegates to consider if they would be prepared to contribute more or less, or come up with their own mechanism for funding ACSEF objectives.
A show of hands at yesterday’s meeting in Aberdeen Exhibition and Conference Centre suggested about 25% of businesses would be prepared to pay the additional charge.
Mr Smith said he took that as a positive sign, given the current economic climate.
Aberdeen City Council’s strategic leadership director, Abigail Tierney, said the £220million forecast was based on a unique funding model which combines a number of schemes being pioneered elsewhere in the UK and overseas. Some of these would require Scottish Government approval and legislation before they could proceed.
If agreed, the 1% business tax top-up would be put into the new Aberdeen City Development Company, plans for which were unveiled by the city council yesterday.
Bosses of the private-public partnership – the first of its kind in Scotland – would be able to use the estimated £5million a year to borrow from government, banks and other funding sources.
In addition, ACSEF would expect property prices to rise as a result of investment in schemes such as the civic square. This would trigger a rise in business rates and ACSEF would be seeking government approval to keep the additional income – known as tax-increment funding – and reinvest it locally.
“It would be hugely innovative and groundbreaking for these ideas to come together in the mechanism we have come up with,” said Ms Tierney. “But we are facing an intractable position. The economic climate means the private market is no longer there to support major projects, nor can they rely on public-sector funding.
“And the decline of oil and gas means we have got to do something to ensure the city and shire survives beyond the next 30 years.”
Construction firm boss Stewart Milne was in the audience yesterday.
He supported Mr Smith’s proposal.
“ACSEF has come up with a lot of really positive ideas but they will have to be paid for,” he said.
“In the past we might have been guilty of hoping others would come forward with the money we need to develop. That’s not the case any more.
“If we can demonstrate that we can raise substantial amounts ourselves it gives us a strong case to go to others to fill any funding gaps.”
Andy Willox, of the Federation of Small Businesses, said the scheme could work as long as it was business-led and businesses were made aware of the benefits it could bring them.
“This has planted the seed of an idea and, clearly, there is a lot to discuss,” he said.
“Any agreement would have to be unanimous though. I can’t see how it would work unless every business gets behind it.”
A Scottish Government spokesman said it was open to innovative ways of encouraging local economic growth.
“Tax-increment funding is an option. We are exploring, in conjunction with Cosla and the Scottish Futures Trust, the possibility of taking this forward.”