An inquiry by the All Party Urban Development Group found that Britain's transport crisis will not improve unless the Government loosens its strangle-hold on the finances available to cities and towns, and allows wider private sector involvement.

Already vital redevelopment schemes, like the proposed Birmingham Gateway above New Street station are being put on hold because city councils are denied the ability to raise the funding for essential transport infrastructure.

The Government has promoted the proposed Planning Gain Supplement - a tax levied on the increase in land values that arise when land is granted planning permission - as a solution to infrastructure funding needs. But the committee warned that the system, due to be introduced in 2009, could result in further centralisation, bureaucracy, and infrastructure delay.

The committee's report, 'Loosening the Leash', recommends two new local financial powers that would increase local investment in vital infrastructure: Tax Increment Financing - already used in the United States and Australia - would allow local authorities to build infrastructure ahead of new development. And a Supplementary Business Rate, with business support, could be used to ring-fence money for transport improvements.

Clive Betts MP, Chair of the All Party Urban Development Group, said: "Britain's cities are being held back by our centralised funding system. Government needs to empower city leaders to take more of their own decisions. The report recommends some new local financial powers, for cities to fund more of their own transport systems. Our message is clear: greater devolution is essential for the future success of our cities."

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