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Greater Manchester has set out the details of the innovative finance mechanism agreed with Treasury which will see the city region invest 拢1.2bn upfront in infrastructure and claw back up to 拢30m per year from the national tax pot.

The 鈥榚arn back鈥� mechanism, confirmed in last week鈥檚 Budget, is based on the tax increment financing model, which enables the ten councils that comprise Greater Manchester to borrow against future business rates revenues to raise finance to invest in infrastructure across the city region.

This will be supplemented by a levy on the local authorities, which will bring the total investment pot to 拢1.2bn.

The councils said this investment could attract further private sector investment to create a 鈥渟hort-term鈥� economic impact in excess of 拢2bn by 2016, the councils said. Over the long term, the investment fund is estimated to produce economic impacts of 拢1bn per annum by 2025.

Investment will be prioritised on the basis of net GVA impacts across the city region, with a pipeline of projects to be identified that could include the Metrolink extension to Trafford Park and the south-east Manchester relief road scheme.

The deal will also see the city region claw back up to 拢30m per year between 2015-16 and 2020-21 from Treasury, in the form of a proportion of the national tax take that will be calculated on the basis of the level of GVA growth the city region achieves through its infrastructure investment.

Under the terms of the deal, the government will review the 拢30m cap in 2020 and depending on the city region鈥檚 performance either raise it or maintain it at that level.

The deal states that the 鈥榚arn back鈥� mechanism will run for 30 years, creating a revolving infrastructure investment fund for the city region, the first if its kind in England.

Lord Peter Smith, chair of the Greater Manchester Combined Authority, said: 鈥淥ur innovative new funding model has challenged orthodox thinking and means we can press forward with much-needed investment in transport infrastructure, which will play a vital role in helping our economy realise its potential.鈥�