Deputy Prime Minister Nick Clegg wants to boost regeneration schemes across Yorkshire by giving local authorities new borrowing powers.

Councils already borrow money for capital projects, with pay-back terms measured against revenue income from taxes and grants.

What Mr Clegg is proposing is for councils to borrow millions of pounds for major schemes in advance of income from those proposed developments.

This would be like Bradford Council borrowing money against the anticipated income from Westfield’s proposed Broadway shopping mall.

Borrowing against unknown tax revenues from hoped-for schemes is not without at least one obvious risk. If anticipated revenue income falls short of the loan repayments, who picks up the bill? Council tax payers.

According to research by the Financial Times, this has happened in Chicago, where this policy, known as Tax Incremental Funding, began. The need to service the total debt accrued by 165 TIF schemes has been blamed for a “hole in the city budget”.

The English version of TIF is known as Accelerated Development Zones (ADZ). The 2010 Budget contained proposals for this method of raising money for capital projects to be piloted across the country. But that was before the General Election and Chancellor of the Exchequer George Osborne’s looming Comprehensive Spending Review.

Bradford Council leader Councillor Ian Greenwood, who has already announced budget cuts of £38m over the next three years, is wary of the cost of borrowing.

He said: “As a rule of thumb, for every £1m we borrow, we have to pay £100,000. Prudential borrowing is sensible and we do that; but where budgets are being slashed you would not want to borrow in a way that would affect your current financial position badly.”

Mr Clegg, who also leads the Liberal Democrats, maintains the proposal would liberate local authorities by unlocking growth.

“Labour rattled on about decentralisation, but they held the purse strings tight. We are different, we are liberal,” he said.

But with the Chancellor of the Exchequer’s cuts package looming on October 20, concern has already been expressed widely that necessary spending reductions must be balanced by investment in schemes that keep the economy going.

In plants, growth can be accelerated by cutting back. Similarly, economic recovery can be encouraged by slashing waste, getting rid of dead wood and concentrating resources on growth.

Recovery also comes down to what Andrew Mason, chairman of Bradford Property Forum, has said often enough in the past: Britain must build its way out of recession.

This is the nub of a 48-page report, Funding And Planning For Infrastructure, by the Local Government Association chaired by Baroness Margaret Eaton, former Bradford Council leader and Conservative councillor for Bingley Rural.

It states that an estimated £500 billion is needed to pay for repairing crumbling roads, improving poor housing, inefficient power generation and pollution, combating delays in rail services and meeting the needs of a growing number of elderly – including an extra 800,000 people aged 65 by 2012.

Road congestion, travel delays and lost production resulting from all this could cost an extra £22 billion a year by 2025.

The association maintains that investment in major projects drives economic growth, and that central to this is using the £250 billion capital base of local authorities to borrow more imaginatively – not recklessly, however.

Given the problems we’ve got, Baroness Eaton says in her foreword to the report: “It will be crucial for both central and local government to rise to the challenge.

“The Government will need to work to follow through on its commitments to localism and decentralisation. It will need to move towards removing the plethora of appraisal and bidding processes, excessive bureaucracy, control and inspection regimes that have built up over the years to allow funding to be targeted to the needs of places, joined up at local level and spent on local priorities.”

Among the proposals other than Accelerated Development Zones, outlined in the report, are development tariffs and local authority bonds.

The first simply means asking existing businesses in particular areas to pay a bit extra. This money then goes back into improving the infrastructure of that particular area.

Local authority bonds were scrapped in the 1980s. The Local Government Authority says offering tax-exempt bonds to the public could draw upon the estimated £68 billion of household savings in the UK.