Most people have never heard of Business Improvement Districts (BIDs). Most probably don’t want to. Yet BIDs are one of the key policy tools we have for improving the towns and cities where we live, shop and work. A BID is an area within which local businesses, in partnership with the local authority, agree to a joint plan to improve the area, funded by an increase in business rates, agreed by a ballot and paid by all businesses in the area.

On the whole, BIDs seem to work OK. But they are unlikely to “transform the face of urban England.” Why not? What are their limitations?

1. ‘Tax and spend and hope" - BIDs follow a conventional public sector model of raising revenues (inputs) to spend on a programme of activities (outputs) with the aim that these will lead directly to the desired results (outcomes). However, risk is borne by those funding the activity, in this case the businesses via their increased taxes, and there is no guarantee that the desired outcomes will be achieved.

2. Complexity and cost - evidence suggest that BIDs take up to 2 years to develop, cost around £50,000 and sometimes even £380,000. With unprecedented pressures on local government and with the demise of the RDAs, this may be a bit of a stretch.

3. Limited ambition and addressing greatest need – most BIDs are about marketing and promotion, safety and security, and cleaning. Riveting stuff of course. But perhaps not really the kind of imaginative, creative and innovative ideas we need to drive sustainable transformative regeneration in our towns and cities.

4. Measuring and demonstrating impact - the evidence for assessing the success of BIDs is pretty patchy and inconsistent. If BIDs can’t demonstrate their value then those paying for them through higher taxes may not be very excited about continuing to do so in future.

5. Governance and structure - BIDs are sometimes seen to be driven by local authorities, rather than the business or local community. Whilst not one to knock local government myself, it does seem that the “willingness of businesses to support BIDs is influenced by… the credibility of those leading the BID.”

6. Financial viability - BIDs have sometimes been successful at attracting funding in addition to the BID levy but they remain principally funded through taxation. In challenging economic times this is going to be a harder ask.

7. Wider community engagement - the BID levy falls on occupiers rather than owners, which may skew priorities towards short-term issues rather than longer-term investments. What’s more, local citizens and domestic ratepayers are normally oblivious to their existence.

8. Coverage - if BIDs were truly successful, everyone would want one.

So attempting to address these, can we imagine an innovative BID 2.0 which avoids the danger that, in CLG’s words, “the levy is seen as an additional financial contribution to the costs of local authority services, rather than as a payment for actions in response to the specific needs of the local business community”?

1. ‘Tax and spend and hope" – instead, how about a “No win: no fee” model where risk is transferred away from those paying, who only cough up if they see the improvements they want? A payment by results model could secure a commitment from landlords, retailers, businesses, market traders and others with an interest in the success of the town. They agree to share a proportion of the financial benefits accruing to them in future but crucially, however, only when these benefits are realised.

2. Complexity and cost – so perhaps a standard template that could be applied locally and learning lessons from PFI and SIBs which (wherever you stand) have both undeniably had significant transactions costs in their early days.

3. Limited ambition and addressing greatest need – through more ambitious interventions than street cleaning and a few posters. Instead, taking inspiration from some of the creative, innovative, imaginative, pop-up, entrepreneurial and community-led ideas which are reimagining our high streets across the country.

4. Measuring and demonstrating impact – using some hard outcome metrics around footfall, cash going through the tills and commercial property value.

5. Governance and structure – through an independent, transparent, accountable, asset-locked social enterprise governed by a diverse community of interests, with a business-like approach and a community purpose.

6. Financial viability – with income earned not through taxes levied but with customers paying for benefits they receive. Also exploring other income sources through service delivery and asset management.

7. Wider community engagement – bringing in landlords and local citizens as stakeholders and not limited to current tenants.

8. Coverage – everyone seems to want a Social Impact Bond. Maybe BID 2.0 could be called a “Retail Impact Bond”? That should drum up a bit of interest.

This model could ultimately be financed through community shares or bonds, reintroducing the link between where people invest their money and their vested interests as citizens of their local town or city (and maybe even attracting a tax break like EIS). But to test its viability initially, BID 2.0 would need to be financed by high risk money, an innovative grant maker or perhaps CLG’s Portas Pilots pot. It might not make great TV but perhaps it’s time for a BID makeover?