The UK’s first Tax Increment Financing (TIF) scheme, the regeneration of Edinburgh’s waterfront, has been given the backing of the Scottish Government.

Following the backing of Scottish finance secretary John Swinney, Edinburgh City Council will now pioneer the US-style funding model in the development of a new cruise liner terminal, lock gates, esplanade and link road.

The Scottish Futures Trust has developed TIF for use in Scotland and is working with a number of local authorities to develop pilot projects, of which Edinburgh is the most advanced. Other schemes are being planned by Aberdeen and Glasgow City Councils.

Only last week, deputy prime minister Nick Clegg announced TIF would be extended to councils south of the border following the spending review. A move welcomed by local government despite warning from regeneration experts US TIF regimes had left some cities burdened with high debts and inequalities.

Planners claim the £84m venture on Edinburgh’s waterfront has the potential to unlock £660m of private investment and create up to 4,900 jobs.

Jenny Dave, leader of Edinburgh City Council, said: ‘Attracting new investment is critical to the city's future and I warmly welcome the Scottish Government's support. ‘We produced a clear and compelling business case for the use of TIF to help transform Edinburgh's Waterfront into a more attractive area for living, working and leisure.

‘Our aim is to kick-start growth, which will protect and create jobs now rather than waiting until the economy recovers. As well as being an innovative step, this shows we are being proactive and looking out for Edinburgh's long-term success. This is crucial for the country as a whole, because when the capital performs well it benefits all of Scotland.’

Mr Swinney said Westminster cuts to the Scottish budget had prompted the importance of finding new funding models to deliver crucial infrastructure projects.

‘We expect Scottish Futures Trust to become an increasingly valuable asset in dealing with the challenges which lie ahead,’ he added.

Barry White, chief executive of the trust, described TIF as ‘an innovative way to fund growth from growth’ supporting jobs and aiding economic recovery.

He said: ‘Such innovation is key to SFT's work with the public and private sectors to attract additional investment while ensuring value for money for the taxpayer.’

Holyrood has just appointed Sir Angus Grossart as chairman of the Scottish Futures Trust for a further three years.