New financial tools for local authorities are vital if Britain is to improve its deficient transport infrastructure, according to a cross-party group of MPs and peers.

The All-Party Urban Development Group says the government should use this year's comprehensive spending review to simplify and consolidate the multiple revenue streams that go to local government - 30 sources of funding for Liverpool, for example - and devolve more spending power. Among the group's preferred options to provide more local spending power is US-style tax increment financing, which would allow cities to borrow against future revenues associated with development in order to fund infrastructure at an early stage. Another is the introduction of supplementary business rates, which could ring- fence money for transport improvements. Both options would require legislation.