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One of the difficulties about putting emphasis on the “Northern Powerhouse” – or a Powerhouse for any other region, is that there is considerable variation in prosperity within different regions. People in Cheshire tend to be richer than those in Cornwall. But even within Cheshire and Cornwall there will be variations. Therefore making smaller areas Enterprise Zones seems a more sophisticated approach.

Another advantage is the emphasis on the state getting out of the way – although there is a bit of funding for infrastructure projects.

The following incentives are offered:

  • Up to 100 per cent business rate discount worth up to £275,000 per business over a 5-year period. Central Government fully compensates councils for that loss of revenue.
  • Simplified local authority planning, for example, through Local Development Orders that grant automatic planning permission for certain development (such as new industrial buildings or changing how existing buildings are used) within specified areas
  • Government support to ensure that superfast broadband is rolled out throughout the zone, and, if necessary, public funding
  • 100 per cent enhanced capital allowances (tax relief) to businesses making large investments in plant and machinery.

The Government adds that:

“Established in 2012, Enterprise Zones are at the heart of the Government’s long-term economic plan, supporting businesses to grow. Since starting in April 2012 they have laid down the foundations for success for 635 businesses, attracting over £2.4 billion pounds of private sector investment, building world class business facilities and transport links and attracting nearly 24,000 jobs. The success of the programme led to more Enterprise Zones being announced in the Autumn Statement in 2015 and in the March Budget. Up to 48 Enterprise Zones are currently planned to be in place by the beginning of April 2017.”

Some argue that the success has been modest. It is true that the 24,000 new jobs was below the 30,000 target. There is always the argument – which was heard during the earlier Enterprise Zones effort in the 1980s – that the jobs would have been created anyway. The Enterprise Zone simply changed the location. That is hard to prove or disprove. Of course there will also be the case made that improving mobility of labour is easier – moving Muhammad to the mountain rather than the mountain to Muhammad. 

These economic arguments miss the social and political aspect. There is a strong sense of national identity – a wish for all parts of the United Kingdom to thrive.

Furthermore if the success of Enterprise Zones has been modest so has been the cost of the policy. The main item seems to be £150 million in tax breaks over four years. By contrast the money spend on regional aid in this country from the European Union is over £2 billion a year.  Of course that is our money – and those who have already been told they will be receiving money will have the payments honoured. But in the longer term we will have control of our own regional policy and one option would be to use more of the funding for more Enterprise Zones.

That should please George Osborne. He announced Enterprise Zones in his 2011 Budget. Brexit offers the freedom to build on his legacy.

 

5 comments for: Enterprise Zones have proved a quiet success story – let’s have more of them

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