By Lucy Phillips
March 24, 2011
Local Enterprise Partnerships are to be tested to the limit
as hard-pressed councils strive to be part of the 21 new ‘enterprise zones’
announced in the Budget.
In a Budget focused on boosting growth, Chancellor George
Osborne named 11 LEPs – alliances between local businesses and councils that
are replacing regional development agencies – that would benefit from enterprise
zone incentives. The exact locations of four vanguard areas – Nottingham Boots
Campus, Liverpool Waters, Manchester Airport and London’s Royal Docks – were
announced the following day.
The remaining seven LEPs (Birmingham & Solihull; Leeds
City Region; Sheffield City Region; West of England; Tees Valley; North
Eastern; the Black Country) will now have to decide where to locate their
enterprise zone, while a bidding process will be opened up to determine which
other ten LEPs will site zones. The results of the latter will be revealed in
Budget statement, Osborne said: ‘Helping
all parts of our country succeed is also the purpose behind the new enterprise
zones we launch today.
‘In return for
radically reduced planning restrictions, we will let local authorities keep all
business rate growth in their zone for a period of at least 25 years to spend
on development priorities.’
Super-fast broadband will also be rolled out in the zones. Businesses
that move into the areas within this Parliament will also benefit from a 100%
rates discount for the first five years.
But the enterprise zones, a throw-back to a flagship 1980s
Thatcher policy, came under considerable fire, not least for their ‘divisive’
impact on relations between LEP members.
Andrew Sissons, a researcher into enterprise zones for the
Work Foundation, told Public Finance:
‘The place that gets the enterprise zone will be more prosperous... If you are
a council within an LEP, every council will want it within their boundaries.
You will see some pretty frantic negotiations within LEPs. There is the
potential for it to cause division if not managed carefully.’
But Sissons also warned that it would take years for
enterprise zone gains to kick in and for councils to make any ‘major returns’,
which would be short-lived anyway. Research from the previous generation of
enterprise zones showed they stimulated short-term investment, which lasted no
more than three years before the area began a long-term reversal back into depression.
Katie Schmuecker, a senior research fellow for IPPR North,
told PF: ‘We have been here before
and, unfortunately, if you look at all the evaluations of past enterprise zones,
they proved more successful at encouraging businesses to relocate from one area
to another than creating new jobs... . If they don’t do that, all we have done
is reshuffle the deckchairs, not boost growth.’
She added: ‘As a major plank of the [government’s] growth
strategy for the regions, it’s a little wanting.’
When it came to locating enterprise zones, Schmuecker
said: ‘It’s going to be a real
test for LEPs to see whether they can agree what is their shared priority
Andy Sawford, chief executive of the Local Government
Information Unit, criticised the government for ‘picking winners’ in the new
era of localism by restricting benefits from enterprise zones ‘to just a few
favoured councils, rather than opening them up to all’.
But Local Government Secretary Eric Pickles hailed the
enterprise zones as a ‘springboard for private sector growth and wider
regeneration’. He added: ‘Enterprise zones are unashamedly pro-growth, with
lower taxes and reduced regulations to attract business, but they are also
unashamedly localist, keeping power and profits within the local areas so
Enterprise zones formed part of a Budget that otherwise did
very little to help local government, currently wrestling with major funding
cuts, commentators said.
Iain Hasdell, partner and UK head of local and regional
government at KPMG, said the chancellor had done nothing to offset the effects
of council budget cuts, nor anything to ‘invest in the coalition’s localism
ethos’. ‘[There was] no new financial, as opposed to policy, muscle to be put
behind the divestment of public services and assets to the private and third
sectors and to community groups,’ he added.
In his Budget speech, Osborne did refer to the fact that
100% of councils in England have committed to freezing or reducing their
council tax for the year from April. He also announced a series of ‘land
auction’ pilots, will enable local authorities to auction off planning
permission for their property, and has allocated £100m extra to help councils