8 March 2011
The chancellor’s plans for a new generation of enterprise zones have been criticised by an economic think-tank, which warned against an artificial confrontation between the public and private sectors.
George Osborne told the Conservative Party’s spring conference this weekend that, in these zones, ‘taxes will be even lower and more restrictions on growth removed’.
He said: ‘They will be in places in our land with great potential – but which need that extra push from government and local communities working together.’
Osborne did not say where they would be established nor what reliefs would be offered.
Sarah Longlands, policy director of the Centre for Local Economic Strategies, told Public Finance: ‘There is now a different context [compared] to the 1980s. My concern is that there has been a lot of anti-public sector rhetoric from the government, but if these zones are going to be successful the private sector has to work with the public sector so that total of government investment is used effectively.’
Longlands said it would be essential to ‘see the local economy as a whole, not as separate public and private investment’.
The original enterprise zones were set up in the early 1980s, and offered tax breaks and the removal of most planning controls to investors. They lasted around a decade each.
A government evaluation of the original enterprise zones, published in 1995, found that from 1981/82 to 1992/93 the total public sector cost of the zones was between £798m and £968m.
More than £2bn of private capital was invested in property in the zones, giving a public-to-private leverage ratio of about 1:2.3.
Meanwhile, the Confederation of British Industry has called on Osborne to focus his March Budget on economic growth and job creation.
It called for measures to assist exports, encourage domestic investment spending, and for continued central control of business rates.
