Kwasi Kwarteng has announced plans for new low-tax, low-regulation investment zones in his mini-budget today.
The government is currently in talks with dozens of local authorities across England to set up the zones which will see taxes cut.
What are low-investment zones?
Under the Prime Minister’s plans, the areas that are selected as low-investment zones would benefit from a low-tax burden, reduced planning restrictions and regulations tailored on a case-by-case basis.
It means that those who live and work in the low-tax areas envisaged by Liz Truss would see their own contributions cut, with the burden also lightened for firms.
Ministers are also said to have discussed whether environmental protections could be watered down in these areas to clear the way for new developments.
Additionally, the government is thought to be considering converting the post-Brexit freeports introduced by Boris Johnson into the investment zones, where further deregulation is expected.
During the Tory leadership campaign, Ms Truss said investment zones would be central to her plan to boost growth.
The Chancellor told the House of Commons on Friday (23 September): “To support growth right across the country, we need to go further, with targeted action in local areas.
“So, today, I can announce the creation of new investment zones. We will liberalise planning rules in specified agreed sites, releasing land and accelerating development.
“We will cut taxes. For businesses in designated tax sites, for 10 years, there will be: Accelerated tax reliefs for structures and buildings. And 100% tax relief on qualifying investments in plant and machinery.”
Are low-tax zones beneficial?
Professor John Bryson, chair in enterprise and economic geography at the University of Birmingham, said that low-tax investment zones have been applied in many countries and said a well-managed national economy should not need to introduce them.
He argued that to support business investment the focus should be on inclusive economic growth, rather than isolated hot spots.
He said: “One could argue that the need for low-tax zones represents place-based patches to wider problems in the UK economy. A well-managed national economy should not need to establish low-tax zones.
“The key is to ensure that national policies and regulations are supportive of business investment that results in job creation and not labour exploitation.
“The focus should be on inclusive economic growth rather than on highly targeted place-based and isolated economic growth hot spots.
“A key issue with low-tax zones is ensuring that they create new wealth and employment opportunities rather than pulling existing activities into the zone from elsewhere in the UK. These zones must demonstrate real additionality.”
Which areas are in line to get lower taxes?
The West Midlands, Thames Estuary, Tees Valley, West Yorkshire and Norfolk are among the areas the government is reportedly looking at as potential sites for low-tax investment zones.
Mr Kwarteng confirmed in his mini budget that the government was in early discussions with regions across England to establish the new zones, as well as the devolved administrations in Scotland, Wales and Northern Ireland.
“If we really want to level up, we have to unleash the power of the private sector,” he said.
The 38 areas of England in discussion to become an investment zone are as follows:
- Blackpool Council
- Bedford Borough Council
- Central Bedfordshire Council
- Cheshire West and Chester Council
- Cornwall Council
- Cumbria County Council
- Derbyshire County Council
- Dorset Council
- East Riding of Yorkshire Council
- Essex County Council
- Greater London Authority
- Gloucestershire County Council
- Greater Manchester Combined Authority
- Hull City Council
- Kent County Council
- Lancashire County Council
- Leicestershire County Council
- Liverpool City Region
- North East Lincolnshire Council
- North Lincolnshire Council
- Norfolk County Council
- North of Tyne Combined Authority
- North Yorkshire County Council
- Nottinghamshire County Council
- Plymouth City Council
- Somerset County Council
- Southampton City Council
- Southend-on-Sea City Council
- Staffordshire County Council
- Stoke-on-Trent City Council
- Suffolk County Council
- Sunderland City Council
- South Yorkshire Combined Authority
- Tees Valley Combined Authority
- Warwickshire County Council
- West of England Combined Authority
- West Midlands Combined Authority
- West Yorkshire Combined Authority