Budget Announcement Local Growth Zones Will Stimulate Economy
Tuesday, 22 March 2011
Following on the heels of the much debated Localism Bill, GVA reports that there is strong expectation that George Osborne's Budget speech will introduce measures to establish new growth zones across areas of the UK hardest hit by the recession.
Expectation is that there will be an announcement for special measures to relax planning restrictions and provide important fiscal incentives - including tax relief - to provide a much-needed boost to the economy. The location of these growth zones will emerge from a local authority bidding process.
Stephen Hollowood, Head of Public Sector Consultancy at GVA comments: "In the 1980s and 90s, a total of 38 areas across Britain were awarded Enterprise Zone status, combining tax breaks, lighter regulation and simplified planning rules.
"However, the success of these areas was mixed. From a positive view point the transformation of the old docks on the Isle of Dogs in East London into the shiny Canary Wharf financial centre, which also benefitted from the construction of the Docklands Light Railway, has been an obvious success.
"To the contrary, the Merry Hill shopping centre in Birmingham was less so. This was borne out of a 1980's Enterprise Zone and, in particular, a relaxed planning regime that permitted development of a regional shopping centre on the former Round Oak steel works. This, in turn, proved to be to the detriment of Dudley town centre which subsequently went into terminal decline."
A number of the former Enterprise Zones have been seen as failures as growth areas. Criticisms focus especially upon evidence which demonstrates that jobs and investment were largely shifted from other areas outside these zones, and the fact that their growth stalled immediately as the 'Zone' status was removed and did not, therefore, contribute towards long-term sustainable economic growth.
Stephen Hollowood continues: "We anticipate Osborne will pledge £100 million to stimulate growth and job creation in the proposed growth zones to be selected by the Coalition Government. This investment will, however, be a mere drop in the ocean, compared to the money spent a generation ago when over £1 billion was waived in business rates and capital allowances alone across the 38 Enterprise Zones.
"To overcome criticisms of the 1980's approach and to align with the Localism Agenda, we would encourage Osborne to designate wider growth areas within which local authorities can pick from a range of incentives to stimulate local job creation. These measures can then be tailored to most suit the local economic circumstances affecting the area."
"We are eagerly awaiting the outcome of Wednesday's Budget announcement to see how the Government's policy framework to stimulate growth will be put in place. The money provided under the £1.4 billion Regional Growth Fund will form part of this, but this fund has been massively oversubscribed nationally."
GVA reports that Tax Increment Finance (TIF) is another new initiative likely to be mentioned in Wednesday's Budget speech to stimulate development activity. TIF has been successful in the USA as a means of providing the crucial kick-start funding required to bring forward large development and infrastructure projects. Birmingham is likely to provide a pilot project using TIF once the Government gives the go-ahead for its adoption.
Stephen Hollowood concludes: "Planning regulations are also likely to be relaxed to encourage new construction, including the removal of current rules that restrict conversion of offices to residential use."