March 11, 2011 - Anonymous
The enterprise zones due to be unveiled in this year’s Budget must offer different tax breaks depending on the need of the local area, the Forum of Private Business (FPB) has said, writes Kate Horstead.
Chancellor George Osborne announced at the Conservatives’ spring conference that the Government will create an initial ten enterprise zones, giving businesses in potentially high-growth and less wealthy areas tax breaks and simpler planning rules. The aim is to encourage businesses in these regions to start up and grow.
The scheme is a smaller-scale version of the first enterprise zones launched in 1981 by Michael Heseltine.
FPB research projects manager, Thomas Parry, said that the zones have the potential to drive growth if a “flexible approach” is used. “There should not be a rigid set of rules, because the zones need to reflect local priorities in order to be effective,” he said.
“For instance, there is no point giving people heavy discounts on business rates if property values are very low in the first place, and some areas may benefit more than others from an extended National Insurance holiday to the first five years,” added Parry.
“However, we welcome the idea of enterprise zones. In some areas people need more encouragement and incentives to start businesses – it is still seen largely as something that rich people do.” he said. “But any employment and business growth in the enterprise zones should be sustainable, by using measures that encourage firms to stay in the area once they are established.”
He added that the Government should avoid “displacement”, where businesses and jobs move to certain regions, rather than driving overall growth. “The enterprise zones should also be introduced alongside a wider package of measures so that people everywhere are encouraged to set up businesses,” he said.
A Work Foundation report criticised the Government strategy, saying the zones would only ensure short-term investment, as they would focus on physical growth rather than skills and innovation. It also said that most of the jobs would be moved from other areas and that most of the zones of the 1980s are still struggling today.