Eric Pickles is pressing for a second tranche of enterprise zones as part of the government’s push to devolve more power to Britain’s big regional cities.
The communities secretary told the Financial Times that devolution deals such as the one signed with Manchester last week were the best way to extend the 24 tax-friendly zones to more areas.
“I think there is a case to further extend this, I think it can be extended through a city deal,” Mr Pickles said. He is lobbying George Osborne even as the chancellor prepares to strike similar deals with Leeds and Sheffield in the coming weeks.
Manchester, which already has an enterprise zone by its airport, is to receive power over skills, transport, housing and billions annually of public spending through the deal, from 2017.
More than 20 cities have already agreed less extensive “city deals”, which could now be granted to towns and counties, with an enterprise zone included.
Mr Pickles’ pitch came as the number of jobs created in the zones reached 12,500, more than double the figure at the beginning of the year.
The government had originally pledged to create 54,000 jobs but reduced that target to between 6,000 and 18,000 last year as it struggled to attract businesses into the zones. In April last year, just 1,700 jobs had been created by the initiative while in December it was 4,649. It also extended incentives from 2015 to 2018 in recognition of the slow take-up.
The government has also had to offer about £160m in infrastructure and capital grants to make the zones “shovel ready”.
Eight of the zones still only have partial superfast broadband – although four of those are set to be fully online by the end of the month.
The government is expected to forgo £95m in taxes until 2017 from incentives.
The zones offer companies relief on business rates, simplified planning procedures and superfast broadband. Some also attract capital allowances or EU-backed grants because of local economic deprivation.
Paul Swinney, senior economist at the Centre for Cities think-tank, said the “jury was still out” on whether they provided genuine economic benefit.
“There is an issue with how long it takes to get these sites ready. How many of these jobs are new and how many simply displaced from elsewhere?”
He said zones should be focused on city centres, where companies would derive the biggest benefit.
Most have attracted mainly big infrastructure projects, such as waste plants and logistics warehouses.
Mr Pickles said he now believed he would hit that new 18,000 target next year on the back of the economic recovery. The zones, in economically deprived parts of the country, have attracted 434 businesses and generated more than £2bn worth of private investment.
He said the uptick in activity on the sites proved the policy was working. “If we are paving the way for more, I am happy with that,” he said.
“I do think the principle of where these [new enterprise zones] are likely to come is through city deals and county deals.”
Local enterprise partnerships, in charge of economic development, retain some of the revenue from the zones, giving them a funding stream independent of Whitehall.
Courtesy of ft.com