The chancellor announced plans to establish 21 new enterprise zones across England that will seek to stimulate selected areas of the country through tax breaks, reduced planning restrictions and "superfast" broadband.
George Osborne announced that the first zones will be based in Leeds, Sheffield, Liverpool, Greater Manchester, the west of England, the north-east, Tees Valley, Nottinghamshire, the Black Country and Derbyshire. Boris Johnson, the mayor of London, said he had been asked to select a suitable area in the capital and had chosen 125 hectares (more than 300 acres) of land in the historic Royal Docks, in the borough of Newham. Local authorities have been invited to tender for the remaining zones.
The enterprise zones will offer a business discount rate worth up to £275,000 over five years for firms that move into the area over the course of this parliament. The government said it will also help develop "radically simplified" planning processes, and pledged to introduce superfast broadband in the area.
The chancellor also said he would consider enhancing capital allowances for plant and machinery in the zones and announced that, for at least 25 years, all business rates growth within the zone will be retained by local authorities to support their economy.
Commentators broadly welcomed the initiative, although some said they ran the risk of simply shifting business from one area to another, rather than encouraging start-ups. Andrew Goodwin, of the Ernst & Young Item Club forecasting group, said: "Enterprise zones are a good idea, so long as they encourage new investment. Just moving business that would already have happened into an enterprise zone actually takes away from the macro-economy because of the incentives. On balance, I think the proposal has a fighting chance of success."
Andrew Tyrie, chairman of the Treasury select committee, added also voiced his concern "that we don't inadvertently end up merely moving activity around the country while adding nothing to the overall welfare of UK Inc." He added: "This is a very difficult judgement and we need to look extremely carefully at it."
Mark Serwotka, general secretary of the Public and Commercial Services Union, added: "While the 21 new enterprise zones have real potential, we question why the whole of the UK can't be an enterprise zone."
Enterprise Investment Scheme reform
In what the chancellor repeatedly described as his quest "to make the UK the best place in Europe to start, finance and grow a business", he introduced a related measure – reform of the Enterprise Investment Scheme (EIS), which encourages investors to put money into unquoted companies by offering tax reliefs.
The EIS changes will increase the rate of income tax relief from 20% to 30% from April 2011, and, from April 2012, double the annual investment limit to £1m per person, increase the size of eligible companies from 50 to 250 staff and the gross asset size of eligible companies from £7m to £15m. "Let Britain be the home of enterprise in an age when people can invest all over the world," Osborne said.
"The lack of start-up capital has been a longstanding problem in the British economy," the chancellor added. "Too often we have the great ideas in Britain, but it's the other countries that exploit them."
ohnson enthused about his decision to award enterprise zone status to about 125 hectares of land in London's historic Royal Docks, adjacent to City Airport, near Newham.
"This new status is the icing on the cake for my vision to return the Royals to their former glory as a thriving, vibrant place to live, work and visit," said the mayor.
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