Readers, you need to get your heads around the implications of this extension to the “freeports” that Boris Johnson announced.
As with freeports these low tax, low regulation investment zones will probably end up relocating, rather than creating, economic activity and jobs. They are unlikely to lead to the sort of growth transformation the Truss Government needs by the election due in January 2025. It’s a beggar my neighbour strategy.
The rules surrounding these zones will be open to “gaming”. They are likely, therefore, to be accompanied by some significant unintended consequences. The ability of the affluent in society to “relocate” by outbidding local people on a whim, is an example. The rise in second homes we see locally is driven by a desire to have a holiday home in more scenic parts of the country. Seeking residency in an area to reduce personal tax liability might provide a similarly strong motive for a second/alternative residence.
If these zones are a natural extension of freeports, consider this.
Dartmoor and the South Hams are already included in the Plymouth freeport area, so obviously would be included in any “Plymouth Investment Zone”.
Is Liz Truss going to replicate the Northern Ireland border issue all over the country as we move in and out of each “investment zone”, between the “low tax regimes” and “high tax regimes”? Sounds divisive to Owl.
Liz Truss to cut taxes in certain parts of the country picked by the government
Jon Stone www.independent.co.uk
The prime minister is reportedly planning to badge the areas “investment zones” – and will claim that the approach could boost economic growth.
Businesses based in the handpicked regions will be able to ignore some environmental regulations and pay lower rates of tax.
And workers living there could pay personal income taxes and national insurance at reduced rates, the government-supporting Sun On Sunday newspaper reports.
Details of the plans are still said to be being worked out, but an announcement could come as early as chancellor Kwasi Kwarteng‘s emergency budget on Friday.
The plans to apply the tax cuts to particular areas of the country only may raise eyebrows because the government has previously come under fire for playing political favourites.
A previous policy, the Towns Fund, selected areas to benefit from a £1 billion pot of investment – but this was mostly funnelled into Tory areas.
An inquiry by parliament’s spending watchdog, the Public Accounts Committee, concluded last year that the selection process to benefit from the fund was “not impartial” and decisions were “politically motivated”.
39 of the 45 places to receive the first round of funding were represented by Tory MPs.
It is not clear which areas will benefit from the “investment zone” tax cuts or how they will be picked.
Mr Kwarteng, who was appointed by Ms Truss earlier this month, is set to use Friday’s emergency budget to reverse Rishi Sunak’s rises in corporation tax and national insurance contributions.
Other policies are expected to include lifting the cap on bankers bonuses, which limits payouts to twice a banker’s annual salary. The policy was intended to reduce the risk-taking associated with bonuses incentives, and so reduce the risk of another financial crisis.
12 places earmarked for this status
Andrew Sparrow www.theguardian.com carries a bit more detail:
Planning regulations will be relaxed in up to 12 places earmarked for this status, and taxes will be cut to incentivise investment.
The West Midlands, the Thames estuary, the Tees Valley, West Yorkshire and Norfolk are among the places where the new zones might be sited. According to the plans set out by Truss in the summer, in each area there will be a central region, where regulations and planning rules will be eased to encourage industrial, commercial and residential development, and a periphery where the planning rules will be streamlined for housing.