Investment zones and red-tape removal drive Kwarteng’s ‘new era for Britain’by
New low-tax, low-regulation investment zones and a package designed to speed up the development of infrastructure projects form part of the new Chancellor’s plan to grow the economy.
In a press release issued the night before the mini-Budget, newly appointed Chancellor Kwasi Kwarteng promised “a new era for Britain”.
This was to be facilitated by the prospective introduction of 38 new investment zones and legislation to speed up around 100 major infrastructure projects.
What we know
Many of the details are currently sketchy, which is to be expected given that the new administration has only been in place for a fortnight and events surrounding the Queen’s funeral occupied much of that time.
The intention is for there to be new investment zones in 38 regional locations across England (for full location details see the government’s factsheet).
In addition, other areas will be invited to make proposals to join the list and the government is to work with the devolved administrations with a view to introducing investment zones in Scotland, Wales and Northern Ireland.
In the Treasury’s words “each investment zone will offer generous, targeted and time-limited tax cuts for businesses, backing them to increase productivity and create new jobs. This could encourage investment in new shopping centres, restaurants, apartments and offices – creating thriving new communities.”
There is limited information about the tax incentives, but the Chancellor has stated his intention to offer reduced taxes for businesses in designated sites for a 10-year period.
The incentives will include accelerated tax relief for structures and buildings and 100% tax relief on qualifying investments on plant and machinery connected with purchases of land and buildings for commercial or new residential development.
Going further, there will be no stamp duty on acquisition or business rates.
Finally, the first £50,000 of remuneration for each new employee will not be subject to employer’s national insurance contributions.
There will also be reforms to environmental regulation and other planning policies, for example removing height restrictions on development. Negotiations between councils and developers for each project over affordable housing conditions, labelled by the Chancellor as “time-consuming,” will be scrapped. Instead, a set percentage of affordable homes will be required in any relevant project.
Since planning regulations are to be watered down in an effort to speed up the implementation of development projects, there is likely to be considerable concern amongst local residents who are affected, unless they retain adequate rights to object -- for example to high-rise buildings that will block out light and views.
In the same press release, the Chancellor announced that he plans to “set out an ambitious package of measures” to accelerate delivery of around 100 major infrastructure projects.
Broadly, the intention is to remove as much of the red tape around development, consultation and consent as possible, in order to speed up the completion of projects to build new roads and rail lines, green energy initiatives and other major infrastructure projects.
Many might applaud this initiative but there will be concerns, especially from environmentalists at proposals that include “reducing the burden of environmental assessments in the consultation process and reforming habitat and species regulations”.
What we don’t know
In many ways, what we don’t know is more significant than what we do.
Investment zones will only be introduced if there is support from local leaders. In some cases, they may prefer to plough their own furrow rather than getting on the government’s bandwagon.
In an effort to encourage them to become involved, the government plans to work closely with local leaders to develop tailored proposals that work in their regions.
Therefore, it is uncertain whether any or all of the proposals will be implemented.
There are few precise details on the tax incentives available in the investment zones. This will be to be critical both to selling the concept and implementing projects.
While there are no tax implications around the new proposals, they could prove equally controversial and may face significant opposition and amendment in both Houses of Parliament.
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