The East Midlands could get three low tax “Investment Zones” in a bid to drive growth as the new Government desperately tries to outmanoeuvre the looming recession, rising inflation and businesses desperately trying to keep their heads above water.
Chancellor Kwasi Kwarteng has said the new low-tax zones would see planning rules relaxed and business taxes cut to encourage investment. They were part of a raft of tax cuts announced in the mini-budget – which will cost the Exchequer billions of pounds – and are above and beyond plans already under way for a freeport around the East midlands Airport, Ratcliffe on Soar power station and the East Midlands Intermodal Park in Derbyshire.
The Investment Zones would see businesses benefit from time-limited tax benefits, more land for housing and commercial development and extra financial support for Mayoral combined authorities hosting the zones.
The Government says they will be “carefully designed to encourage investment and new economic activity, supporting growth and jobs”.
The three East Midland council areas where discussions have taken place – out of 38 in total – are Derbyshire County Council, Leicestershire County Council and Nottinghamshire County Council. All are Conservative controlled.
David Pendle, a Nottingham-based partner at planning consultancy Marrons Planning, hopes the Investment Zones could encourage growth thanks to the lower taxes, simplified planning and less red tape around environmental protection.
He said: “The country is facing many challenges and the public sector – certainly at a local level – is trying to work out how to extract more funding from development. It will be interesting to see the proposals and work out how they fit together into broader plans.”
East Midlands Chamber policy and external affairs director Chris Hobson said the Chancellor’s fiscal statement was a bold attempt to keep the economy on track.
He said: “We’ve been crying out for the economic pressure valve to be released, and businesses will welcome many of the policies featured in the Growth Plan, including a reversal in national insurance contributions, cancellation of the planned corporation tax rise, a wholesale energy price cap for firms and making the annual investment allowance permanent.
“These are measures that will give businesses more headroom at a time when spiralling costs for energy, people, fuel and raw materials have forced many to tighten their belts and restrict investment plans, which are vital to kickstarting our economy.
“There were a lot of big statements that businesses will cling to – in particular, getting the basics right in terms of streamlining planning rules for commercial development and promising to accelerate infrastructure projects in key areas like road, rail and digital.
“However, these aren’t new concepts and previous policy promises haven’t always been delivered, so real progress must finally be made – nowhere more so than in the East Midlands, where we receive the lowest public investment per head in areas like transport and are eagerly awaiting to see schemes like HS2 East and Midland Main Line electrification move forward.
“The announcement of investment zones will be intriguing for businesses and it’s positive to see Derbyshire, Leicestershire and Nottinghamshire county councils all in discussion with Government. We really need to see more detail about what these will involve, their scale and how they will interact with other schemes, such as the East Midlands Freeport, before firms can begin to think about funnelling investment through these zones.”
The discussions about low tax zones combined with wholesale tax cuts elsewhere in the budget came as one council leader in the region warned its budget gap was set to grow from £8 million to £28 million next year – and could even top £140 million by 2026.
Coun Nick Rushton, Tory leader of Leicestershire County Council, said the council was facing a crisis unlike any before, with global events, rising inflation, surging demand for services and the continued impact of Covid sending costs up at an unprecedented rate.
He said: “Our financial situation is frightening, worse than the years of austerity. We’ve lost £230 million a year in spending power since 2010.
“We’re very lean so it’s not possible to balance the books without impacting front line services. We pride ourselves on doing the best we can with the money we have but we will have to make some tough decisions. Nothing is off the table.
“As the lowest funded county council under the Government’s funding system, Leicestershire will always be sensitive to financial shocks. But the challenge currently being faced will put even the best funded local authorities under pressure.”
Lisa Botterill is a corporate partner in the Leicester office of Shakespeare Martineau law firm and said businesses further reassurance that they would be able to survive through the coming months and years.
She said: “While always welcome as it helps encourage growth – which we will need to keep us out of a recession – the announcement that next year’s planned corporation tax rise will no longer happen isn’t going to solve the cost of living problem we are currently facing.
“The real issue here is the huge increase in energy bills. While consumers have been given some protection by the recent price fix Prime Minister Liz Truss announced, the recently-announced six-month support for businesses isn’t going to help with any long-term business planning and still leaves a huge amount of uncertainty for businesses of all sizes.
“Companies in all sectors – but especially those involved in manufacturing that consume large amounts of energy in producing goods – have seen astronomical increases in their energy bills, which are then inevitably being passed on in the cost to the end user, fuelling inflation.
“The recently-announced measures fall way short of giving businesses the certainty they need to continue to invest and grow.
“Any measures introduced need to get right back to the crux of the problem to provide more long-term certainty and stability to really get control of inflation.”
Elsewhere cuts to stamp duty will benefit the region’s big housebuilders including Barratt, David Wilson, Jelson, William Davis and Davidsons.
The nil rate stamp duty band has been doubled to £250,000, with the threshold for first-time buyers rising to £425,000, to support the UK housing market.
Measham-based Bloor Homes said the stamp duty cut along with cuts to income tax and the energy price cap would help it.
Group sales and marketing director Mark Powell said: “We welcome any measures which will help people afford the biggest asset most of us will ever own – a new home.
“Saving up for a new home can be an arduous task, so cutting stamp duty costs could help many people buy quicker than they had previously thought possible. It may even mean that some people are able to buy a bigger home than they had originally planned on purchasing.
“Not only that, but the ‘Energy Price Guarantee’ means that we can all be more comfortable in our homes this winter, without worrying about spiralling household bills.
"Newbuild homes, such as those built by us here at Bloor, tend to be more energy efficient anyway, but it’s great to have that extra reassurance.
“A thriving housing market underpins a successful economy, so we welcome these important changes made by the Government.”
