A new report (40-page / 673KB PDF)by the business body assesses the growth potential in different UK regions, and recommends “bigger and bolder” incentives targeted to the needs of individual areas, rather than the ‘one-size-fits-all’ approach of current regional initiatives.
Specific recommendations include reassessing the size and scope of Enterprise Zones, reducing the minimum amount that can be bid for under the Regional Growth Fund (RGF) to £500,000 and encouraging the use of tax increment financing (TIF) schemes in urban areas outside the core cities. Policymakers involved in Local Enterprise Partnerships (LEPs) should be given statutory status to encourage them to take the lead on local projects, and to work together to plan for ‘larger-than-local’ projects, such as integrated transport networks.
CBI director-general John Cridland said that “every part of Britain” needed support in order to rebalance the UK economy.
“It is possible, if the Government avoids a ‘one-size-fits-all’ approach to regional growth across the UK, and instead concentrates on boosting the private sector wherever pockets of potential are found in towns and cities within regions,” he said. “While Government initiatives like the Regional Growth Fund, business rate retention and Enterprise Zones are certainly welcomed by businesses, the incentives must be bigger and bolder.”
Last month the Government signed “city deals”, devolving individually-negotiated powers from central government to local government, to eight of England’s largest cities. While welcoming the agreements, the CBI said that these arrangements should cover areas which correspond with existing LEP boundaries. LEPs consist of partnerships between local authorities, businesses and other stakeholders. They were launched by Government in June 2010 to help deliver economic growth and decentralisation. There are currently 39 LEPs across England.
“Where a city deal only applies to a portion of an LEP there is the potential for division and unnecessary complexity,” the report said. “Businesses would urge government to work with cities to ensure that LEP and city deal boundaries differ only where there are good reasons for this being the case.”
According to the report, the current £1 million bid threshold for the RGF prevents small and medium-sized enterprises (SMEs) from bidding for a share of the funding. The RGF is a funding programme operating across England between 2011 and 2015 to support projects and programmes with significant potential for economic growth and sustainable private sector employment opportunities. The Government recently increased the amount of cash available under the scheme to £2.4 billion. The CBI also suggests that the Government give preferential treatment to larger bids by cities or LEPs that pledge to make money available to SMEs.
Enterprise zones, which can offer a range of incentives such as relaxed planning rules and tax incentives to businesses, should be expanded geographically to raise awareness of their existence, the report said. In addition, zones should be better linked into other local growth incentives including RGF projects and LEP work.
Tax increment financing (TIF) allows local authorities to fund regeneration projects by borrowing money against the predicted increase in locally-collected business taxes from the new development. It has recently been introduced in Scotland, while the Government expects to introduce it in England from next April.
The Scottish Government this week gave final approval to an £80m TIF scheme at the Buchanan Quarter in Glasgow City Centre, which it said could result in up to £310m of private investment and create almost 1,500 jobs. The scheme includes improvements to the city’s George Square and Upper Dundas Street areas, due to be completed before the Commonwealth Games in 2014, and upgrades to the Royal Concert Hall, Buchanan Street and Queen Street Station areas.
“The approval of the Buchanan Quarter project demonstrates what TIF is all about - delivering significant investment in infrastructure alongside private development commitment; creating economic activity and jobs in what remain difficult times,” said Peter Reekie, director of finance at the Scottish Futures Trust (SFT). “SFT has led the development of the TIF pilot programme across Scotland to deliver exactly these outcomes.”