Back to the future – but will new enterprise zones work?

It’s a Big Occasion.

We’ve had Chancellors of the Exchequer who’ve droned on like Gordon Brown, spraying statistics like a Gatling gun. Some, like Keighley’s own Denis (now Lord) Healey, had a sense of fun, and then there were quiet yet incisive ones like Geoffrey (now Lord) Howe; pompous ones like Nigel (now Lord) Lawson; those who enjoyed a tipple of weak Scotch while speaking, like Ken Clarke, and new boy George Osborne, an as-yet-unproven toff with plenty of zeal but little experience.

All very different. All claiming to have put Britain back on the road to recovery (will we ever get there?). “This is a Budget for growth”, is a regular claim.

Mr Osborne was boxed in by his own policies of cutting everything to the bone, which left him little room for generosity.

Nevertheless, he managed to pull some rabbits from the hat – doubling the cut in Corporation Tax by 2p; reducing fuel duty and axing a planned future rise; signalling the end of the 50p top rate of income tax (possibly) – and confirming rumours that the Coalition is to resurrect a 1980s economic policy of establishing Enterprise Zones in needy areas (they’ll need a lot of them then).

The new zones, 21 of them to start with, will include somewhere in the Leeds City Region, a collaboration of 11 local authorities, including Bradford.

A decision on where it will be will be taken by the board of the new Local Enterprise Partnership, which includes Bradford Council leader Ian Greenwood.

Weeks on from the Budget announcement, the idea of the zones looks as if it has lost some of its sparkle.

Harold Robinson, president of Bradford Chamber of Commerce, said: “We need to be wary about scrambling to get an enterprise zone in Bradford at any cost. Yes, there are some benefits if they are set up right and operate in the right way, but there are some dangers too. Enterprise Zones should not put existing businesses at a disadvantage or penalise them for the benefit of those within the zones.

“We must guard against displacement – simply moving firms and jobs from one place to another to take advantage of the benefits. You have to have safeguard measures in place for when the benefit period ends as well. We’ve had members argue that enterprise zones often put existing firms out of contention when bidding for work and can, indeed, ‘destroy’ them.

“Having said that, we don’t totally rule out the idea – it could work for Bradford if it is in the right place, operating under the right terms and conditions, and with an eye on securing long-term competitiveness. Ultimately, though, investing in regeneration and infrastructure is the way forward.”

Chamber chief executive Sandy Needham pointed out that the zones could be based on a geographical area, as in the old days; or on a sector such as the digital industry or manufacturing, in which case one would benefit Bradford.

“On the face of it, having an enterprise zone could be a good thing, but the danger of creating an uneven playing field, and encouraging companies in just because of available funds, should be borne in mind,” she said.

Mrs Needham and her membership are worried about a little-noticed Budget measure, which slashed the rateable threshold at which landlords start to pay rates on empty commercial premises, from £18,000 to around £2,600.

The Chamber had a long battle with previous Chancellor Alistair Darling in a vain bid to get him to restore previously higher-rate relief on empty properties.

Now, business leaders fear that Mr Osborne’s measures present a major hurdle for owners of premises which remain empty in a sluggish property market.

“If rates kick in at this much lower level, it will be a big problem for some owners. These are not people who are deliberately sitting on empty properties until values rise substantially. That is not going to happen in the current market, and in any case property values in Bradford are traditionally lower than elsewhere.

“Years ago, when faced with a similar situation, I understand that some landlords took the roofs off their buildings to avoid the tax. I’m not saying that will happen again, but the Budget has added to the problems of hard-pressed commercial landlords in the district.” said Mrs Needham.

Chamber members were also opposed to another rise in National Insurance contributions and were disappointed that the Chancellor did not take steps to start unifying the income tax and National Insurance systems.

Bradford chartered accountancy firm Watson Buckle has advised its clients to look at the finer details of the Budget and the provisions that have been made to fuel businesses growth, create jobs and encourage enterprise.

Partner John Kinsella said: “It was encouraging to hear that George Osborne wants to promote Britain as the best place to do business in Europe. We may currently be far from that, but the new measures outlined by the Chancellor will hopefully encourage start-ups and benefit smaller businesses.

“Small-to-medium businesses have had a tough couple of years, and it is encouraging to see that the Government is making moves to ensure there are some positives ahead.”

Mr Kinsella believes that enterprise zones will help to boost economic activity through tax incentives. He also welcomed the initiation of 40,000 new apprenticeships for unemployed people, along with 100,000 work experience placements and a clampdown on tax avoidance.

Alan Jones, managing director of Pudsey-based human resources specialist Cascade, said: “Some business leaders seem generally happy with the points raised, while the Chartered Institute for Personnel Development, on the other hand, has warned that the Budget will do little to diminish economic pain, especially in the short term.

“I personally feel that more could have been done, and that the focus could have been slightly different to ensure a Budget of greater overall benefit.

“A one per cent reduction in corporation tax, for example, has been welcomed by many. However, a better approach would perhaps be to maintain the rate of National Insurance as essentially a tax on jobs.

“Not only would this prevent an additional financial burden for employers, but if the cost to take on new staff remained manageable, unemployment rates would perhaps not rocket by a further 100,000 this year, as the Government has forecast.”

Mr Jones said the promise of a three-year suspension of new employment legislation for small businesses could also be viewed as questionable. He said: “I feel the Government should instead concentrate on bringing about employment regulations that do good not harm, irrespective of company size.

“As a responsible employer I look to protect my workforce at every possible opportunity, but on a practical level, extending the time in which a new employee can be dismissed if they’re underperforming for example, would help many organisations regardless of how large or small they are.”