Tories revive 1980s plan to boost economy


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The Independent Online

The Chancellor, George Osborne, is hoping to kick-start the economy and create businesses and more jobs with a series of new "enterprise zones".

The areas will offer tax breaks, relaxed planning regulations and high-speed broadband to attract start-up companies and have been described by Mr Osborne as a "critical part" of the government's growth strategy.

But many have questioned the effectiveness of the policy, arguing that jobs created are simply displaced from other areas and that the cost of setting up the zones outweighs the economic benefits. A report by Centre for Cities released in February called for "a new approach to area-based growth," suggesting that the scheme used in the 1980s by Margaret Thatcher's government was ineffective.

"The enterprise zones of the 1980s did not create enough jobs and were too costly for the public purse to be effective today," the report said.

It added: "The incentives used to encourage business growth and relocation – business rate relief or capital-based spending and allowances – also weighed heavily on public finances." Supporters of Mr Osborne's strategy point to the success of the Isle of Dogs in the London Docklands – now Canary Wharf – which itself began as an enterprise zone.

But another think-tank says this example is misleading. A report from the Work Foundation, also released in February, said that when the Docklands enterprise zone expired there were just 7,000 people working in Canary Wharf, compared with 90,000 today. Andrew Sissons, a researcher at the foundation, told Radio 4's Today programme that the zones were merely an "expensive way of moving jobs around the country."

The report claimed that four out of five jobs created were displaced jobs from areas outside the zone.