Osborne hopes to kick-start economy with enterprise zones

Many argue that the jobs created are simply displaced from other areas, and that costs outweigh the benefits

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

Click HERE to view graphic (94k jpg)

The enterprise zones will offer tax breaks, relaxed planning regulations and high-speed broadband in an effort 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, pursued by both Margaret Thatcher and John Major throughout the 80s and 90s, arguing that jobs created are simply displaced from other areas, and that the cost of setting up the zones outweighs the economic benefits.

Months before an official announcement of the enterprise zones, two think tanks urged the government to reconsider the policy.

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 Thatcher was ineffective.

"The enterprise zones of the 80s 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 the Today programme that the zones were merely an "expensive way of moving jobs around the country."

The foundation's report claimed that the zones typically provided only a three-year boost to an area before it slipped back into depression, and that four out of five jobs created were displaced jobs from areas outside the enterprise zone.

This was the case in Dudley, according to John Rider, chairman of the Institute of Directors in the West Midlands, when it became one of the first waves of enterprise zones under Margaret Thatcher in the early 1980s.

A former steelworks site was transformed into a huge retail park with the help of the scheme, but not without a cost.

"I think the concept is reasonable but the reality was that they displaced people's jobs over the boundaries into the enterprise zones," Mr Rider said.

An Eighties revival

The original urban enterprise zones were the work of town planner Professor Peter Hall in the 1970s. He proposed setting up small sectors that allowed for "shamelessly free enterprise" as a "last-ditch solution" to turn around disadvantaged areas, and the first zones were established in 1981 under Margaret Thatcher.

Over the next 15 years, 38 were created across the country, with the most famous being London's Docklands. There, the success of turning what had been derelict wasteland into a modern financial hub might be considered to form the perfect inspiration for one of the nearby Royal Docks, which has been designated as one of the new zones.

While some would argue it would have been hard to encourage such a massive redevelopment without tax incentives, a report from the Work Foundation think tank has downplayed the impact of the project in encouraging investment in the Docklands, saying that when the zone expired, only 7,000 people were working there, as opposed to the 90,000 today when no such relief exists.

Another of the old zones was set up in Dudley in the West Midlands, leading to the creation of the Merry Hill shopping centre. There, however, some people argue that it merely led to jobs moving into the zone from other places, rather than creating new jobs.



Rob Hastings

Start your day with The Independent, sign up for daily news emails
News
The two faces revealed by the ultraviolet light
newsScholars left shaken after shining ultraviolet light on 500-year-old Welsh manuscript
News
Rosamund Pike played Bond girld Miranda Frost, who died in Die Another Day (PA)
news
Arts and Entertainment
books
News
Lapping it up: a woman feeds felines at a cat café in Japan
newsThe vast majority of cat and dog 'wet foods' contain items not specified on the tin, study finds
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: In House Counsel - Contracts

Negotiable: Recruitment Genius: This leading supplier of compliance software a...

Recruitment Genius: Associate System Engineer

£24000 - £30000 per annum: Recruitment Genius: The Associate System Engineer r...

Recruitment Genius: Executive Assistant

Negotiable: Recruitment Genius: An Executive Assistant is required to join a l...

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Day In a Page

General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat