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EVERY northern city would be designated an Enterprise Zone and regional pay introduced for future public sector workers under a radical plan to kick-start growth laid out by business leaders.

Adam Marshall, director of policy at the British Chambers of Commerce, told a fringe meeting at the Labour Party conference that sweeping changes were required to boost the private sector in the North.

Mr Marshall said the Skills Funding Agency should be abolished and its entire budget handed to the private sector, and that National Insurance should be abolished for 18 to 24-year-olds to encourage firms to take on young people.

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He also called for the Government’s Enterprise Zones to be extended to cover the whole of “every major city” to offer tax breaks to start-up firms and boost growth.

Most controversially, he said the Government should push ahead with regional pay deals in the public sector despite widespread concern that such a move would suck money and talent out of poorer areas and widen the North/South divide.

“We do have very strong anecdotal evidence of the public sector crowding out the private sector in the competition for top-level skills,” he said. “When a new graduate who is 22 years old goes into a public sector managerial job, he is often on a 10 or 20 per cent wage premium; a much enhanced pension.

“I’m not saying we should cut public sector wages in our northern cities tomorrow. If we did that it would be cutting us off at the knees – a disaster for our local economies.

“But I do think we have to go back to the issue of regionalised pay and look at it very closely for future employees, so we never again get into a situation where we are crowding out some of these private companies.”

Mr Marshall also criticised the way infrastructure is rolled out in the UK, saying it is frequently hampered by “political short-term-ism”.