Low tax investment zones must not be used to 'steal businesses from the North'

Prime Minister Liz Truss is keen to roll out dozens of these zones, where businesses will be offered a range of tax cuts and planning rules will be relaxed, in a bid to accelerate development, generate additional investment and drive economic growth.

The Government is holding discussions with political leaders representing 38 areas that have expressed an interest, including North, South, East and West Yorkshire, and Hull.

Despite a number of recent u-turns on its economic policies, Levelling Up Secretary Simon Clarke told MPs earlier this week the Government remains committed to these zones, and assured critics they will not be used to erode employment rights or get rid of environmental regulations.

Henri Murison, Chief Executive of the Northern Powerhouse Partnership, said the scheme must aim to attract overseas investment, not encourage British-based businesses to relocate so they can take advantage of the tax breaks.

“We’re not concerned that any areas in Yorkshire are going to become involved in a race to the bottom, but other parts of the country might try and do that,” he said.

“We don’t want to incentivise places in the South to try and steal businesses from the North of England. We don’t want to steal business from the South either, we want it to come from overseas.”

He added: “Why should very prosperous parts of the country get any investment zones at all? They are already commercial places to develop housing and invest.”

Mr Murison also said the zones should only be set up in areas like Bradford where they can be used to support regeneration, by attracting highly skilled and highly paid jobs.

He added: “Our view is that they should be specifically focused on attracting foreign direct investment, because in that space you are competing against countries like Singapore, Ireland and France.

“If they're going to literally just move the same activity around the country, then it doesn't help the UK economy one bit. It just means we lose tax revenue.”

The Government has said it will work with local leaders to ensure businesses and developments are not “displaced” by the low-tax zones.

It also said they will be set up in areas where they will have “the greatest impact on growth and housing supply” and they will “particularly support regeneration of undeveloped and under-developed areas”.

Speaking in the Commons, Mr Clarke said the scheme is designed to “deliver growth and jobs”.

“We have had hundreds of applications from local authorities for these zones, which is testament to the huge appetite for growth and investment opportunities,” he said.

“On tax advantages, there will be a range of powers available, including on business rates relief, enhanced structures and buildings allowances, enhanced capital allowances and, critically, action on employer national insurance contributions."