The coalition government’s widely anticipated plans to revive enterprise zones in a bid to regenerate local economies and boost employment will prove costly and “ineffective”, two leading think-tanks have warned.
The return of the zones, which were widely used by the last Conservative administration between 1981 and 1996, is expected to be announced in the Budget next month. The move comes as the government finds itself under increasing pressure from business to come up with a strategy for economic growth. The scheme would see tax breaks and localised incentives being offered to local communities in a bid to stimulate investment.
But the Work Foundation’s analysis of historical data reveals that each job in the 38 previous zones cost an estimated £23,000 to create (the equivalent of £50,000 now) and four out of five posts were simply displaced from outside areas. Moreover, enterprise zones typically boosted local regions for only three years, before they lapsed back into depression.
Andrew Sissons, researcher at the think tank and lead author of the report, said: “Looking at enterprise zones created in the 1980s, there are serious doubts about the wisdom of bringing the policy back. Most of the areas that had such zones are still struggling today – places like Middlesborough, Speke, Hartlepool and Swansea. Any attempt to redesign the enterprise zones for the 21st century is likely to be equally ineffective.”
The Centre for Cities was somewhat more sympathetic to the concept, but said that it needed to be updated to create “local growth zones” in order to provide local communities with a wider range of policies from which to choose. The scheme should also be open to growing cities such as Cambridge and Brighton as well as to deprived areas, it added.
The think tank put the cost of creating each job at a lower £17,000 or £26,000 in today’s money, but the figure still compares unfavourably with the £6,500 per job created for Labour’s Future Jobs Fund and the £3,500 per job for its New Deal for Young People.