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Chancellor announces Enterprise Zones for Tyneside and Teesside

Richard Moss | 14:20 UK time, Wednesday, 23 March 2011

George Osborne

George Osborne leaves 11 Downing Street to deliver his Budget.

It was billed as a Budget for growth - a switch from rescue to recovery - and in the North East much of that will depend on the success of two new enterprise zones.

The Chancellor announced there will be 21 enterprise zones in total and revealed the areas that will get the first 10.

They include Tyneside and Teesside.

George Osborne said there will be more specifics announced about their exact locations within those areas tomorrow.

But he did reveal what will be on offer.

Businesses could be offered up to 100% rate relief, superfast broadband and enhanced capital allowances to encourage investment.

And the areas that get enterprise zones will also benefit. They will be able to keep and spend any growth in business rate receipts for 25 years, and benefit from simplified planning regulations.

It marks the latest departure from Labour's policy of putting economic development in the hands of the likes of One North East.

Instead of big grants, the emphasis will be on offering incentives to businesses to locate and expand in targeted areas.

But will it work?

One Labour MP certainly doesn't think so.

Middlesbrough South's Tom Blenkinsop secured a Commons debate this week about economic development in the region.

In it he raised serious doubts about the effectiveness of the enterprise zones that existed under the last Conservative government.

He said: "Locally, Middlesbrough's Riverside Park...was designated as an enterprise zone, but all that happened was a rush to get speculative office development off the ground with no tenants and no businesses to fill the new buildings."

Tom Blenkinsop

Labour's Tom Blenkinsop is not convinced that enterprise zones will be a big help to the North East economy.

He also quoted figures which suggested that between 1981 and 1986, the £300m poured into enterprise zones only created 13,000 new jobs.

The same research also suggested many of the jobs created were merely displaced from areas which didn't have enterprise zone status - 25% from within the same town.

Others though are enthusiastic. The Stockton South Conservative MP James Wharton is a big fan of the idea, and has pushed hard for Teesside to be among the first tranche.

He said: "The Enterprise Zone is further great news story for Teesside, hot on the heels of the announcements of new investment in Corus and Hitachi. It provides the new Teesside Local Enterprise Partnership with a powerful tool for attracting investment, and will bring sustainable jobs to our community."

But what of the areas that missed out? Local Enterprise Partnerships will get a chance to bid to be in a second wave of zones in the summer, but somewhere like Cumbria will have to compete with big urban areas if it wants a slice of the action.

The Politics Show will be looking at what enterprise zones might or might not have to offer at 12pm on 27 March.

Some were expecting the Chancellor to announce the first awards from the Regional Growth Fund too.

The North East and Cumbria has 76 bids in, but with the fund massively oversubscribed, the ones that don't get money might attract as much attention as those that do.

But that will have to wait, although not for too long.

The Government is keen to get away from the constant talk about cuts, and move the agenda onto what they are doing to boost the economy. The announcement of the growth fund grants will be a key part of that.

And transport minister Theresa Villiers is in the North East to talk about the economic benefits of High Speed Rail for the region (we won't be on the line, but the Government says it could cut 30 minutes off journey times from Newcastle to London).

But nevertheless of course, we are still living with the legacy of George Osborne's first budget. The new financial year will be one of austerity for councils and other organisations dependent on public sector funding.

And Labour is already seizing on the Chancellor's downgrading of growth forecasts.

So George Osborne and the Coalition really do need enterprise zones and the like to deliver to ensure cuts do fade in the public mind before a 2015 election.

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