The UK will “change its approach” to investment zones, shifting the focus to research and development in universities, Britain’s Chancellor Jeremy Hunt has said.
The policy, which was introduced by former UK Prime Minister, Liz Truss, proposed low-tax investment zones in a bid to boost UK economic growth.
At the time of the launch in September, former British chancellor Kwasi Kwarteng said the zones would offer sweeping tax cuts and loose planning rules.
Local authorities raced to submit their applications by an October 14 deadline, but six days later Truss resigned.
Sources had suggested Mr Hunt was planning to scrap the policy. He has now confirmed the “approach” will change.
Addressing the Commons during a speech to announce the autumn statement, the Chancellor said: “To spur competition, I have listened to requests from businesses and I'm removing import tariffs on over 100 goods used by UK businesses in their production processes, from car seat parts to bicycle frames.
“I will also change our approach to investment zones which will now focus on leveraging our research strengths, to help build clusters for our new growth industries.”
During Ms Truss's premiership, the Treasury calculated the investment zones could cost up to £12 billion ($13.85 billion) in lost tax revenue each year — if a strict cap was not placed on the number — because they would subsidise economic activity that would happen anyway.
The autumn statement said the new plan for the programme will “catalyse a limited number of the highest potential knowledge-intensive growth clusters, including through leveraging local research strengths”.
“The Department for Levelling Up, Housing and Communities will work closely with mayors, devolved administrations, local authorities, businesses and other local partners to consider how best to identify and support these clusters, driving growth while maintaining high environmental standards, with the first clusters to be announced in the coming months,” said the statement.
“The existing expressions of interest will therefore not be taken forward.”
The announcement was part of a raft of measures announced in the statement, which included a package of £30 billion spending cuts and £24 billion tax rises over the next five years to help address the UK’s fiscal deficit.
They include an increase in the windfall tax on oil and gas giants, from 25 per cent to 35 per cent, and a 45 per cent levy on electricity generators.
The threshold at which the top rate of income tax is paid will be reduced from £150,000 to £125,140.
Other measures include state pensions increasing in line with inflation in April, the “biggest ever cash increase in the state pension,” while the defence budget will be maintained at least 2 per cent of gross domestic product (GDP).
Mr Hunt confirmed the economy is set to shrink by 1.4 per cent next year after the fiscal watchdog, the Office for Budget Responsibility, slashed growth forecasts amid rampant inflation.
GDP will fall in 2023 by 1.4 per cent, before rising by 1.3 per cent, 2.6 per cent and 2.7 per cent in the next three years, he predicted.