The Government intends to create Investment Zones (IZ) in England and to work closely with the devolved administrations to establish investment zones in Scotland, Wales and Northern Ireland. Companies and new development located within IZ will benefit from a range of tax and planning incentives; tax measures will encourage investment and employment, the need for planning permission will be lessened, and additional/new land will be made available for development.
In September 2022, The Government announced the creation of low-tax, low-regulation IZ in every part of England “as quickly as possible” to encourage “rapid development and business investment”. Specifically, the Government invited Expressions of Interest (EOI) to be submitted by 14 October 2022. The full list of those authorities with which Government is in discussions is below. The submissions are not generally in the public domain, however some have been referenced in a debate on the 17th October in the House of Commons (HOC).
Government intends that the local authorities, Mayors and those in control of the IZ will designate ‘development sites’ for housing and commercial development and will take measure to support accelerated development. The process of designating these development sites has yet to be described by Government.
The creation of the IZ will require primary legislation to be enacted prior to their commencement. And so any Government intention and ambition for IZ is likely to be influenced by the parliamentary process, notwithstanding the current majority. The Government envisages that investment zones will be within a Mayoral Combined Authorities (MCAs) and Upper Tier Local Authorities (UTLAs), district councils have seemingly been excluded from submitting EOI.
Some details of the various corporate tax, employment taxes, stamp duty and Duty and VAT reliefs which may be available to companies established in designated sites within IZ have been published and these are set out below. Again caution is needed as this list is likely to be amended:
- 100% first year allowance for companies’ qualifying expenditure on plant and machinery assets for use in tax sites.
- Accelerated relief to allow businesses to reduce their taxable profits by 20% of the cost of qualifying non-residential investment per year, relieving 100% of their cost of investment over five years.
- Full Stamp Duty Land Tax (SDLT) relief for land and buildings bought for use or development for commercial purposes, and for purchases of land or buildings for residential developers.
- Zero-rate Employer NICs on salaries of any new employee working in the tax site for at least 60% of their time, on earnings up to £50,270 per year, with Employer NICs being charged at the usual rate above this level.
- 100% relief from business rates on newly occupied business premises, and certain existing buildings where they expand in English Investment Zone tax sites. Councils hosting Investment Zones will receive 100% of the business rates growth in designated sites above an agreed baseline for 25 years.
In the HOC debate the Secretary of State gave an indication that Government will make additional public sector funding available for aspects of IZ. However this must now be in some doubt with recent Government changes. Notwithstanding extra funding or not the central tenet of an IZ is the waiving and lifting of regulatory and tax requirements. One of the key barriers to increasing productivity, increasing growth and accelerating development is seen by the Government as the ‘red tape’ of the planning process. Quite how this process will be ‘relaxed’ to be less of a barrier is unclear. As many practicing planners will tell you much of the delay in determining applications is often caused by delays in the response of statutory consultees – each struggling from cuts to staff and unable to respond within tight timescales. Tensions within the current Government will also require a balance to be achieved between community involvement in whatever changes are made to decision making and speeding up of development. One nation Tories v ERG?
From the perspective of planning policy, Government intends to allow investment zones to (in some as of yet undefined) way set aside existing development plan policies. Quite which ones and how they will be legally set aside will require some careful legislative drafting. And some quick local plan work!
In setting aside existing development plan policies it is anticipated by Government that the ‘new policy framework’ will allocate / release additional land for housing and commercial development. This rapid (and undemocratic?) change if likely to lead to procedural and political challenges, with any such new allocations of land for development being challenged by objectors. The need for some types of development to obtain planning permission may be waived with changes made to the use classes order and ‘permitted development’ rights. Such changes are likely to be modest as developments of any magnitude will necessitate some scrutiny by regulators to ensure that flood risk is not exacerbated or highway access is to standard etc. The overall objective of investment zones will be to minimised the need for applications for planning permission and for the process of making and determining applications to be streamlined. However no details of how have been released.
The Government ambition is that new development sites may be co-located with, or separate to, tax sites, depending on what ‘makes most sense for the local economy’ – how so ever that is to be measured? The Secretary of State for the Department for Levelling Up, Housing and Communities will set out the selection criteria to become an IZ, and the process for designating sites within it.
Government has indicated that IZ sites may be aligned with existing local growth strategies and transport plans. From a quick review of the information available of EOI’s many of the submissions are based on these strategies. Sites that already have a masterplan, development order or outline permission are included by some MCAs and UTLAs as a potential IZ, whilst others include land where planning consent is yet to be granted. Government has confirmed that development sites where planning policies and regulations are to be simplified may be co-located with, or separate to, tax sites, depending on ‘what makes most sense for the local economy’ – again who decides?
These Mayoral Combined Authorities (MCAs) and Upper Tier Local Authorities (UTLAs) where there is no MCA, were invited to complete a full EOI to submit to the Government by 14th October 2022.
The Government’s expectation for MCAs, and UTLAs is that as an absolute minimum they will:
- Agree that IZ flexibilities / benefits will be conditional on MCAs, UTLAs and local partners honouring the commitments made in the EOI and any subsequent negotiation and, and on local democratic consent and Parliamentary approval of any legislation
- Comply with Subsidy Control and the Public Sector Equality Duty
- Work with the Government to agree suitable governance mechanisms for any potential IZ; and for the complementary functions
- Work with the Government to agree suitable accountability and readiness arrangements as part of any potential IZ
- Demonstrate how an IZ will meet the MCAs and UTLA’s own objectives, including in relation to transport, regeneration, economic growth, and tackling local challenges
- Provide metrics of success closely aligned with the growth and housing ambitions of the programme to the Government
Existing Freeports will be able to apply to become investment zones.
To accelerate developments which are in the concept/design stages and to encourage additional development proposals there will be a new faster and more streamlined process for the granting of planning permission.
In particular, the Government ambition is to:
- Remove such EU requirements as are considered not to protect the environment
- Ensure developer contributions are for essential infrastructure requirements only
- Reduce consultation periods with statutory bodies
- Relax key national and local policy requirements
Government has committed to ensure that (some) existing national planning policies will be retained and will be ‘material’ in determining applications within IZ. Again quite how this will be achieved is unclear, however those national policies which have been highlighted as relevant include those which ensure developments are well designed, maintain the Green Belt policy and protect national heritage. Quite what this means for a proposed development will depend on the detail. Similarly the Government has indicated that new developments must ‘address’ issues of flood risk, public safety matters and building regulations. The devil is in the detail! Government has indicated that developments which already have permission measures will be taken to accelerate the delivery of these sites.
Government has not been prescriptive on the governance and decision making for an IZ and expects MCAs and UTLAs to fund any governance arrangements and any organisation set up to administer investment zones. Government is requiring MCAs and UTLAs to demonstrate that they have business sponsors to lead and drive investment. opportunities.
Government discussions on investment zones are currently ongoing with:
- Blackpool Council
- Bedford Borough Council
- Central Bedfordshire Council
- Cheshire West and Chester Council
- Cornwall Council
- Cumbria County Council
- Derbyshire County Council
- Dorset Council
- East Riding of Yorkshire Council
- Essex County Council
- Greater London Authority
- Gloucestershire County Council
- Greater Manchester Combined Authority
- Hull City Council
- Kent County Council
- Lancashire County Council
- Leicestershire County Council
- Liverpool City Region
- North East Lincolnshire Council
- North Lincolnshire Council
- Norfolk County Council
- North of Tyne Combined Authority
- North Yorkshire County Council
- Nottinghamshire County Council
- Plymouth City Council
- Somerset County Council
- Southampton City Council
- Southend-on-Sea City Council
- Staffordshire County Council
- Stoke-on-Trent City Council
- Suffolk County Council
- Sunderland City Council
- South Yorkshire Combined Authority
- Tees Valley Combined Authority
- Warwickshire County Council
- West of England Combined Authority
- West Midlands Combined Authority
- West Yorkshire Combined Authority
If you are interested in IZ or getting any planning advice please contact us. You can also follow us on Twitter and LinkedIn to keep up to date on what we do.