Jeremy Hunt will use his Budget on Wednesday to offer close to £1bn for 12 new low-tax zones designed to drive economic growth and reduce regional disparities.
The chancellor will announce plans to start discussions with regional leaders in a dozen locations around the country to host investment zones which will each receive £80mn over five years — totalling £960mn — in government support.
The Treasury said in a statement that the money could be used to offer tax incentives or to improve skills, provide specialist business support, improve the planning system or for local infrastructure in the zones.
The tax breaks could include relief on stamp duty, business rates or employer national insurance contributions, according to people familiar with the negotiations.
Four of the zones will be in Scotland, Wales and Northern Ireland. The other eight will be in the East Midlands, Greater Manchester, Liverpool City Region, North East, South Yorkshire, Tees Valley, West Midlands and West Yorkshire.
The announcement will mark a striking scaling down of the earlier version of the plans under former prime minister Liz Truss, who wanted as many as 200 of the new sites at an estimated cost of up to £12bn.
The twelve new sites will instead be highly specialised and clustered around research institutes such as universities. They will be focused on driving growth in one of five key areas: technology, creative industries, life sciences, advanced manufacturing and “the green sector”.
The zones will operate in tandem with a dozen “freeports”which were given tax and deregulatory advantages by Rishi Sunak, the prime minister, when he was chancellor.
Separately Greater Manchester, the West Midlands and Glasgow will also share a further £100mn for R&D investment, building on existing “innovation accelerators” already being piloted in those areas.
The accelerators, announced last year, have already shared an initial £100mn of investment to create partnerships between universities, colleges, councils, businesses and mayors, which have been developing proposals to create new spinouts from research projects. The new money will fund 26 projects, including in the fields of AI, net zero and health technology.
Successful collaborations include a net zero project led by the University of Strathclyde and a University of Birmingham-led project to accelerate new health and medical technologies.
Mayors in Greater Manchester and the West Midlands are also expecting new “trailblazer” devolution deals to be announced by the Chancellor, featuring new longer-term, flexible block grants of funding.
Currently local leaders, including mayors, must bid for money to fund projects from Whitehall through scores of different pots, in a highly centralised model widely criticised by regional leaders, who say it engenders a “begging bowl” culture.
However a push by West Midlands Conservative mayor Andy Street for further fiscal devolution, which would have included retaining a percentage of VAT and corporation tax raised in his area, is said not to have been agreed by the Treasury, according to several people familiar with the devolution negotiations.
Hunt will announce so-called Levelling-up Partnerships which will bring together councils, MPs and business leaders to help identify ways for the government to unblock obstacles to regeneration.
The chancellor will also unveil increases in both the £40,000 cap on annual pension contributions and the £1mn limit on tax-free pension pots. The lifetime allowance was set at £1.5mn when it was introduced in 2006, rising to £1.8mn in 2010. But it was cut to £1mn in 2016 and is currently £1,073,100, where it was due to remain until 2026.
Hunt will lift the annual cap to £60,000 and the lifetime cap to £1.8mn.
