CHANCELLOR Jeremy Hunt has announced funding for an “investment zone” in Scotland in another bid by the Tories to “drive growth”.

Speaking in the House of Commons on Wednesday afternoon, Hunt told MPs that the new zones would be “12 potential Canary Wharfs”.

He added: “In England, we have identified the following areas as having the potential to host one: West Midlands, Greater Manchester, the North East, South Yorkshire, West Yorkshire, East Midlands, Teesside and, once again, Liverpool.

“There will also be at least one in each of Scotland, Wales and Northern Ireland.”

The National has dug into the UK Government’s Spring Budget supporting policy document to reveal the available details behind the plan, and what it means for Scotland.

READ MORE: Jeremy Hunt announces funding for Scottish projects in Spring Budget

What are investment zones?

The UK Government has described the incoming investment zones as “growth clusters”, with four due to be set up across the devolved administrations. It is not clear which nation will be assigned two investment zones from the policy document.

The paper reads: “Each cluster will drive growth in key future sectors and bring investment to the local area.”

The UK Government did not set out how much investment the Scottish zone will have but did reveal that those established in England will have access to funding worth £80 million over five years.

The document continued: “Local government and research institutions will be able to tailor their investment zone plan to their local circumstances.”

The National: Hunt announced an investment zone would be located in Scotland during the Spring BudgetHunt announced an investment zone would be located in Scotland during the Spring Budget (Image: PA)

The investment zones will also have numerous tax benefits over five years, similar to freeports, with enhanced rates for Capital Allowances and Structures and Buildings Allowance. The areas will be exempt from Stamp Duty Land Tax, Business Rates and employer National Insurance contributions.

They will also have access to “flexible grant funding” for funding apprenticeships, supporting businesses operating in the zone and for local infrastructure projects.

“Local partners will be able to choose the number and size of tax sites, within the £80 million envelope, up to a maximum of 3 sites totalling 600 hectares,” the policy document said.

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“The amount of grant funding will depend on the number and size of tax sites.”

Similar to the Levelling Up scheme, it appears that local authorities who hope to become home to one of the zones will be required to put together a proposal.

Local authorities applying will be required to set out how they will “propel growth” in sectors, identify private sector funding for the zone, and “use the local planning system to support growth”.

“Plans will need to demonstrate how the Investment Zone will support the UK reaching net zero by 2050 and the government’s new long-term targets to protect and enhance the natural environment, and be resilient to the effects of climate change,” the document said.

However, the plans set out above relate to the eight proposed areas already identified in England, including Liverpool, South Yorkshire and Tees Valley.

On the devolved administrations, the paper added: “DLUHC [the Department for Levelling Up, Housing and Communities] is working closely with the devolved administrations to establish how Investment Zones in Scotland, Wales and Northern Ireland will be delivered.

“The final design choices and agreement on an Investment Zone in Northern Ireland will be subject to the restoration of the Northern Ireland Executive.”

What are the experts saying about investment zones?

Accountancy and tax firm Blick Rothenberg described the investment zone plans as a "damp squib". 

Robert Salter, a director at the company, said: "The announcement of 12 new investment zones is a bit of a ‘damp squib’ in many respects.

"Such zones remain in many respects ‘unproven’ and the funds which have been allocated to this idea – circa £80m per zone over five years – is basically ‘nothing’ from an overall Government spending perspective.  

"The claim that one can earn £1000 per month without paying a penny in Income Tax or NICs [National Insurance Contributions] is much too simplistic. People who have zero-hours contracts or work on a seasonal basis, for example, will in many cases continue to be liable to employee NICs on their wages, despite earning under £12,000 per annum.

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"This is because the regulations continue to charge NICs on a ‘per pay’ basis rather than on annual earnings."

Cameron Stott, head of Scotland at real estate firm JLL, welcomed the introduction of investment zones.

He said: “It’s encouraging to see a recommitment to investment zones in Scotland, especially given the strength of the country’s existing innovation and knowledge hubs, which are linked to our world-class universities which in turn impact every sector of the economy."

What is the Scottish Government's position on investment zones?

The National understands that there will be a bespoke approach to investment zone(s) north of the Border, with the UK Government documents published on Wednesday applying only to England.

The Scottish Government has indicated it will aim for a non-competitive approach to the allocation of the zone(s).

A Scottish Government spokesperson said: “The Scottish and UK Governments will work in partnership over the coming weeks so that any investment zones are tailored to Scotland’s economic strengths and opportunities.

“It is vital investment zones seek to enhance existing economic activity in a way that works for businesses and innovation across Scotland and that they contribute to a wellbeing economy.”