Investment incentives
62. During our visit to South Yorkshire we were
struck by the contrast between the economic desolation that still
existed in many parts of the coalfield areas, notably Grimethorpe,
and the relative economic vibrancy in the Dearne Valley Enterprise
Zone. Dearne Valley was designated an Enterprise Zone in November
1995. It gives financial incentives for inward investors, including
exemption from National Non Domestic Business Rates and 100 per
cent capital allowances for tax purposes on eligible expenditure
for the period of the Enterprise Zone. The Zone also offers a
simplified planning regime. We were told by Kate Marsden, Human
Resource Director at Ventura, a call centre company which had
located in the Enterprise Zone, that the financial incentives
had been one of the important factors in its location decision.[172]
63. There was recognition in Grimethorpe that the
village would have difficulty competing for new investment against
the Dearne Valley Enterprise Zone, which had another five years
to run. There were calls for Grimethorpe to receive a similar
designation.[173]
The Dearne Valley is one of three areas which had specific sites
designated as Enterprise Zones after the 1992 pit closures; the
others were in East Durham and the East Midlands. Although supportive
of the initiative, the Coalfield Task Force's preferred option
of financial incentives for the coalfield areas drew on the experiences
in other EU Member states, where firms operating in designated
areas receive exemptions from corporate tax.[174]
They argued for the development and introduction of a new package
of fiscal incentives targeted at job creation on specified coalfield
sites.
64. More generally, the Regional Development Agencies
have called for the creation of zones in poorer areas, where businesses
would receive tax and business rates relief.[175]
Evaluations of previous area-specific initiatives aimed at attracting
investment, such as the original Enterprise Zones and the Urban
Development Corporations, were critical of their failure to provide
sufficient local jobs and to safeguard against "boundary
hopping".[176]
However, such initiatives can be successful. The Dearne Valley
Partnership indicated that two thirds of the workforce in the
Enterprise Zone lived within a five miles radius and that two
thirds of the workforce had not been in employment prior to taking
up their job. This suggests that, properly implemented, financial
incentives can engender employment opportunities for local people.
We recommend that the Government should develop, in co-operation
with the Regional Development Agencies, innovative area-specific
tax structures aimed at attracting job-creating investment into
low employment areas.
Local labour clauses
65. It is important to ensure that those who
are unemployed benefit from the employment opportunities being
created through regeneration schemes in their local areas. Both
UK and European legislation restrict the ability of public bodies
to ensure that contractors, whom they appoint, recruit local residents.
Section 17(1) of the Local Government Act 1988 prevents local
authorities and some other public bodies, such as the Passenger
Transport Authorities, from taking non-commercial factors into
consideration when carrying out their functions in relation to
contracts. The Act lists non-commercial matters which include
" the terms and conditions of employment by contractors of
their workers or the composition of, the arrangements for the
promotion, transfer or training of or the other opportunities
afforded to, their workforce".[177]
The Treaty of Rome and the Public Works Contracts Directive[178]
have sought to ensure the right of establishment and the freedom
to provide services within the European Union.
66. It has been suggested that European legislation
does not impose a blanket prohibition on local labour clauses,
which could be used if they were embodied in the contract and
not used as a criterion for the selection of contractors or the
award of contracts. It argued that the Local Government Act 1988
was out of step with a regeneration approach which sought to target
the benefit of economic development at specific disadvantaged
communities.[179]
This is obviously a complex area and we recognise the importance
of guaranteeing the right of establishment and the freedom to
provide services for all EU nationals. This must be balanced with
the need to provide employment opportunities for unemployed people
in deprived areas. Local authorities have an important role
to play in facilitating and supporting regeneration and job creation
in their areas, not only through strategy documents but also in
their capacity as major employers in deprived areas and through
their role in contracting with third parties for a range of works
and services. In the absence of a substantial overhaul of the
legislation, we recommend that the Government should issue guidance
to local authorities encouraging them to incorporate local labour
clauses in contracts and setting out how this might most effectively
be achieved.
171 Cm 4176, Our Competitive Future: Building the Knowledge
Driven Economy, DTI, December 1998. Back
172 Meeting
with the Dearne Valley Partnership, Annex A, p. xxxix, para. 19. Back
173 Meeting
with the Grimethorpe Regeneration Executive, Annex A, p, xli,
para. 36. Back
174 Making
the Difference: A New Start For Britain's Coalfield Communities,
The Coalfield Task Force, November 1998, para. 2.7. Back
175 Yorkshire
and Humberside Draft Economic Strategy, Yorkshire Forward, 1999,
para. 4.38; A strategy towards 2020, North West Regional Development
Agency, 1999, para. 2.22. Back
176 Regeneration
Research Summary Nos.17 & 18, 1998. Back
177 Local
Government Act 1988, section 17(5)(a). Back
178 71/305/EEC. Back
179 Appendix
30. Back
