LESSON (UN)LEARNING AND SPATIAL FISCAL INCENTIVES: ENTERPRISE ZONES AND EMPOWERMENT ZONES

Graham Squires and Stephen Hall

Introduction:

Source: Author

Overview

• Methodology• Policy Context• Success and limitations

– UK Wave 1 Enterprise Zones (1981–2006)– Policy Transfer: US Enterprise Zones & Empowerment Zones (1993-2009)

• What is New?– Policy Transfer: UK Wave 2: New EZs in England (2010-)

• Conclusions: Lessons (Un)Learned?

Methodology

Picture

Source: Author

Methodology

• Review of policy and practice documentation on EZs (UK and US)

• Primary interviews with 15 key academics and practitioners, conducted in Washington

• Government Audit Office (GAO), The Urban Institute, The Urban Land Institute, and The Brookings Institute, George Washington University (GWU), League of Cities

Methodology

• Key themes of interest:

– Rationale / Ideology– Mechanisms in Policy– Geography– Implementation / Stakeholders– Outcomes / Successes / Lesson Learning / Policy Transfer

Background:

Source: Corbis

UK Wave 1 Enterprise Zones (1981 – 2006)- Policy Context

• In the 1980s, urban policy was market-orientated and property-led.

• EZs deployed alongside ‘gap financing’ instruments project-by-project (e.g. Urban Development Grant)

• Area regeneration was transferred to business led agencies (e.g. Urban Development Corporations - Docklands)

• In the 1990s, centralisation and privatisation were displaced by government sponsorship of holistic regeneration schemes

(e.g. City Challenge, Single Regeneration Budget, New Deal for Communities)

UK Wave 1 Enterprise Zones (1981–2006).

Enterprise Zones were deployed in thecrisis-hit coalfield regions of Central and Northern England until asrecently as 2006/7

• US Empowerment Zones formed part of a wider 'community empowerment agenda’ by HUD

• A shift from laissez-faire approaches to economic development and an attempt to include poorer marginalized citizens (McCarthy, 1998)

• Informed by the experience of the 1960s Federal Model Cities program and the 1980s State Enterprise Zones

- Both as place-based strategy, aimed to revitalize poor neighbourhoods

US Empowerment Zones (1993-2009)- Context

Empowerment Zones/Enterprise Communities and Renewal Communities (2003)

(SOURCE: GAO, 2004)

UK Wave 2: New EZs in England (2010-)- Policy Context

• Led by Conservative David Cameron and elected in May 2010, re-invigorated the EZs programme

• Designating 22 new EZs in England

• Currently ‘operational sites’ with ‘live deals’

Map of Enterprise Zones (Wave 2) and Local Economic Partnerships.

Successes and Limitations

• Original UK Enterprise Zones demonstrated capacity to stimulate new economic and employment opportunities in a manner that would otherwise prove impossible

• Fulfilled their narrow remit of encouraging local industrial and commercial development, a pure place strategy with notable success

• The evaluation literature records an impressive set of aggregate results for the Enterprise Zones, but these must be off-set against some well documented problems

UK Wave 1 Enterprise Zones (1981-2006)- Key Successes

1. Displacement Effects: Almost half of the economic and employment activity recorded in the zones had relocated from elsewhere

2. Public subsidy as ‘deadweight’ – no return to public purse

3. Stakeholders often struggled to anchor new growth into the pre-existing network of local economic relations (spatially and sectorally)

4. Produce unanticipated outcomes, even policy dysfunctions

UK Wave 1 Enterprise Zones (1981-2006)- Key Limitations

• Lessons learnt from US Enterprise Zone program and Model Cities

• Benefits of competition for zone designation

• Prohibition of subsidies for industrial relocation into a zone

• Moved beyond narrow property development focus (e.g. Urban Development Action Grants) to indigenous and holistic area based policy

US Empowerment Zones (1993 – 2009)- Successes

• Process was seen to lose impetus over time

• Difficult to isolate the impacts of the programs, particularly tax benefits, on conditions in distressed communities

• Measures were under-utilized, primarily due to lack of business, especially small business, knowledge

• Market-oriented tools, while important, also needed strong local leadership and good governance (urban regime theory)

US Empowerment Zones (1993-2009)- Limitations

UK (England) Wave 2 (2010-): New Characteristics

Picture

UK (England) Wave 2 (2010-) EZ Policy

• Funding grants available is to be worth £200 million between 2012–13 and 2015–16

• European Union competition law restricts assistance to individual firms to a maximum of £55,000 per year for five years

• 100% first year capital allowances available in selected Enterprise Zones will cost around £95 million

• A simplified planning regime – includes a priori Local Development Order of scope

• Enterprise Zone stakeholders to retain local tax receipts arising from new zone development for a period of 25 years

Conclusions: Lessons (Un)Learned

Picture

Conclusions: UK (England) Wave 2 Enterprise Zone Lessons (Un) Learned?

• The new wave Enterprise Zones are located in more advantageous locations than their 1980s predecessors

• Therefore less so in poorer areas and structurally already weak regions such as the North of England

• Seeking to minimise displacement effects, primarily by passing the decision as to the location of the zones to LEPs

• Economic gains in the cause of national growth and defer any response to local policy dysfunctions into the long term – unanticipated outcomes

Conclusions: Business/Growth Approach to Regeneration

• ‘We are taking on the enemies of enterprise–the bureaucrats in government departments who concoct those ridiculous rules and regulations that make life impossible, particularly for small firms–the town hall officials who take for ever with those planning decisions that can be make or break for a business–and the investment and jobs that go with it.’ (David Cameron)

Conclusions: Inclusive Approach to Regeneration

• It is the lack of this sensibility [inclusivity] that prevents crucial historic and comparative lessons in respect of the distribution of economic gains, their impact on areas beyond the zone, linking employment opportunities to resident populations, the importance of public investment and partnership working, and so on, being learned.

• Further Research: (GS) US-UK Fulbright-Berkeley (SH) UK-France

Thank you!

Graham Squires

graham.squires@uwe.ac.ukStephen Hall

stephen3.hall@uwe.ac.uk