Kwasi Kwarteng Announces Network of Low Tax Investment Zones | economic policy

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Chancellor Kwasi Kwarteng is expected to announce the creation of a network of low-tax, low-regulation investment zones in an emergency budget on Friday.

In up to 12 locations designated for this status, planning regulations will be relaxed and taxes reduced to encourage investment.

The announcement, which is expected to push deregulation further than the post-Brexit freeports set up by Boris Johnson’s government, will be part of a package that will also result in the abandonment of increases in social security contributions, a planned increase in the Corporate tax is removed and green temporarily removes charges from fuel bills.

While not formally billed as a budget, Kwarteng’s statement to MPs will eclipse most budgets in terms of their impact on public finances. The key tax changes announced ahead of time are expected to cost the Treasury at least £30bn a year.

Kwarteng wants to use the statement to show the government is quick to deliver on promises made by Liz Truss during its campaign for the Conservative leadership, when it said investment zones would be at the heart of its growth plan. A formal budget is due later.

The West Midlands, Thames Estuary, Tees Valley, West Yorkshire and Norfolk are among the places where the zones can be placed. Under plans unveiled by Truss over the summer, each area will have a central region where regulations and planning rules will be relaxed to encourage industrial, commercial and residential development, and a periphery where planning rules will be tightened for housing.

According to a report, the Treasury Department is considering offering not only lower taxes for companies operating in the zones, but also lower personal taxes for people living or working there.

Policy will likely focus on England first, although Truss wants to work with devolved governments to set up investment zones in Scotland, Wales and Northern Ireland as well.

During her leadership campaign, Truss also vowed to reverse the increase in Social Security contributions introduced by Johnson’s administration earlier in the year. It was originally thought that this tax cut, which will benefit wealthy workers disproportionately, would not come into effect until the start of fiscal year 2023/24, but there were reports it could come into effect from November.

MPs are due to resume normal business on Thursday in the House of Commons and before Kwarteng makes his statement, Jacob Rees-Mogg is due to give details on how companies are getting help with their energy bills and Thérèse Coffey, the health secretary, will due to MPs briefed on plans to tackle backlogs and staffing shortages in the NHS.

During the leadership contest, Truss said tax cuts, energy bills and the NHS would be her three immediate priorities when she took office. But the Queen’s death has put all government activities on hold, meaning announcements must now be made shortly later this week before the start of the caucus season.

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