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Regional disparities

Comment 16th July 2010

Why should private equity and hedge funds, to use a high profile example, be considering re-locating to jurisdictions like Geneva for the tax breaks?

Instead, they should be encouraged to relocate to places like the West Midlands or Tyneside.

There should be five year term income tax and national insurance breaks for individuals living in areas of low employment.

Alternatively, there should be higher rates of tax for those working in designated areas such as central London.

Why does this matter?

This would reduce the UKs dependency on the South East; and the industries that are over-represented in the South East; it would encourage labour force mobility and greater population homogeneity across the country; it would increase incentives to work for those that are able but unwilling; it would encourage greater population dispersion and a reduced burden on local infrastructure in densely populated areas; it would encourage wealthy individuals and entrepreneurs to locate to more deprived areas; it would reduce the cost of labour to corporations operating in those more deprived areas. It would also address housing market imbalances.

Five years is an appropriate duration for such a break, given the average duration of a business cycle.

And by targetting this incentive in the poorest areas with the lowest employment participation rates, the cost in lost revenue could be minimised.

Consider the impact that Admiral Group has had on South Wales. A small number of high performing entrepreneurs can create significant wealth in deprived areas if people were given the appropriate incentives.

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