The past 18 months have seen a number of changes to stamp duty that could affect development in Yorkshire and the northeast.

Earlier this year the European Union (EU) approved the lifting of the £150,000 threshold on exemption from stamp duty for transfers of commercial property in disadvantaged areas. Many have hailed this as exactly the step needed to boost investment in areas that have previously been overlooked, of which Yorkshire and the northeast have many. The Government announced that the budget of 9 April will confirm this exemption for transfers on or after this date.

Another change, which could particularly affect local businesses, is the proposal to alter lease duty payable on the grant of a rental agreement as part of the Government's proposals to overhaul the stamp duty system. The Stamp Office believes leases can serve as an alternative to freehold sales to save stamp duty. The proposal is consequently to charge for them in substantially the same way. This system is particularly unfair for many retail and leisure leases, which are not granted as an alternative to a freehold sale. As the lifeblood of most thriving town and city centres is often independent bars, restaurants and shops, on which this could have a dramatic effect.

Indeed, to impose stamp duty on this basis will result in significant increases in stamp duty for such businesses taking even moderately short leases. For example, a seven-year market rent contract may be subject to a 2,700% increase in duty under the new proposals compared to a lease entered into today.

Such an increase in duty will depress rental yields and consequently there would need to be growth in the market for landlords' incomes not to be affected. It will also make certain development projects uneconomic in areas not designated as disadvantaged, while also acting as a deterrent to regeneration.

In terms of how these changes will directly impact on Yorkshire and the northeast, it is probably areas in the latter which will reap the most benefit. The Treasury has confirmed that 208 northeast wards are classed as 'disadvantaged'. In fact Easington in County Durham tops the national list with 22 wards included, closely followed by Newcastle with 17 and South Tyneside, Sunderland and Middlesbrough all with 16.

According to a TUC survey conducted in June last year, the northeast also has the lowest number of business start-ups in the UK at 21 per 10,000 population – the UK average is 38. It also has the lowest employment growth rate at 6% in the past five years compared to 21% in London.

Many in this region are hoping that the change in stamp duty on commercial property in disadvantaged areas will encourage enterprise and investment – providing the additional incentive needed to continue the revival of cities such as Newcastle-upon-Tyne.

The city has many historic buildings, which have ceased to be used either in whole or in part many years ago and require extensive investment to bring them back into use. It will also encourage investment into areas that have been overlooked in the past and which would otherwise sink further into decline.

The new exemption should also provide additional encouragement for residential development in deprived areas, which already benefit from exemption and are in desperate need of affordable social housing. While it does not look so good for the region in terms of employment and business start-ups at the moment, it must be noted that there is plenty of room for growth – an advantage the southeast lost long ago.

The extension of the exemption will ultimately have an impact on the funding available to regeneration projects from the public sector. This is because a large part of the public sector funding is used in land assembly, where each individual land transfer which exceeds the current threshold of £150,000 in the deprived areas, will attract stamp duty.

Yorkshire is a different case. While Sheffield, Bradford and Hull certainly have wards in the disadvantaged category, cities such as Leeds attract a lot of private investment and are growing rapidly without help from the Government. However, earlier this month John Prescott and Gordon Brown announced plans that could keep hundreds of millions of pounds in aid flowing into depressed areas in South Yorkshire in a move to repatriate EU powers to Britain.

Because of the inclusion of Eastern European countries such as Poland and Slovakia into the EU these South Yorkshire areas will not be considered 'poor' enough to receive funds from the EU Objective One aid scheme to regenerate run-down and depressed areas. Parts of West and North Yorkshire will not be affected, as they are on the Objective Two programme, aimed at areas with problems not as major as those on Objective One.

The changes in stamp duty in disadvantaged areas will be of great advantage to the depressed regions named above, but Leeds might lose out because of the changes to duty on leases. As a city with a lot of independent bars and restaurants, the loss of these in the city centre and in other affluent areas such as Headingley or Chapel Allerton, would be a great loss. On the other hand Chapeltown could greatly benefit as a seriously run-down ward.

The two fastest growing cities in Yorkshire and the northeast are Leeds and Newcastle. The latter has seen masses of public money flowing into run-down areas and reaping the rewards with the impressive regeneration of the Quayside on both the Newcastle and Gateshead banks. Leeds has benefited primarily from private investment – property developers spotted a rapidly growing market a few years ago and are still set on expanding the city centre out towards formerly neglected areas, such as Holbeck and Beeston.

But which way is best – has Leeds or Newcastle flourished the most because of private or public money?

Neither public nor private sector schemes can be definitively deemed to be the best vehicle for the delivery of regeneration. In a perfect world regeneration would be carried out exclusively by the private sector without any cost to the public. However, this is not an ideal world, since deprived areas exist as a result of complex social and economic problems, which cannot be solved by the private sector alone.

Furthermore, while the cost of stamp duty may be removed from the regeneration equation giving the private sector confidence to invest in deprived areas, it is unlikely the measures will stop the need for public sector funding and involvement in these areas.

Many regeneration projects will not be taken on by the private sector alone. For example, projects on the majority of brownfield sites involve costs that make regeneration by the private sector uneconomic – costs of site assembly, contamination, infrastructure and demolition. It should be remembered that the motivations of public and private sectors are very different and the 'best' in terms of sustainable regeneration projects will be achieved by partnerships between the public and private sectors.

In short, sustainable urban regeneration will only be achieved if the public and private sectors work together and the Government continues to provide incentives, such as the stamp duty exemption for the regeneration of deprived areas.

David Jervis is a corporate partners in Eversheds' Leeds office and Sarah Hawkins is an assistant solicitor in Eversheds' Newcastle office.