Liz Truss is planning to levy lower tax rates and strip out regulations in certain parts of the country picked by the government.
The prime minister is reportedly planning to badge the areas “investment zones” – and will claim that the approach could boost economic growth.
Businesses based in the handpicked regions will be able to ignore some environmental regulations and pay lower rates of tax.
And workers living there could pay personal income taxes and national insurance at reduced rates, the government-supporting Sun On Sunday newspaper reports.
Details of the plans are still said to be being worked out, but an announcement could come as early as chancellor Kwasi Kwarteng’s emergency budget on Friday.
The plans to apply the tax cuts to particular areas of the country only may raise eyebrows because the government has previously come under fire for playing political favourites.
A previous policy, the Towns Fund, selected areas to benefit from a £1 billion pot of investment – but this was mostly funnelled into Tory areas.
An inquiry by parliament’s spending watchdog, the Public Accounts Committee, concluded last year that the selection process to benefit from the fund was “not impartial” and decisions were “politically motivated”.
39 of the 45 places to receive the first round of funding were represented by Tory MPs.
It is not clear which areas will benefit from the “investment zone” tax cuts or how they will be picked.
Mr Kwarteng, who was appointed by Ms Truss earlier this month, is set to use Friday’s emergency budget to reverse Rishi Sunak’s rises in corporation tax and national insurance contributions.
Other policies are expected to include lifting the cap on bankers bonuses, which limits payouts to twice a banker’s annual salary. The policy was intended to reduce the risk-taking associated with bonuses incentives, and so reduce the risk of another financial crisis.