Low tax ‘Investment Zones’ better placed to succeed following Treasury overhaul, says former No10 advisor

view original post

Plans to scrap planning regulations in return for tax exemptions for councils are better placed to succeed following the overhaul of the Treasury, according to a former Number 10 advisor.

In Friday’s economic statement, Chancellor Kwasi Kwarteng announced plans to offer councils time limited tax exemptions as part of an ‘Investment Zones’ scheme.

Thirty eight councils were last week approached by the Government to join the new programme, with all councils now having been invited following the Chancellor’s mini-Budget.

As part of the policy, businesses in investment zones will benefit from 100 per cent business rates relief on newly occupied and expanded premises.

Tax relief for capital investment will also be included, as part of a scheme which the Government sees as an extension of the freeport policy.

Former Chancellor Rishi Sunak speaks with Tees Valley Mayor, Ben Houchen, during a visit to Teesside Freeport. (Photo: Owen Humphreys/PA Wire).

The policy has come about as part of an overhaul of the Treasury to focus more on growth.

i understands that Councils listed by the Government as engaging in initial discussions were approached within the last week, as the policy had quickly been drafted for inclusion in the mini-budget.

While the policy is similar to a previous George Osborne initiative of ‘enterprise zones’, a tonal shift within the Government is likely to make the policy easier, claim insiders.

The departure of the Treasury Permanent Secretary Tom Scholar is a key turning point, as he was sacked by Liz Truss upon entering Downing Street in order to refocus the Treasury away from a budget surplus and low inflation as priorities.

The Government’s new target for economic growth of 2.5 per cent has forced reconsideration of ideas designed to stimulate growth, including ‘Investment Zones’.

Chancellor of the Exchequer Kwasi Kwarteng speaks during the Government’s Growth Plan statement at the House of Commons. (Photo: Jessica Taylor/House of Commons).

Former Number 10 advisor Giles Wilkes told i that the changes within the Treasury give the policy a better chance of succeeding, with Mr Osborne’s iteration of the policy struggling.

Mr Wilkes said: “In some ways the policy is an improvement on Osborne’s by going to places where there’s a bursting need to get on with development.

“If they identify issues where development is needed, it’s a good sort of bargain. It’s reliant on getting that process correct, but that’s a positive.

“The Treasury’s need to say ‘how did you spend that money’ impedes and infantilises people. The idea that the treasury should check on where you’re putting rail junctions or roundabouts isn’t needed.

“That being said – this is an economy at full capacity, where are the spades and the shovels to do it all?

Former chancellor Mr Osborne’s enterprise zones faced criticism for ineffectiveness in the years following their implementation.

In 2019, the Centre for Cities think tank published a report highlighting how new jobs in the areas had under performed Treasury estimates by a factor of four. At least one-third of the jobs created had come as a result of the move of businesses from elsewhere, rather than the creation of new jobs.

More from Politics

Paul Swinney, the author of the report which critiqued Mr Osborne’s policy said that the policy can’t merely focus on deregulation.

Mr Swinney said: “Whitehall needs to go beyond deregulation and develop a clear overarching strategy that ensures the zones are located in cities that already have great potential for growth, while delivering targeted investments in these areas to increase housing & improve public transport.

“While we welcome the Government’s commitments to liberalising the planning process and giving metro mayors more control over their finances, we’ll need to see more on what will be done to make these policies effective.”