Is this the end? Is the anti-growth coalition triumphant? The Blob, master of all it surveys? Taxation, already at record levels, is to rise further. Public spending will continue to rise in real terms. It will increase more slowly than planned – but that will scarcely cause the Quangocrats to quake as they preside over their £272 billion budgets.
Grant Shapps, writing in The Times, argues that “targeted government investment” is the path to success: “Then, as the economy improves, we can revisit lower taxes.” All those technocrats in Whitehall will decide what to do with our money. Then we can have a tax cut as our treat for being patient – like a lollipop.
But those who believe in free enterprise, rather than corporatism, regard low tax as the mother rather than the daughter of economic growth. Corporatism was given a fair run in the 1960s and 1970s. Subsidies, controls, industrial planning, regional aid, the National Enterprise Board. There was lots of “targeted government investment”, or “picking winners”. British Leyland, DeLorean, Meriden Motorcycles. Earlier we had the Groundnut Scheme. No doubt those responsible for these doomed projects were as fond of spreadsheets as Shapps is. Some thought the Thatcher era put an end to such vanities. But The Blob quietly came back.
Yet I don’t think we should give up quite yet. Though much is taken from Trussonomics, much abides. For instance, Investment Zones. The “full-fat freeports”. As the prospectus puts it:
“The government envisages working in partnership with places across the country together to get the United Kingdom working, building and growing. Investment Zones will accelerate the housing and infrastructure the UK needs to drive economic growth. They will cut back unnecessary bureaucratic requirements and processes and red tape that slow down development, cut taxes to back business, and, as a result, attract new investment to create jobs.”
It represents a change in the approach to “levelling up”. Instead of deprived areas getting extra state spending, the offer will require the state to get out of the way. But all parts of the country will be able to participate. Lower tax, over a ten year period, will be a key incentive:
“1. Business Rates – 100% relief from business rates on newly occupied business premises, and certain existing businesses where they expand in English Investment Zone tax sites. Councils hosting Investment Zones will receive 100% of the business rates growth in designated sites above an agreed baseline for 25 years.
2. Enhanced Capital Allowance – 100% first year allowance for companies’ qualifying expenditure on plant and machinery assets for use in tax sites.
3. Enhanced Structures and Buildings Allowance – accelerated relief to allow businesses to reduce their taxable profits by 20% of the cost of qualifying non-residential investment per year, relieving 100% of their cost of investment over 5 years.
4. Employer National Insurance contributions relief – zero-rate Employer NICs on salaries of any new employee working in the tax site for at least 60% of their time, on earnings up to £50,270 per year, with Employer NICs being charged at the usual rate above this level.
5. Stamp Duty Land Tax– a full SDLT relief for land and buildings bought for use or development for commercial purposes, and for purchases of land or buildings for residential developers.”
Just as important will be “a liberalised planning process” to rescue costs and delays.
There will not be forced on anyone. That makes it harder to object on political grounds. Lisa Nandy, the Shadow Levelling Up Secretary, has said they have “failed in the past” and falls into the zero-sum fallacy that any wealth created in such zones will just mean other places will be poorer by a corresponding amount.
But has she told her colleagues in local government in Birmingham, Liverpool, and London? They were falling over themselves to get bids put in by last week’s deadline. Perhaps her Wigan constituents will be among the winners should the Greater Manchester Combined Authority be successful? I wonder if she will take a break from denouncing the policy to go and lobby for Wigan’s designation.
Some environmentalists have objected on rather spurious grounds. The Government stresses that the process is prioritising brownfield land and environmental protections. Those familiar with the planning process will be aware that bureaucratic processes do not necessarily protect the environment.
I do not wish to overstate the case. It may be that progress will be too slow to make much difference in time for the next General Election.
On the other hand, Investment Zones is just an example. What if it comes alongside some other pro growth initiatives? What if we get that elusive free trade deal with India? What if doorstep wooing by shale companies (with a combination of financial incentives and reassurance to combat some of the myths) does persuade some communities to allow fracking in their areas? What if Jacob Rees-Mogg is right and reform of Solvency 2 really does release £65 billion of investment? What if the wholesale price of natural gas continues to fall, as it has recently, meaning the cost to the taxpayer of the Energy Price Guarantee is much diminished?
It is still possible, just about, for the Government to deliver on its ambition for us to become a nation of high economic growth. Investment Zones might turn out to be part of that narrative.