Liz Truss has so far stuck to her mantra of ‘growth, growth, growth’, insisting that her plans to grow the economy through major tax cuts and trickle-down economics will pay off in the long run, despite short-term market chaos.
The Truss economic philosophy is based around enabling communities to grow their own economy rather than providing government handouts, but with local authorities across the country crying out for more government support, and others like Thurrock in Essex being bitten by ambitious investment projects that have not paid off, is the new plan of lowering taxes to encourage private sector investment a safe and reliable tactic?
Under Boris Johnson, Levelling Up was central to his plans for holding on to the Red Wall that he won in the 2019 General Election, and government handouts to local authorities to boost infrastructure and investment were already well underway when Liz Truss moved into Number 10. 105 local authority projects were granted Levelling Up funding in the first round of bidding, totalling £4.8bn, and the second round of funding was well underway when Liz Truss was appointed Prime Minister.
Since then, there has been a shift in government policy from handouts to investment zones designed to grow local economies though low tax and private sector investment. The first round of bidding for local authorities to be appointed as low tax investment zones closes today, with the government saying that these zones may be phased in if there is a large number of authorities applying.
Businesses within these investment zones will benefit from 100% business rates relief on newly occupied and expanded premises. There will also be significant flexibility over planning regulations to encourage developers to build in these areas, something that may be unpopular among residents who do not want large building projects on their doorstep, especially in traditional Conservative rural and greenbelt areas where planning and building restrictions are important for many voters. The scheme will boost the local economy and provide plenty of work for local builders, but relies heavily on private sector support for the projects and the willingness of the private sector to invest in areas they haven’t previously been in.
With Levelling Up funding already underway, with phase one already being promised and phase two still open, there are major questions about the future of Levelling Up and whether those who have been promised funding will receive it in full, or if investment zones are intended to replace it altogether.
Uncertainty over the future of Levelling Up and low-tax investment zones has been plunged into further doubt by the expectation of large-scale U-turns on the mini-budget announced last month, which the investment zones were a part of. The Prime Minister sacked her Chancellor Kwasi Kwarteng earlier today and is set to overturn much of the growth plan throughout the afternoon and weekend, but this is likely to primarily focus on the national insurance and corporation tax cuts rather than investment projects and Levelling Up funding.
