In the mercurial world of British politics, it is often hard to predict which policies will be carried through to completion, and which will be quietly ditched after the latest ‘changing of the guards’ in Westminster.
Unfortunately, it seems the economic plan which excited local leaders most over the summer – Investment Zones – may be the latest Liz Truss initiative to be relegated to the political scrapheap. Such an about-face by the Conservatives would cause much frustration amongst both councils and businesses; many of whom have been working tirelessly to meet the sharp deadline set by the previous Prime Minister.
However, it may be that such a reset is precisely what is needed to enable a more comprehensive and successful version of the plan to emerge.
The idea of low-tax, low-regulation economic zones has been trialled in various forms throughout the world – and with some notable successes. The concept is simple: identify an appropriate site, offer tax-breaks to companies who choose to locate there, and hence supercharge an area that has previously struggled to attract much trade.
Critics of the strategy argue that simply creating such zones does not guarantee new businesses will move into them. Instead, they may simply draw in other local companies who are willing to hop short distances to take advantage of the tax breaks. The result is a mere shuffling around of the local economy, rather an injection of new life into the area.
This is no doubt a genuine problem. Indeed, I personally saw this happen at Alconbury Weald in Cambridgeshire – which for me underlined the vital need to establish checks aimed at preventing savvy opportunists from gaming the system. There are also ways that the Investment Zone strategy could be tweaked at a structural level to mitigate this risk.
One method would be to pivot away from a model centred on a single central Investment Zone (in Norfolk, say), towards one which establishes a network of such zones at multiple points throughout a region. Doing so could reduce the fiscal and logistical burden of moving areas for many companies (by providing a range of zone options to choose from), and would encourage productive interactions between the many different growth zones as well.
My colleagues and I at the Eastern Powerhouse have for months been advocating for this kind of ‘polycentric’ approach, and we believe that the East of England – with its eclectic and scattered economic geography – could be an ideal place to road-test the plan.
It is clear to see where the major economic drivers in the East are. Cambridge, Norwich, Ipswich, and Colchester are all vital regional hubs which host leading business in high-growth sectors like agritech, green energy, and life sciences. By gathering these success clusters together into a region-wide ‘archipelago of growth’, a revitalised Investment Zones plan could spread prosperity and opportunity to all corners of the East.
What’s more, it could offer a model for rural areas across the UK which have not been well served by centralised economic policies in the past.
Clearly, methods used to promote growth in cities are often ill-fitted to economically diverse and spread-out regions like the East. And yet, a common tendency in central government is to try and shoehorn urban-based policies into the countryside – a clumsy and ineffective way to utilise local resources.
By fixating on one lucky area in each region, the current Investment Zones plan risks deepening the problem of centralisation and the aggregation of success in regions that could achieve so much more by pulling together.
In short, trying to replicate successful schemes like Canary Wharf in places like the East of England is a pointless exercise – as what works in cities may not be applicable elsewhere.
When I worked with ResPublica to set up the Eastern Powerhouse in March, one of our aims was to encourage the government to ‘think regionally’ in its levelling up plans for the East. In making this case, we hoped to inspire a shift in economic policy towards a region-based, cross border approach, to business growth. This would require the government to consider bespoke, tailor-made solutions to local economic challenges – and to adapt existing policies to the unique opportunities and challenges presented by each region.
Doing so may prove vital to Rishi Sunak’s goal of steering the economic ship back on course. A polycentric Investment Zones plan – to be trialled in the East before potentially being rolled-out nationwide – would be a fighting start.