Local Authorities and Investment Zones
It’s been over two weeks since Liz Truss’ government announced the introduction of Investment Zones (IZs). The response from policy makers, think tanks, local authorities and regional bodies has been mixed. Whatever position is taken on Investment Zones, the announcement of the policy has sharpened the focus on the relationship between power, planning and economic growth.
What are the real and perceived barriers to private sector investment and job creation? Do geographically defined tax incentives really catalyse regeneration?
For many combined authorities and local authorities, these questions are neither new nor theoretical. Rather, they reflect years of deliberating, designing, and in many instances delivering local economic growth. In some cases, this has been as a result of, in response to, or even despite of, national government policy (or lack thereof).
The two-week process for Expressions of Interest in Investment Zones follows the closure of Levelling Up Fund submissions, covering projects ranging from high street regeneration to unlocking strategic employment and housing opportunities. Prior to that came the Towns Fund, Freeports and Future High Streets initiatives. Investment Zones are not so much an example of policy churn but policy accretion – covering over the cracks of struggling productivity and economic development with layer upon layer of wallpaper.
Accretion, however, is less of a threat to successful development than attrition. In isolation, Investment Zones risk undermining the very purpose and process of more outcome-focused approaches. The LUF (Levelling Up Fund) White Paper, which launched just eight months ago, set out six types of capital or ‘drivers’ that are fundamental to successful places: physical, human, intangible, financial, social, and institutional. This was an approach to place-based investment and development that was more evidence-based than ideological.
The Investment Zone policy does not reference any of these drivers. A legitimate fear is that newly formed IZs not only ignore existing government policy and the fundamentals of sustainable development, but actively undermine and contradict existing policies and programmes. In part this is because IZs seem to define success as a quantum of inward investment or real estate development, rather than the development of skills, stable and secure employment, innovation ecosystems and thriving neighbourhoods.
Sometimes necessary, seldom sufficient
The wisest local authorities will treat Investments Zones as a compliment to - rather than a substitute for - a robust and long-term local growth plan, making use of the tools of low taxation and planning where they represent key missing ingredients. For many of our public sector clients, IZs represent one element of local growth, sitting alongside complementary strategies that take into account the wider drivers of sustainable economic development.
Identifying when and where IZ levers are necessary is an art rather than a science. The more cynical will assume that private sector businesses and investors will always claim that taxes could be lower, and planning could be easier. Our conversations with investors and occupiers, however, suggest that this is not always the case, with ESG and social value playing an increasingly important role in decisions about lending, investing, and deploying capital. Often Avison Young acts as a broker in these discussions, facilitating between public sector ambition and investor appetite for sustainable and ethically robust propositions.
Hoop Dreams
Some have even gone as far as to suggest that local authorities, like a dog gone rogue at Crufts, just boycott the process overall, and stop the hoop jumping in favour of... well, that’s the problem. In the absence of substantial fiscal and political devolution, sitting out the latest set of hoops may make a bold political statement, but it is one that’s only likely to work if everyone joins the boycott. It’s a risky tactic, and from our recent conversations with local authority clients, one that is unlikely to be adopted.
Despite the protestations and justifiable complaints of policy churn and governmental short-termism, many local authorities are keen to engage with the next steps of the IZ process – the Expressions of Interest due to be submitted at the end of this week. It’s a timeline that is most kindly described as ambitious, no doubt reflecting the political pressure to hit targets, unveil schemes and cut ribbons within the nearest political cycle. As a result, the process will support projects that are already almost over the line – in some instance little more than the political equivalent of replating a microwave meal with a sprig of fresh parsley to pass off for your own.
Keeping Options Open
For many areas, the recent call for Expressions of Interest for the new Investment Zones represents a challenge. Filling in forms will tax both officials and consultants, and favour those with existing and well-established proposals. Winners will need to develop robust delivery plans and business cases, while those not so fortunate can take an opportunity to reprioritise and develop placemaking ambitions. In the longer term, the solution will not just be about Investment Zones, it will be about working with investors, government and business to provide a creditable long-term plan. Confidence in ‘place’ will be the key to success.
