Plans for new ‘investment zones’ dropped following Chancellor Jeremy Hunt’s autumn statement
Much-vaunted plans for new ‘investment zones’ set for Teesside have been dropped by the Government less than two months after they were announced.
Expressions of interest were only recently submitted by Mayor Ben Houchen’s Tees Valley Combined Authority to site the proposed zones in Middlesbrough and Hartlepool as part of new mayoral development corporations.
But in some of the detail which followed Chancellor Jeremy Hunt’s autumn statement, the Government said it would “refocus” and would not be taking expressions of interest forward.
It said instead “highest potential knowledge intensive growth clusters” were being considered, leveraging local research strengths – likely to mean tie-ups with local universities – with no mention of potential tax-cutting incentives intended to lure in business.
The investment zones, announced by ex-Chancellor Kwasi Kwarteng during Liz Truss’s ill-fated spell as Prime Minister, promised to divert half of all business rates paid that currently go to the Government and retain them locally to reinvest in economic-boosting projects.
Businesses would also be able to claim 100% rates relief on newly occupied and expanded premises, full stamp duty land tax relief on land bought for commercial or residential development and a zero rate for employer National Insurance contributions on new employee earnings up to £50,270 per year.
Mr Houchen had previously described the zones as “game changers for Teesside” and bringing “jobs, jobs jobs”, and turbo-charging investment.
The Department for Levelling Up, Housing and Communities said it would work closely with mayors, devolved administrations, local councils, businesses and other partners to consider how best to identify and support the growth clusters.
Meanwhile, the Conservative metro mayor made no mention of the shelved plans in a statement, but promised “lots of regeneration and investment” thanks to the new mayoral development corporations that are being set up.
He said: “I’ll continue to bang the drum for our region and work with central Government to get the further powers and funding that our region needs and deserves.”
Otherwise, Mr Houchen said the Chancellor’s statement was a “mixed bag” and described the significant cuts in spending laid out as the Government trying to get spending under control and restore some financial credibility.
The mayor said the protecting of capital budgets meant “exciting projects” currently being undertaken such as revamps to Middlesbrough and Darlington railway station could be pressed on with and plans for a minimum wage rise would put more money in the pockets of local residents.
Mr Hunt confirmed the Government’s intention to carry on with round two of bids from the Levelling Up Fund, which will be a relief to many councils, including those on Teesside which have drawn up a variety of proposals in the hope of accessing the money available – £20m for each parliamentary constituency.
He said £1.7bn in projects that were being invested in would be announced shortly.
But Zoe Billingham, the director of left-leaning think tank organisation IPPR North pointed out that there was no inflation-proofing and “simply re-announcing this won’t cut it to level up”.
It claimed in real-terms £340m could be lost from the fund through rocketing costs of things like the price of building materials and other goods and services.
Middlesbrough South and East Cleveland MP Simon Clarke, who briefly headed up the Government’s levelling up department under Mrs Truss’s tumultuous administration, said on Twitter he wanted to see a balancing of the books being accompanied by an effort to tackle the causes of low growth, which has dogged the UK for several years.
‘Grim reading’
Predictably, Labour MPs Alex McDonald and Alex Cunningham, who represent Middlesbrough and Stockton North respectively, were unimpressed.
Mr McDonald said the autumn statement made for “grim reading” and would be devastating and far reaching for people in his constituency.
He said: “Already households are struggling with soaring fuel bills and rising costs every time they go to the supermarket.
“Nothing they heard today will ease those worries and struggles.”
The MP added: “It cannot be right that the average worker is earning less today than when the Tories came to power 12 years ago.
“The continued running down of our public services will see residents in Middlesbrough face higher costs for fewer services.”
Mr Cunningham said: “Our country is facing a crisis made in Downing Street.
“Instead of apologising for the mess they’ve made of our economy, the chancellor used today’s autumn statement to not only blame everything but his own party, but also portray the Tories as people who will fix the economy.
“They are taking people for fools and asking working people to foot the bill for their mistakes.”
Mr Cunningham said the Office for Budget Responsibility, the Government’s fiscal watchdog, was predicting that living standards would fall by 7% by 2023/24 and the Government offered “no vision for a prosperous future, just rehashed austerity and a long list of excuses”.
Mr Hunt described giving local authorities – many of whom have made dire warnings about the financial black holes they are facing – more flexibility to increase council tax.
As a result, councils may be allowed to increase council tax by up to 5% without going out to a local referendum – the current threshold being 3%.
While this could put more money in council coffers, it is estimated it could mean the average ‘Band D’ household will pay £250 a year more in council tax by 2027/28.
A representative at one Teesside council told the Local Democracy Reporting Service that more detail was being awaited with council tax levels in 2023/24 and the accompanying budget being considered as normal in February next year.
He said it was worth noting that the Government usually assumed councils would put council tax up by the maximum amount when allocating funding.
Councils are currently awaiting the outcome of the annual financial settlements they receive from the Government, an announcement being expected shortly before Christmas.
Middlesbrough Council has warned of a potential budget gap of between £15m and £20m in 2023/24 and is proposing to go out to public consultation over savings worth more than £14m.
Street lights, road repairs, libraries, council jobs and school dinners are all in the firing line if the plans go ahead with £5.4m being cut from basic services.
It has already unveiled a suggested overall council tax increase in 2023/24 of 2.99%.
Just down the road in Redcar and Cleveland the council there has said it could also face a funding shortfall of £15m next year with managing director John Sampson warning of an “unsustainable financial position” without extra funding from the Government.
It has begun to look at various options to make savings with jobs and services potentially under threat.
Councillor Glyn Nightingale, the cabinet member for resources, said last month the financial pressure on the council was “unprecedented” and proportionately higher demand for social care in the borough used a disproportionately high share of its funding.
Mr Hunt revealed that a plan to cap social care as part of the Dilnot reforms would be delayed for two years with the money instead going to councils to deliver more care packages.
Redcar and Cleveland Council’s children and families department is forecast to account for £5.2m of the predicted £8m it will overspend by the end of this financial year, which is attributed to the provision of children’s social care services and home to school transport costs.