Labour outlines infrastructure and housing plan to boost regional growth
CBI backs plan for decentralised funding for skills and investment as Miliband tries to reassure industry over tax.
New city or county regions will be given the power to keep all growth in their business rates income and use it to build new housing and infrastructure, and reskill their local workforce, under plans to be announced on Tuesday by Ed Miliband and former Labour cabinet minister Lord Adonis.
In what is being billed as a decisive shift away from decades of Whitehall centralisation, Adonis also proposes that at least £6bn a year of transport, housing, welfare and infrastructure budgets are devolved from central government to large city councils or combined authorities.
The government has so far agreed half of the growth in business rate revenue could be retained, a measure derided as too modest to provide an incentive for councils to focus on growth.
The Miliband-Adonis plans are seen as vital to reassuring business that Labour’s responsible capitalism agenda will encourage balanced growth and not lead to punitive tax rates or excessive regulation. The ideas were welcomed by both the CBI and the EEF manufacturers’ organisation, suggesting a much-needed thaw in Labour’s relations with the business community could be under way.
Lord Mandelson, the former business secretary, recently warned that Miliband had not set out how he would create “the conditions in Britain for businesses to grow and thrive”.
The launch is also internally important to Labour after reports emerged of the anger of the party’s policy coordinator, Jon Cruddas, over the “dead hand” of the Labour leader’s office.
Ed Balls led the pro-growth charge in a speech in which he promised to reduce and then freeze small business rates, rather than press ahead with a planned cut in corporation tax next year. The shadow chancellor said he was looking at cutting capital gains tax to reward long-term investors, but would keep the lowest rate of corporation tax in the G7. Adonis also sets out measures to address the lack of skills in the UK labour force – a factor cited by business to Adonis as the single biggest barrier to growth. He proposes:
• A threefold increase in apprenticeships for school-leavers in science, technology, engineering and maths.
• More than 100 new University Technical Colleges and the creation of a new “Teach Next” organisation for successful career switchers to teach maths and science.
• The appointment of new directors of enterprise and employment in schools to improve careers advice in schools and advise pupils on apprenticeships and higher education.
He also suggests that the boundaries of the current 39 Local Enterprise Partnerships (LEPs) should be redrawn to match local economic identities such as “travel to work areas”, leading to a significant reduction in their number. LEPs were set up by the coalition government in 2010 – replacing the nine regional development agencies – and Adonis was told industry could not stomach another change to the architecture of local business support. The new LEPs will also be given direct say over growth strategies and priorities, backed by a substantial single pot of funding to invest in economic development.
The ability to keep the growth in business rates income will be dependent on the creation of a city or combined authority broadly modelled on those that already exist, notably in Greater Manchester. Working in concert with LEPs, the combined authorities would tackle the chronic problems of poor skills, infrastructure and economic development across a wider area than local government can currently address.
In England, business rates raised about £22bn in 2012-13, and were charged on about 1.8m properties.
Greater Manchester is looking for a deal with the government over the full five years from the next spending review (expected in autumn 2015) covering significant blocks of funding where the region can keep savings generated through reforms over the period – with an agreement sharing risk and reward.
These regional economic powerhouses would receive additional business rates revenue generated by growth to invest in building further success. This would be revenue-neutral – offset by reductions in grants – but would mean that any additional income generated by growth would be invested locally.
Adonis also proposes that 25% of all government procurement contracts go to small and medium-sized enterprises, both directly and through supply chains. A new Small Business Administration would be given the task of meeting the target.
Adonis is expected to say: “England’s business leaders and local governments need empowering to invest in infrastructure, skills and economic development. While big numbers dominate discussions about economic growth, the real story exists in the company, the cluster, the school, or the city.”
Katja Hall, CBI deputy director general, said:”Lord Adonis’s report identifies the right priorities for growth and job creation, and recognises that the benefits of the recovery must be shared across all regions of the UK.
“Size matters for local government, and more combined authorities would help create regional economic powerhouses to invest in research and development, support exporters and expand apprenticeships.”
- The Guardian,