Councils spent £12.5m on bids for Liz Truss’s investment zones, data shows

Cash-strapped councils are estimated to have spent £12.5m compiling bids to launch low tax and regulation-lite “investment zones” that were binned by the government just weeks later, new figures suggest.

Labour, which compiled analysis about the waste suffered by local authorities, hit out at the “cost of Tory chaos” given the scheme was effectively ditched by the prime minister, Rishi Sunak, when he took over after Liz Truss’s short-lived premiership.

Initially billed as a major part of Truss’s growth agenda, the investment zones announcement saw a rush of interest – with 626 submitted from 90 councils across England.

But while many areas jumped at the chance to be granted slimmed down planning rules and have other regulations eased, as well as tax breaks to encourage investment, putting together the documents came at a cost.

Councils had to spend an average of £20,000 to £30,000 in each bid for central government funding, and sometimes lost staff hours while work was done preparing the submissions, according to the Society of Local Authority Chief Executives.

Taking the most conservative end of that estimate, the total cost to councils was calculated to have been £12.5m.

Using the same equation, Labour also said the 418 bids rejected last week out of 529 received for the second round of distribution from the levelling up fund amounted to a loss to councils of £8.4m.

The nature of the system that sees local authorities forced to bid for central government funding was criticised by Lisa Nandy, Labour’s shadow levelling up secretary.

She claimed struggling councils had been “forced to waste millions of pounds during a cost of living crisis on applications that now lie in a bin in Whitehall”.

Nandy said: “Many councils were rightly sceptical about investment zones but felt they had to engage with what seemed to be the only game in town. A huge amount of time and money has been wasted because of the Conservatives bouncing from one half-baked idea to the next with no serious plan for growth.”

She vowed that Labour would end the “Hunger Games-style approach to levelling up, which forces communities to go cap-in-hand to Whitehall”, and said the party had “set out a proper long-term strategy to grow the economy, create good jobs and shift power of out Westminster”.

The levelling up department was contacted for comment.

Previously, the Guardian revealed that all expressions of interest from councils in becoming investment zones were not being pursued by the government.

A drastically slimmed down and refocused version of the scheme is still being discussed between the levelling up department, Treasury and No 10 that will probably see the zones focussing on boosting research and development hubs at universities.

Sources have indicated Sunak wants to use the move as a sop to Truss and her allies to fend off criticism about a lack of commitment to her vision of growth.

The levelling up secretary, Michael Gove, will probably express his commitment to a reincarnation of the scheme in a speech to the Convention of the North on Wednesday, but an announcement about the future of the project is still thought to be some way off.

The Guardian

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