Kwasi Kwarteng’s mini-budget contained many elements that can only be described as having a seismic impact. One less controversial – but nonetheless crucial – policy change is that of the “investment zones” set to be created by new planning reforms.
Businesses and developers will receive tax cuts and planning restrictions will be relaxed in an effort to attract investment in various areas across the country, with 38 local authorities reportedly interested at an early stage.
Some specific policy changes that have been floated include the removal of restrictions on height limits, ending the requirement for affordable housing within developments, and loosening environmental rules.
Businesses will also pay no tax on investment in plant, machinery, and new buildings. There will also be no business rates paid on newly occupied or expanded premises; no national insurance paid on the first £50,000 of workers’ salaries in most cases; and no stamp duty on purchases of land or buildings for business or residential development in these zones.
“That is an unprecedented set of tax incentives for businesses to invest, to build and to create jobs right across the country,” said Kwarteng. He added: “If we really want to level up, we need to unleash the power of the private sector.”
Stuart Tym, planning partner at Shoosmiths, said the proposed local investment zones can be seen as “hyper-freeports” which eclipse those announced by the previous administration in terms of regulation. He added:
“This is particularly the case for planning policy, with the zones subject to bespoke regulations and potentially scaling back environmental protections, Section 106 agreements and infrastructure levies.
Changing planning policy can act as a lever for development.”
Tym did, however, have concerns regarding the negative externalities that may result from deregulation:
“It’s critical that we avoid becoming tunnel-visioned in the pursuit of economic growth; ensuring that deregulation does not impact the environment and balances the delivery of much-needed market rate and affordable housing with the related required infrastructure.
Government funding will be used to fill the void left by reducing developer contributions in these zones. The success of this system hinges on often under-resourced local planning authorities being not only able to demonstrate what they would have asked a developer to finance, but also obtain funding from a new government stream and deliver projects in a timely fashion to mitigate the impact of development.”
On Kwarteng’s notion of “unpicking” the wider planning system, Tym added:
“The confirmation that a bill is set to be brought forward to ‘unpick’ the wider planning system may signal the end of the Levelling Up and Regeneration Bill and its planning proposals. The Chesham and Amersham by-election result may have made that approach to de-regulation unpalatable; which remains the political lens through which further reform must be viewed.
If the government is to accelerate wider planning reform by ‘unleashing the power of the private sector’, it must also empower the public sector by properly resourcing local planning authorities.”
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