Ben Houchen is the Mayor of the Tees Valley.
The release of the Government’s Levelling Up White Paper on Wednesday was a very welcome change from Westminster gossip, with serious policy issues leading the news, and the government getting on with the job of delivering for the British people. There is no shortage of serious thinking behind the white paper, and much to be positive about in it.
When Michael Gove was appointed as Secretary of State for Housing, Communities and Local Government, one of his first acts was a visit to Teesside. I took him to see Teesworks, the transformational project that is breathing new life into the former Redcar steelworks and the heart of the Teesside Freeport. While he was on the site I spoke to him at length and in detail about securing jobs, private investment, and growth in my region, and the lessons that could be learnt from Teesside’s experience. Michael has certainly listened, and the strategic direction the white paper outlines has the right priorities – giving back control to local people, ensuring that there is strong local leadership, enabling people to restore local pride, and hugely raising ambitions for communities abandoned to decline.
I’ve always said delivering levelling up was not going to be achieved in just a few years, and the White Paper has the breadth and depth of vision necessary to guide Government policy for years to come. It’s going to be an invaluable blueprint for both this and future governments, as its ideas work through the different departments of state. But whilst the White Paper is strong on getting the shape of government intervention right, there is a lack of clarity when it comes to enabling the real engine of levelling up to take off. Investing in local priorities and fixing skewed research and development funding formulae is important, but what will really restore pride to left-behind areas and create the new opportunities we all want to see is private initiative. The paper’s relative silence on this essential part of the equation is a missed opportunity. A free market focus could have supercharged the White Paper.
Nevertheless, the free market is going to be crucial to the next stage of levelling up: delivery. At the next election, I believe the government will stand or fall on whether people can see visible progress on levelling up. People need to see cranes on the skyline, spades in the ground, and steel going up, as key infrastructure projects are delivered. But as Conservatives, we know that it’s not always about throwing taxpayers’ money around. History shows the State, with its default mindset diktat handed down from upon high, simply can’t do the right things quickly enough. Plans to extend the kind of devolved powers I have to new elected Mayors need to be accelerated. The invention and skill that the Prime Minister has rightly said exists in every part of our country needs to be unleashed. And we need to convince private investors to commit with confidence to places with a proud past and huge potential but a recent history of reliance on state-administered sticking plasters. How do we achieve this?
Firstly, I’d aim for the low-hanging fruit of business rates. Tax devolution may not sound exciting. But I believe devolution of business rates could be as revolutionary as Margaret Thatcher’s “big bang” reforms to the City of London in 1986. If I, as Mayor, had control of business rates, I’d slash business rates across the board, with a special focus on capital and energy intensive businesses which are a huge strategic priority for Teesside, Darlington, and Hartlepool. Overnight this would stimulate massive private sector investment in strategic industries that are critical for UK PLC. This in turn would lead to an explosion of job creation, put more money in people’s pockets, and restore local pride. Different areas could take different approaches – for example, London could focus on its world-class financial services sector. The result would be a spectacular renaissance and an economic boom not seen for generations.
Getting competition into local government would not only get some much-needed downward pressure applied to tax on job-creating British businesses – it would stimulate over-cautious local authorities to shift from micro-management of decline to big thinking about success – something far too few councils do. Cleverly deployed, it could be a crucial tool in incentivising a net zero recovery, putting the UK at the global forefront of net zero technology, securing first-mover advantages in jobs and technology, and showing that green goals are better achieved through the market than through socialist levies.
The reason I’m so keen that the Government moves boldly on hydrogen technology is because we have a once-in-a-lifetime opportunity to become a global centre for a huge growth market. No great opportunity is completely risk-free, but it’s a moment we need to seize or we could be outstripped even by the usually sluggish EU. The hydrogen contracts for different business models need to be released; heating and transport projects need to be accelerated; and we need to incentivise private investment in the sector on a big and immediate scale, or we are going to come late to a German party.
Treasury officials, lacking confidence in the free market and British enterprise, fret that fiscal responsibility requires regulations and taxes – especially business rates – to stay equally high in all fields and across the country. But the example of Corporation Tax is instructive. Gordon Brown left behind a Corporation Tax rate of 28 per cent. Despite howls from the opposition parties, Conservative chancellors have cut this down to 19 per cent. That led to the creation of huge numbers of new jobs and new businesses, whilst the actual tax yield to the Treasury from Corporation Tax grew. Singapore has pursued the same strategy with much more conviction, and their ten per cent Corporation Tax cuts and other business incentives have been rewarded with six per cent growth. If we’re to overcome the cost of living crisis, this is the kind of growth we too should be reaching for.
We need every part of Britain to be firing on all cylinders if we are to win the global competition for investment. Instead, Treasury fixation on the short-term is keeping a tight central rein on growth. The Treasury plans to let the government’s most pro-growth policy, Rishi’s super-deduction, lapse next year. If the super-deduction is indeed allowed to lapse, CPS and Tax Foundation research shows Britain will fall to about 31st in global competitiveness league tables. This simply isn’t good enough. Brexit gives us the opportunity to make bold business incentives happen without needing EU say-so. We need to take that opportunity and make bold moves now.
Levelling up requires not bigger, but smarter government, smarter politics, and smarter tax. The White Paper rightly prioritises the open publication of new levels of data so that the Government can be held to account on delivery. I’m willing to be judged on delivery, and with the strategy set in the White Paper, the time to deliver jobs, investment, and growth is now. Giving Combined Authorities genuinely extensive powers to set Business Rates is only one of many actions we need to take. But all paths to delivering levelling up need Whitehall officials to be led by Conservative ministers to embrace lower taxes, lower regulation, and the power of private enterprise.