Recommendation 14

HM Government Acknowledged

The Chancellor announced at Autumn Statement last year that the Government intended to take forward a refocussed Investment Zones programme, concentrated on developing a limited number of the highest potential growth clusters around key knowledge assets in order to boost innovation, productivity and jobs. He also confirmed that the previous Investment Zone EOI would therefore not be taken forward. We recognise the work that went into the previous EOI and are grateful to councils for their efforts. The information gathered from councils during the first round of Investment Zones has been invaluable in informing the policy development of the new programme, strengthening our understanding of what measures will support places to attract increased investment in high-value sectors and ensure the benefits are felt by local communities through inclusive and sustainable growth. The previous work of councils, therefore, has not been wasted. In March 2023 at Spring Budget, we published details of the new policy offer, offering Investment Zone areas a total funding envelope of £80m over five years, which can be used flexibly between spending and a single five-year tax offer, scalable based on number of sites. Local partners, within eight geographies named in the prospectus, have been invited to host an Investment Zone, with a view to agreeing co-developed proposals by the end of the year. In June two new Scottish Investment Zones were also announced in Glasgow City Region and the North East of Scotland, each of which will benefit from an overall funding envelope of £80m over a five-year period. Our engagement with local government has taught us that competitions, whilst useful in the right circumstances, should not be the default. A national competition, run for a second time, could have placed undue pressure on local authorities. Instead, places were selected based on a transparent and rational methodology, published on gov.uk. The criteria selected were chosen to identify the functional economic areas (FEAs) in England best suited to supporting the overall objectives of the IZ programme – boosting productivity where its lagging, increasing innovation capacity and growing clusters around key sectors, and Levelling Up in places with the necessary research, sector and governance strengths to be successful. The evidence is clear that successful cluster growth must be founded in long-term partnership and collaboration between central and local government, research institutions and the private sector, and so we will only be announcing 12 Investment Zones at this time. This will also avoid spreading the overall fiscal envelope too thinly. We will keep the list of areas under review with the possibility of considering other places in future, subject to the overall fiscal envelope of the programme. Our wider Levelling Up agenda is ambitious in its scale and Investment Zones is just one of many opportunities available to local authorities. Indeed, complementary initiatives including Freeports, the UK Shared Prosperity Fund, Levelling Up Partnerships and the Levelling Up Fund are not limited to MCAs. However, it is also the Government’s policy to support the creation of new MCAs, which is why six new devolution deals have been agreed since the publication of the Levelling Up White Paper in 2022. It is therefore right that we invest in a more devolved structure of governance, which includes the multi-year, single, flexible funding settlements announced for the Greater Manchester and West Midlands Combined Authorities.