The budget announced by Kwasi Kwarteng on Friday will grant lucrative tax breaks to “affluent” Conservative areas, taking much-needed funds away from areas most in need, Labor has warned.
Some wealthier counties, including those containing the seats of Liz Truss and her deputy, are earmarked as “investment zones”, where billions will be handed over to businesses to encourage them to invest and grow.
But Labor is questioning how the list of proposed zones has been drawn up, for a policy described as “level in action” by a cabinet minister.
It comes as Liz Truss is said to be planning more tax cuts in the new year, with moves to further reduce income tax and savings for child benefit claimants, The Telegraph reports.
The proposals could see people earning more than £100,000 with tax-free Personal Income Allowance, the removal of charges for workers who earn more than £50,000 and claim child benefit and an overhaul of the tax paid on pensions of more than a million pounds.
The news came as Friday’s dramatic budget tax cuts were branded a “southern comfort” package by the Resolution Foundation think tank, fueling protests that the plans announced by Mr Kwarteng are unfair and unwise .
According to analysis by the foundation, households in London and the South East will benefit by around £1,600, more than triple the amount by which households in Wales, the North East and Yorkshire.
Sir Keir Starmer criticized the risks taken in the Budget as he arrived at Labour’s annual conference in Liverpool, saying: “The Tory casino economy is playing with the mortgages and finances of every family in the country.”
The CBI also criticized the government for its assumption that tax cuts alone would “suddenly unlock growth” and called for a “broad-based plan” to turn the economy around, including measures aimed at boosting skills.
The investment zones will offer generous relief from business rates, stamp duty and capital allowance, as well as zero employer national insurance contributions, in a bid to kick-start stagnant investment.
But the proposed areas include Norfolk, home to the Prime Minister’s constituency, and the Suffolk base of his deputy Therese Coffey, as well as leafy Bedfordshire, Cheshire, North Yorkshire and Greater London.
“The government has chosen to locate many of these investment zones in wealthy parts of the country,” said Lisa Nandy, the shadow secretary.
“If businesses there don’t pay taxes, businesses elsewhere will have to take the strain. That’s a big demand for small businesses struggling with energy costs and business rates right now.” .
Investment zones have already been dismissed as a rehash of George Osborne’s “enterprise zones”, a failed policy that has ended up creating few new jobs over the past decade. Analysis by the Center for Cities think tank of Osborne-era areas found they had created fewer than 14,000 jobs, not the 54,000 expected, of which more than a third had been displaced from other places.
A Tory minister has described the government’s proposed “investment zones” as “levelling in action”.
(AP)
This finding was similar to that made by the Treasury watchdog in its investigation into free ports. The investment zones are an expansion of the free port policy.
The chancellor has avoided giving an estimate of the huge bill for up to 38 investment areas, arguing that “it is not possible to publish a cost at this stage”.
Ms Nandy also attacked the scaling back of environmental planning and controls, and affordable housing targets, in the areas as “reckless”.
“This country needs a serious plan for growth, not more recycled and failed conservative ideas. Investment zones have been tried before and have not delivered the new jobs or growth promised,” he added.
The extensive list of local authorities in “early discussions” with the government also includes Blackpool, Cornwall, Hull, Liverpool, North of Tyne, Stoke-on-Trent, Sunderland, South Yorkshire, Tees Valley and West Yorkshire.
Simon Clarke, the leveling secretary, said the investment zones would be “transformational” and deliver “this government’s defining mission: to grow our economy and level the country”.
He said: “It means spreading opportunities and raising living standards in parts of the country that are full of talent but have been overlooked and undervalued for years.
“It’s leveling up in action and it’s leveling up in a conservative way,” he added, using a slogan coined by Boris Johnson’s government, one that Ms Truss seems to shy away from.
Chris Philp, the chief secretary to the Treasury, defended the big tax cuts, insisting: “We’re going to do the right thing. We’re going to get growth. And we’re not going to worry about the politics of envy, or the optics of this”.