Exclusive: councils wasted time and money ‘bidding in the dark’ on Liz Truss’ short-lived Investment Zones scheme

Ministers met with representatives from local councils the day the scheme was announced

Councils in England wasted time and money putting together plans for the short-lived Investment Zones initiative announced by then-Chancellor Kwasi Kwarteng in September.

Regional leaders have described the scheme as a “costly flash in the pan,” after putting together time-consuming expressions of interest which have now all been shelved. All that effort went to waste after the plans were drastically watered down following Liz Truss’ resignation as Prime Minister after just 44 days in office.

It comes after widespread criticism of the competitive bidding process which has been favoured by central government as a way of distributing funding to local authorities, following reporting by NationalWorld which showed millions has been spent on unsuccessful levelling up bids.

Ministers met with councils day scheme was announced

Investment Zones were a key policy of former Prime Minister Truss, who envisioned up to 200 being set up across the country. Within these zones companies would have been able to benefit from simplified planning, lower regulation and tax incentives. However, Treasury analysis suggested the cost in lost tax revenues would have been up to £12 billion per year.

Announcing the scheme, Kwarteng said the government was already in discussions “with nearly 40 places like Tees Valley, the West Midlands, Norfolk and the West of England to establish Investment Zones”.

Further details of the scheme were published in the following days, and the scheme opened on 2 October with a deadline for councils to submit expressions of interest by 14 October, leaving local authorities little over two weeks to prepare their proposals.

NationalWorld spoke to several sources across a number of local authorities, who stressed that at the time of the announcement they’d had very little detail about what the scheme would involve, with one source describing talks as “very recent”.

Liz Truss and Kwasi Kwarteng’s mini budget sent the financial markets into chaos. Credit: Getty ImagesLiz Truss and Kwasi Kwarteng’s mini budget sent the financial markets into chaos. Credit: Getty Images
Liz Truss and Kwasi Kwarteng’s mini budget sent the financial markets into chaos. Credit: Getty Images

A spokesperson for the Greater London Mayor, Sadiq Khan, told NationalWorld at the time that the authority had “only had very early discussions regarding the potential creation of any Investment Zones”.

Transparency releases now show just how recent these discussions were. Ministers at the Department for Levelling Up, Housing and Communities (DLUHC) met with representatives from 38 councils on 23 September, the day the initiative was announced as part of the ‘mini-budget’, to discuss Investment Zones.

In November, the Treasury confirmed that the scheme would not be dropped entirely, but would be significantly altered, with all existing expressions of interest scrapped.

West of England Metro Mayor Dan Norris with Labour leader Keir Starmer. Credit: Matthew Horwood/Getty ImagesWest of England Metro Mayor Dan Norris with Labour leader Keir Starmer. Credit: Matthew Horwood/Getty Images
West of England Metro Mayor Dan Norris with Labour leader Keir Starmer. Credit: Matthew Horwood/Getty Images

‘Bidding in the dark’

Speaking to NationalWorld, West of England Mayor, Dan Norris, said: "Just like the politicians behind them the Truss/Kwarteng Investment Zones were a short lived but costly flash in the pan.

“There were demanding deadlines to apply that used up a great deal of staff resource, but very little detail. It was bidding in the dark with no idea on if we wanted what might have been on offer.”

The work involved in creating an Investment Zone bid was significant, according to local government sources, with many complicated factors to consider. Despite this, and the far-reaching implications of having actually setting up one of the zones, councils were given just a few weeks to first decide whether they wanted to apply and then put together proposals.

One council chief executive told NationalWorld that the way the scheme played out was a “real frustration”.

They said: “We all got very excited, it was two weeks flat out work from my level all the way down. That was then put in a bin. It’s time you don’t get back; it’s legal advice you commission externally, it’s money and investment that should be going on other things."

Kent County Council submitted 20 expressions of interest for the Investment Zone scheme, with support from district councils, but were left “disappointed” at the announcement a few months later that all applications would be shelved.

Speaking to MPs on the Levelling Up, Housing and Communities select committee recently, West Yorkshire mayor Tracy Brabin said competitive bidding pots are “taking up far too much time and are inefficient”.

“We prepared suggestions for the Investment Zones and then obviously government’s minds were changed.”

She added: “It is not good enough and the goalposts are changing all the time, as we saw with the Investment Zones. We know our communities, we know how to deliver on the Government’s pledges and the Government’s commitment to levelling up; give us the power, the tools and the money to do it.