Too many regions in Britain were knocked down by the financial crisis and have yet to get back up.
Outside of London, Manchester and the other largest cities, ‘recovery’ is a word that is sneered ironically.
“Oh yes, the green shoots of recovery have really reached us here,” a local politician in Sunderland joked to me last month, “look, over there the grass is growing back over that abandoned business park.”
According to the Resolution Foundation, a leading think tank, London’s economy is at least 8% larger than it was prior to the 2008 financial crisis. This is good news, but not if you live elsewhere. Significant parts of the midlands, the north, Scotland and Wales remain poorer than they were almost a decade ago. In Belfast, Cardiff, Hull and Sheffield, their economies remain 5% smaller than they were. Seaside towns, meanwhile, continue their sad sixty-year decline.
The result is a two-speed economy, with those in the fast-lane worried about overheating house prices and bitcoin bubbles, and those in the slow-lane struggling to put food on the table.
If the Prime Minister is serious about big, bold ideas to raise wages, improve jobs and support communities, this is where she should start. An idea, low in cost and high in impact, comes from across the Atlantic.
One part of the new Tax Bill has brought Republicans and Democrats together: Opportunity Zones.
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The idea is simple. Too many communities are trapped in a low-growth spiral of bad-jobs, bad-schools, low-investment and limited-hope. At the same time, pension funds, insurance funds, and large corporations are sat on vast cash reserves or have funds tied up in assets like shares which will be subject to capital gains tax upon sale. What if, instead, those investors put some of that money into those low-income, high-potential communities and were rewarded by not being taxed on their returns?
In short, these are tax incentives to invest money in renewing places. Investors pay less tax, and communities get more growth.
Census data has been used to identify potential Opportunity Zones all across America, from Nevada to New York, and from California to the Carolinas. These are places that have lower than average wages and plans for what they would do with new investment: infrastructure, schools, small-business support and more. The Governors of each state have been asked to pick which areas to start with, bringing local knowledge of local problems into the mix.
We could easily replicate the scheme here in Britain.
Step one, the Treasury could produce a map showing which areas of the UK are eligible, for example those communities that have experienced no or negative job growth since the recession. Step two, ask mayors, councillors and local communities to write in with their suggestions of where exactly they need investment and how they would spend it. Step three, hold a big conference bringing together these local representatives with investors (like pension funds), so that investors can choose where to invest, on the back of the government’s pledge to eliminate capital gains taxes for those investments. The whole project would cost nothing, since it’s about changing incentives rather than finding a big new pot of money at the end of the rainbow, and would stimulate growth.
Is it easy? No. Is it simple? No. But few things worth doing in business, politics or life ever are.
On the 13th July, 2016, Theresa May stood in front of 10 Downing Street for the first time as Prime Minister, and declared: “We believe in a union between all of our citizens, every one of us, whoever we are and wherever we’re from. That means fighting against the burning injustice that, if you’re born poor, you will die on average nine years earlier than others.”
That fight should begin now. I suggest Opportunity Zones.
Benjamin Clayton is a Fellow at Harvard’s Kennedy School of Government. He was previously Chief of Staff at the British Government’s National Infrastructure Commission.