Liz Truss’s “bold plan to cut taxes and grow our economy” has yet to be laid out in depth, though we have the general thrust and expect more detail soon. But one aspect has been mentioned repeatedly. At last week’s final leadership hustings at Wembley, our next Prime Minister pledged to “set up low-tax investment zones to drive jobs and growth across our city, just like we did with the Docklands Development Corporation in the 1980s that has now created Canary Wharf”. Her recent Evening Standard article also highlighted Truss’s plans for such zones to “transform more of our country through the power of free enterprise” a la Docklands.
As a historian, I am a great believer in the past providing lessons for the present. There seems to be a mix-up about how Canary Wharf came about, and this is relevant to the Truss plan’s chances of success.
The “investment zones” she envisages setting up across the country seem to amount to extremely low-tax, low-regulation areas, much more akin to the enterprise zones of the 1980s (which were revived under the Coalition government) or to Rishi Sunak’s more recent “freeports” policy than to the London Docklands Development Corporation (LDDC). This distinction matters.
The LDDC was a quango established by environment secretary Michael Heseltine in 1981 to regenerate a once thriving part of the East End. The corporation’s job was to acquire, clean up and sell on land, put in new infrastructure, and market the area to developers. Market forces had seen the capital’s docks collapse into dereliction due to the advent of the shipping container, which favoured deep water ports. It wasn’t explicitly presented as such at the time, but the LDDC was established to spend a great deal of public money, time and effort on turning the area’s fortunes round.
Geoffrey Howe, the Chancellor of that time, favoured an alternative regeneration model he termed the “enterprise zone”. Based on an idea of the Fabian academic Sir Peter Hall, these were to be localised experiments in deregulation, whereby normal planning rules and taxation were waived or relaxed to encourage development and enterprise.
To some degree, this was the opposite of the LDDC’s function. However, it is no coincidence that Canary Wharf emerged in a part of the Isle of Dogs where Heseltine’s development corporation and one of Howe’s enterprise zones overlapped. The LDDC cleaned up the land, put in the roads, cables and pipes, and generally primed the pump for the private sector. It also actively marketed the area, negotiating up the quality and purpose of development – despite the deregulated planning environment – in order to ensure its success. For its part, the Isle of Dogs enterprise zone incentivised private investment on a scale few had imagined.
The two initiatives helped each other, and it is impossible to ignore the degree to which the LDDC’s first chief executive, Reg Ward, worked alongside the scheme’s initial developer, G Ware Travelstead, to persuade, hoodwink and cajole the government into giving Travelstead all he thought was needed to enable the development to go ahead. Indeed, Ward went almost entirely native, and was moved on soon after Canary Wharf was signed off.
Despite his efforts, Travelstead was still ultimately unable to finance the project, and reluctantly handed it over to Canadian property giants Olympia & York. Then, with construction underway, O&Y went spectacularly bankrupt, leaving Canary Wharf half built and potentially redundant. The project eventually emerged from administration, but only after the government was forced to agree to both extend the Jubilee Line eastwards and build the Limehouse Link – pound-for-inch the most expensive piece of road in Europe at the time – in order to ensure its success.
As Canary Wharf rose from the docklands rubble, Margaret Thatcher became a prominent fan, but it was no straightforward triumph of Thatcherite economics and market forces. For better or worse, Canary Wharf would not have happened without a great deal of public investment and government intervention.
Elsewhere, operating without a powerful development corporation in the same area, enterprise zones seem mostly to have underperformed. They stimulate economic activity and create jobs, but there is concern that the tax incentives they provide simply encourage economic activity to move from one place to another, sometimes to locations that are less practical or efficient. And even when they work, they can do so at some expense: the Isle of Dogs enterprise zone was estimated to have cost the exchequer over £1 billion in foregone revenue in today’s money.
Enterprise zones certainly can have an effect, but my historian’s hunch is that simply removing regulations from patches of unused land is unlikely to be enough to make the next Canary Wharf happen.
Jack Brown is lecturer in London Studies at King’s College and author of The London Problem. Follow Jack on Twitter.
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