COMMENT The Conservative leadership contest is now in its final stages. Over the past few weeks, as various prime ministerial candidates have set out their stalls, levelling up – the term central to the Conservatives’ successful election campaign of 2019 – has been used sparingly.
Some commentators have taken this to mean that, under new leadership, the government will be less committed to the vision presented in the Levelling Up and Regeneration Bill – but that seems unlikely.
The need to address the stark inequalities that exist across the UK is undeniable, and Conservative MPs elected on the basis of manifesto promises and under fire from constituents because of the cost of living crisis will be holding the new leader’s feet to the fire. We may, however, see a change of emphasis in some areas – and perhaps even a reframing of some of the 12 missions as the new prime minister seeks to stamp their mark and personality on the agenda for the next couple of years.
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COMMENT The Conservative leadership contest is now in its final stages. Over the past few weeks, as various prime ministerial candidates have set out their stalls, levelling up – the term central to the Conservatives’ successful election campaign of 2019 – has been used sparingly.
Some commentators have taken this to mean that, under new leadership, the government will be less committed to the vision presented in the Levelling Up and Regeneration Bill – but that seems unlikely.
The need to address the stark inequalities that exist across the UK is undeniable, and Conservative MPs elected on the basis of manifesto promises and under fire from constituents because of the cost of living crisis will be holding the new leader’s feet to the fire. We may, however, see a change of emphasis in some areas – and perhaps even a reframing of some of the 12 missions as the new prime minister seeks to stamp their mark and personality on the agenda for the next couple of years.
Bolder ambitions
Rishi Sunak and Liz Truss have both presented ideas for revitalising high streets, promising to take action on empty shops, graffiti and antisocial behaviour. However, these are just symptoms of decline, and the new prime minister must be much bolder in their ambition.
Encouragingly, both appear to recognise the potential of creating the right environment to stimulate action and investment – a great description of the BPF’s proposal for Town Centre Investment Zones, which through tax reliefs, planning flexibility and new models of public-private partnership would provide a new model for urban regeneration, creating more certainty for investors and removing some of the barriers to delivery. This should be near the top of their levelling up inbox.
Joining up different departments and policies – a recurring theme – should also be high on their agenda. There’s not much point creating the right climate to attract investment if in another part of the forest you are taking action which risks being a deterrent to the flow of capital into our towns and cities.
In July, the BPF responded to an HM Treasury consultation on Solvency II, an EU directive that introduced more stringent capital requirements for insurers and reinsurers. We, alongside several other real estate organisations, have argued that the current 25% capital requirement for investments in real estate is too high and overstates the risk to financial institutions of investing in these assets for the long term. Indeed, the basis for the capital requirement was an assessment of real estate volatility for a one-year period in the aftermath of the financial crisis. With insurers holding real estate for an average of 14 years, we should be seizing the opportunity to reduce the capital requirement to reflect this reality, freeing up tens of billions to be invested into UK towns and cities.
Grasp the nettle
This summer the Treasury is also exploring plans to introduce a higher tax rate on all property-related income for sovereign institutional investors. While this may be seen as benefitting the public purse in the short-term, this hardly seems the right time to open this debate – or the right signal to send to a group of investors (and potential investors) which have shown to date significant commitment to the UK, and for which investment objectives are largely aligned with the government’s levelling up ambitions.
We also need the new prime minister to finally grasp another Treasury nettle – business rates reform. As we know, this uncompetitive tax makes occupying town centre premises unviable for many businesses. Institutions will only invest in real estate if they are confident there is sustainable demand for the workspace, retail and leisure spaces they are creating.
The No.10/No.11 relationship has always been critical to the health and success of a government, and I will be watching closely not only on 5 September to see who the new prime minister is, but who becomes their chancellor later that week.
Melanie Leech is chief executive of the British Property Federation
