Pressure grows on Rishi Sunak to create growth plan after he scraps Liz Truss’s investment zones

Rishi Sunak was under pressure to produce a new plan for economic growth last night as it emerged that investment zones are to be axed and infrastructure projects scaled back to save cash.

In a round of media interviews yesterday, Michael Gove read the political last rites to Liz Truss’s plan to create dozens of low tax investment zones, which were central to her growth agenda.

The Levelling Up Secretary said Government infrastructure plans were also set to be cut back, with even the flagship HS2 likely to be ‘under review’ as ministers scramble to fill a £50billion black hole in the public finances.

He said ministers would have to take a series of ‘painful’ decisions in the November 17 Budget to reassure the financial markets that the Government is serious about balancing the books.

Rishi Sunak was under pressure to produce a new plan for economic growth last night as it emerged that investment zones are to be axed and infrastructure projects scaled back to save cash

Former chancellor Philip Hammond said Rishi Sunak and Chancellor Jeremy Hunt were right to act to stabilise the economy. But he warned that they urgently needed a new growth plan to stave off even more tax rises in future.

Official forecasts due next month are expected to show growth is now set to be ‘significantly’ lower than previously predicted. Lord Hammond told the BBC’s Laura Kuenssberg show that Mr Sunak faced a ‘huge challenge’ on the economy. ‘He has got to re-establish fiscal stability, and then he’s got to articulate a growth plan because that’s frankly what we’re lacking now,’ he said.

‘Liz Truss’s growth plan is dead in the water. Boris Johnson’s, which was based on big trade deals, particularly with the US, didn’t happen so they are going to have to set out a growth plan.

In a round of media interviews yesterday, Michael Gove read the political last rites to Liz Truss’s plan to create dozens of low tax investment zones, which were central to her growth agenda

‘Because without growth we’re not going to be able to solve the problems that our public services are facing and solve this conundrum that people don’t want to pay higher taxes but do want to have better services.’

Miss Truss’s growth plan last month was centred on tax cuts and the establishment of 38 new ‘investment zones’ where firms would benefit from low taxes and a light touch regulatory regime, including on planning rules.

The former PM and her chancellor Kwasi Kwarteng believed the new zones could turbocharge investment in neglected parts of the country.

But Treasury officials were alarmed about the potential cost of offering big tax discounts. And ministers faced a backlash over the planning proposals from groups including the National Trust and the RSPB.

Former Prime Minister Liz Truss and her chancellor Kwasi Kwarteng believed the new zones could turbocharge investment in neglected parts of the country

Mr Gove yesterday moved to calm their fears, saying he was ‘reviewing’ the investment zones and ‘anything that might in any way undermine environmental protections is out’.

A Government source said the zones ‘are very expensive and seemingly deliver very few benefits’. Among the capital projects now likely to be scaled back, meanwhile, is a £4billion plan to increase prison places.

Last night, some Tory MPs last night also urged ministers to cut their losses on HS2. Former Cabinet minister Andrea Leadsom said it ‘was always the wrong project’.

Tax hikes could be on the cards too, including raising the windfall tax on energy firms.

• The Prime Minister has overturned Labour’s poll lead on who voters trust with the country’s finances. Some 33 per cent would now prefer a Conservative government led by Rishi Sunak to manage the economy, while 29 per cent want a Labour government led by Sir Keir Starmer, according to the Opinium poll for The Observer. Only 11 per cent had opted for Liz Truss’s financial stewardship a week earlier.