Factbox-Truss prepares her bonfire of the regulations in bid to boost UK growth

By William Schomberg

LONDON (Reuters) – Prime Minister Liz Truss and her finance minister Kwasi Kwarteng want to kick Britain’s economy into a faster growth gear to help fund the tax cuts that sent financial markets into a tailspin.

They plan to outline soon how they will overhaul Britain’s complex planning system, the rules that govern the City of London, immigration and other so-called supply-side reforms to achieve their target of 2.5% annual economic growth.

The last time Britain’s economy grew that fast was in 2015, excluding a bounce-back in 2021 from the coronavirus slump.

The Bank of England said in August that it expected the economy to shrink by 1.5% next year and still be shrinking in 2024.

Following is a summary of how Truss and Kwarteng could deliver pro-growth reforms.

PUBLIC INVESTMENT – Britain has recently increased how much money it ploughs into roads, railways and other projects which help to boost economic growth. But at 2.5% of gross domestic product, public sector net investment is below the average in other leading economies, part of the reason Britain has one of the slowest productivity growth rates among its peers. Truss and Kwarteng also want pension funds to invest in infrastructure.

INVESTMENT INCENTIVES – Businesses have slowed the pace of their investment in recent years after Brexit and the coronavirus pandemic. Despite a generous two-year tax incentive to encourage spending on plant and machinery, business investment in mid-2022 was 10% lower than before the pandemic. Businesses want new investment incentives when the current one expires in April. The government hopes its decision to stop a big corporation tax hike in April will help too.

PLANNING – Britain has an array of rules and restrictions that make it hard to build housing as well as roads, railways and other infrastructure. The rules seek to protect nature or give nearby residents a chance to oppose developments. They are a big factor behind the shortage of homes in Britain. Past governments have tried and failed to streamline the system. Kwarteng said last week the government would liberalise the rules for “specified agreed sites”.

IMMIGRATION – After Brexit and the coronavirus pandemic, it has become harder for businesses to fill vacancies with foreign workers, leading to staff shortages for many firms and weighing on the economy. Employer groups want more categories of workers to qualify for relaxed visa rules. Truss plans to launch a review of the visa system to tackle the shortages in areas such as broadband engineers, defying some of her more anti-immigration ministers, the Financial Times has said.

CITY OF LONDON – Truss has promised to “really unshackle” Britain’s financial services industry which is no longer subject to European Union rules. One of her government’s first announcements was to scrap an EU cap on bankers’ bonuses and she wants to make it easier for insurers to invest by reducing the amount of capital they must hold to protect against insolvency. Kwasi has promised a “Big Bang 2.0” for the City in October.

TRADE – Britain’s trade with the EU dropped sharply in January 2021 when the country finally left the single market and border checks were introduced. More checks are due in the coming months. New trade deals with other countries have so far not offset that drag. Many smaller firms find the extra paperwork to export to the bloc no longer worth the hassle, employer groups say. They want Truss and Kwarteng to cut the paperwork and pursue trade deals with the United States, India and beyond.

SKILLS AND TRAINING – Britain has low levels of training for people in work. The OECD has said the proportion of under-qualified workers in Britain is one of the highest among its member countries. Employer groups want more tax incentives to encourage training.

ENERGY – Truss, casting aside the climate change concerns of previous prime ministers, is backing new North Sea oil and gas production and is lifting a ban on fracking to make Britain less dependent on energy imports which have rocketed in price after Russia’s invasion of Ukraine. But it typically takes several years from exploration until oil and gas is produced from a new field. Employer groups say the push for a net-zero economy represents a longer-lasting source of economic growth and the government provides should provide more incentives. The Institute for Directors suggests certified net-zero companies should pay a lower rate of tax on their profits.

LEVELLING UP – Truss’s predecessor Boris Johnson made “levelling up” a signature policy as he tried to skew investment to low-income regions. But so far they have not benefited much from a Levelling Up Fund, according to the Organisation for Economic Co-operation and Development. It said access to the fund should be made easier. Truss and Kwarteng support creating more low-regulation freeports around the country but critics say they tend to take growth away from other areas.

WOMEN IN WORK – Childcare in Britain remains expensive for many families and as a result three times more women work part time than men, according to the OECD. That represents a big pool of potential extra workers who could bolster the labour market with the right kind of incentives.

(Additional reporting by Susanna Twidale and Huw Jones; Writing by William Schomberg; Editing by Angus MacSwan)