It was supposed to be the great idea that would show the UK’s beleaguered business people that the government has a plan for something other than balancing the books.
Central to the Chancellor George Osborne’s set-piece crowd-pleaser at the Conservative Party’s spring conference was the announcement that about ten regional enterprise zones are to be created to develop the economy outside London.
It is a reheating of a very old idea that encountered serious problems the first time around. Violent gangsters used the big one, London’s Docklands, as a way of getting very rich by laundering proceeds of crime.
To get an idea, rent a copy of The Long Good Friday, starring Bob Hoskins as the gangster Harry Shand, who tries to get the Mafia to invest in the Docklands boom. Sadly it’s a true story copied by robbers, drug dealers, people smugglers and terrorists.
A repeat of the 1980s is now a possibility because of the decision to axe the regional development agencies (RDAs) among the quangos that are to be burned on that coalition bonfire.
RDAs weren’t perfect, but, given that central government money and local people were involved, there was at least a level of scrutiny. The job of the RDAs was to attract inward investment. Regional planning, which is critical to investment, was dovetailed with local plans so that everyone was “on the same page”.
The Chancellor’s zones will be located outside London and will involve local enterprise partnerships, coalitions between businesses and local authorities. Critics say that compared to the multimillion-pound budgets of the RDAs, the local enterprise partnerships lack funds. The cash void, ministers hope, will be filled by private investors.
The model is the Docklands redevelopment, which included the creation of Canary Wharf.
On a superficial level, Docklands worked even though the Canary Wharf developer went bust. The City has relocated there and it has created jobs. But the local community was either locked out or shipped out. But behind the glass and chrome lies a dirty little secret: some of the Docklands regeneration money was seriously crooked.
A sizable amount of cash from the notorious Brinks Mat bullion robbery was invested in the Docklands redevelopment in the 1980s. Exactly how much, no one knows, but the return made the crooks involved even richer.
The idea was copied by several of Liverpool’s crime families a decade later when they wanted to clean drug money. They simply bought in to the redevelopment opportunities created on their doorstep as part of the drive towards the City of Culture bid. Ever wondered why there are so many blocks of flats in regeneration?
And the IRA did something similar by investing in business properties in Greater Manchester. Rumours are that Northern Ireland will become a single enterprise zone. A frightening prospect.
The basics of it are simple: set up an offshore bank account in the name of an investment company and get some UK residents as directors, ideally a lawyer or two, to act as investors. They then bring the cash into the enterprise areas and either sell up on completion or stay as long-term investors. Either way, the cash is cleaned, and earns interest.
Standing in the way will be a group of broke councils with minimal scrutiny skills doing oversight of deals already signed, usually in the planning committee. And yes, there is the potential for bribery. Besides, who would dare to stand in the way of job creation and investment?
That committee votes the development through. Under the Chancellor’s plan, there will also be sweeteners such as tax breaks or reduced developer fees, such as the Section 106 agreements that pay for local infrastructure.
Questions have been asked before about Britain’s lazy approach to international money-laundering, particularly with the influx of Russian cash.
Chris Smith is a former lobby correspondent.
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