Liz Truss’s plans for low-tax investment zones to boost UK economic growth are due to be scrapped by chancellor Jeremy Hunt in next week’s autumn statement.

Former chancellor Kwasi Kwarteng in September announced “investment zones” that offer businesses generous but temporary tax breaks, as well as relaxed planning rules, to encourage the construction of shopping centres, apartment blocks and offices.

But two Whitehall insiders said levelling-up secretary Michael Gove had lobbied hard for the zones to be ditched in favour of a revamped urban regeneration policy.

Although no final decisions have been made, and the zones might alternatively be scaled back dramatically by Hunt, government officials said the chancellor was expected to kill off what was a pet Truss project.

Local authorities last month made initial bids to host the zones, having been set deadlines at short notice.

“Everyone is just so knackered,” one consultant who has been advising local authorities bidding for the government’s levelling-up funds told the Financial Times. “They were led up the hill on something they didn’t want to do and didn’t believe in.”

Gove, the longstanding architect of Boris Johnson’s levelling-up agenda brought back into government by the current prime minister, told the BBC last month that Truss’s investment zones had “caused some concern”.

“One thing is we’ll look at them, we will review them, but there is no way we are undermining our environmental protections,” he said.

Whitehall insiders said Gove had told Downing Street that Truss’s investment zones should be “shelved” and that officials in the levelling-up department had “downed tools” on the policy.

They added that in place of the zones, Gove was pushing plans for a series of “transformational” housing-led urban regeneration projects across the country.

A government insider with knowledge of Gove’s thinking said he favoured an interventionist approach — whereby housing agency Homes England would be given a “more activist” role to kick-start regeneration by purchasing and clearing land for development.