Yesterday, the Chancellor made a long-awaited statement outlining the measures the UK government is taking to tackle the huge amount of debt that the coronavirus pandemic and other events of 2020 amounted to.
One of those new plans that Mr Sunak revealed in his Wednesday speech was the creation of eight freeports around the UK. Although freeports existed in England up until 2012, the Chancellor says this new rollout is “on a scale we’ve never done before”.
His budget report describes this scheme as “a policy to bring investment, trade, and most importantly, jobs right across the country”. And then goes on to explain that “internationally, a Freeport is a place to carry out business inside a country’s land border but where different customs rules apply.
“The UK’s bespoke, flexible Freeports model goes further, combining customs zones with tax reliefs, planning freedoms, and support for regeneration and innovation.”
The English sites, chosen to become freeports, were confirmed as East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City, Plymouth, Solent, Thames and Teesside.
What are the positives and negatives of freeports?
The idea to create freeports came about as a post-Brexit opportunity to unlock global trade and support British businesses UK-wide. Ports submitted bids in order to be included in the freeports list and presented the potential benefits it could bring them.
The Thames bid, for example, claimed that achieving a freeport status could help them to create 25,000 jobs and invest £400m into the port.
Similarly, the Tess valley bid claimed that becoming a freeport would allow them to create 18,000 skilled jobs and “boost the local economy by £3.4bn and support offshore wind, clean energy, chemicals and process, and advanced manufacturing sectors”.
Having a freeport status allows raw goods to be processed and re-exported more efficiently and cheaply, while legally avoiding normal import duties.
Because of these special ‘tax sites,’ however, there are concerns over the rollout of freeports in England being a shortcut to bad practices, such as money laundering.
According to TUC’s general secretary, Frances O’Grady, “Freeports don’t create jobs – and around the world they allow freeloading employers to dodge taxes.”
“There is nothing inherently green about freeports despite Rishi Sunak’s promises.
“Instead there is a real danger that they become low regulation zones where environmental safeguards are thrown aside,” said Mike Childs, the head of policy at Friends of the Earth.
Freeports should remain tightly controlled
To avoid business owners exploiting the relaxed tax rules around those eight spots in England, the government said those freeports should remain tightly controlled, and comply with UK labour, environment and safety laws.
There are some concerns over how this would be regulated and governed, but at this point, there are no details on how these ports and tax sites will be run. The successful bidders are supposed to draw up and present plans as to how they are planning to manage their freeport.