Whatever their political preferences, most people in Britain accept that the economy is underperforming and that living standards have not materially improved in over a decade. A major policy initiative from Westminster to address this, and thereby level up the worsening disparity of wealth across Britain was to introduce Freeports and Special Economic zones (SEZs). There are currently 12 Freeports, two of which (Cromarty and Forth) are in Scotland, plus 74 SEZs, eight of which lie in Scotland. SEZs are smaller and generally focussed on a particular industry. We will therefore focus on the larger, broader freeports.
The intent of these, as the UK Ship of State charts a fresh new course, is that our economy might prosper from mercantile individualism away from former friends across Europe. Their founding principle is to foster enterprise and investment by removing business disincentives. Each freeport will have access to £25m in seed capital. To quote the UK Government:
“Freeports are new hubs for global trade, investment, and innovation within the UK that create favourable opportunities for businesses growth.”
—UK Department for Business & Trade
Their advantages include a reduction in regulation, avoidance of customs restrictions, access to public seed money and lighter tax burdens. The tax reliefs available in Freeports located in Scotland:
- Land and Buildings Transaction Tax relief
- Enhanced capital allowances for investment in both plant & machinery and structures & buildings
- Five years of non-domestic rates relief
- Employer National Insurance contributions relief
Given the general animosity between Holyrood and Westminster, many would think the Scottish Government might oppose the introduction of freeports and SEZs on their bailiwick. Not a bit of it.
“I very much welcome the resumption of joint working between the Scottish and UK Governments, on a partnership basis, to tailor the UK’s freeports programme to the Scottish policy context.”
—Kate Forbes, Cabinet Sec for Finance & the Economy, letter to Michael Gove, 15 February 2022
With little fanfare and scant media interest, these plans have been forging ahead under the enthusiastic guidance of Michael Gove, who regards them as a major vessel to carry his levelling-up brief to successful completion.
“Freeports have attracted £2.9bn of investment and created 6,000 jobs since they were established in 2022. All this investment is from the private sector.”
—Levelling-up Secretary speaking to the Business & Trade Committee, 10 Ja. 2024
However, there would appear to be a reef or two not marked on government charts, but recognised as such by those concerned about cavalier use of public money and especially the independistas who want to jump ship from the British state.
Even the more astute observers of UK politics may now think that our only view of Brexit is in the rear-view mirror. For good or ill, Britain left the EU three years ago and even most remailers consider the matter done and dusted. Certainly, that is what the UK Government and hard-line Brexiteers, such as Jacob Ress-Mogg, Boris Johnson and Nigel Farage, would have us all believe.
Those reefs in the water ahead deriving from freeports are fourfold:
- Autonomy: These freeports are being constructed as states within a state, where many laws and regulations will not apply
- Governance: will be in the hands of private corporations, some with little or no transparency and Democratic involvement is minimal
- Future Impact: Their setup is likely to scupper any attempt by an independent Scotland, or even the UK, seeking to re-enter the EU
- Precedent: attempts to establish freeports have, to date, not been encouraging
Regarding autonomy, freeports make UK jurisdictions start to look like a Russian doll. Each of Scotland’s two freeports (Cromarty and Forth) stretch over a radius of 45 km from their centres. Business and trade laws may well differ from each other and from the rest of the country. This may include control of trade unions, or health and safety.
Freeport governance operates under a ‘Governmental Authority’. The Scottish Government has approved exclusive Labour representation on Forth—Cllrs Cammy Day (Edinburgh), Alan Nimmo (Falkirk) and Altary Craig (Fife). This partial oversight of such bodies sits poorly against democratic principles. Secrecy allows controlling firms to onshore their tax avoidance. Forth. Ports controls five other ports in the UK. It is a subsidiary of Otterports, already registered in the Cayman Islands to minimise tax.
Of more importance to future Scottish independence, freeports may scupper any hope of re-joining the EU. Although freeports exist in the EU, they are exclusively publicly owned. Those in the UK are not, which contradicts EU law and would invalidate any attempt to join. On 31st December, this was exacerbated by Jacob Rees-Mogg’s Retained EU Law (REUL) bill, which came into effect. It scrapped 600 EU laws in food safety, employment rights and environment, making any future harmonisation problematic, at best.
The precedence for these freeports does not auger well. Thatcher tried to set up 11 in the 1980s but was thwarted by the EU law requiring public ownership, mentioned above. Professor Paul Romer of Stanford (mentor to Rishi Sunak) tried to set up a freeport along these lines in Honduras, Central America. It was struck down by their Supreme Court as violating the sovereignty of the people in the zone chosen. The Honduran government is now being sued for $11 billion—one third of the entire GDP.
Worst of all is the precedent set by the UK Government’s flagship freeport on Tesside. Ben Houchen, the Tory metro mayor of Tees Valley, is accused of presiding over a redevelopment deal that left the taxpayer seriously out of pocket. Teesworks is the company developing the freeport was handed 110 acres of public land for £1 an acre. This tripled Teesworks’ profits. Teesworks is 90% owned by “friends and close associates” of Houchen’s, after the public body, South Tees Development Corporation, handed 40% of shares over for free. Far from the “£25m in seed capital” Teessport has already swallowed £500 million in public funds…and counting.
Gove has, under pressure, finally accepted the need for an inquiry into all this but has refused to say when it will report.
“It’s disappointing to hear that this report is being delayed. People deserve answers to these questions in full and as soon as possible.”
— Cllr. Chris McEwan, Labour candidate for Tees Valley Mayor
The whole point of Brexit was to set up an equivalent to “Singapore on Thames”. This is what the UK did in Hong Kong in 19th century—make up the rules to achieve maximum gain from the natives. Only, the natives living and working around Cromarty or Forth may well suffer similar degraded conditions and absence of any voice. Exit from the EU has allowed a “flexible” (i.e. Wild West) approach to employment conditions and scrutiny of practices.
“EU freeports are unsuitable for the UK economy.”
—UK Govt. REUL report, January 2024
Post-Brexit, things defaulted to WTO rules, freeing government to provide State Aid to any company they chose. This creates a non-level playing field and distorts markets, which is anathema to the EU, as it disrupts the integrity of their Single Market.
“The freeports being set up are future-proofed.”
—UK Govt. REUL report, January 2024
This last statement is delusional. As the UK has no constitution, no government can bind a future government, which may rescind or modify laws or regulations already made. This also applies to an independent Scotland.
See the TNT Show, with John Drummond interviewing David Powell on this matter at:
#1106—1,239 words
davidsberry 