Policy Explainer Freeports

They were there to launch the government’s plan to create Freeports, which have a range of tax and planning incentives in order to boost investment and economic growth in parts of the country that have historically missed out.

A lot has changed in the world of politics since then, but the Freeports policy has survived.

Freeports (known as Green Freeports in Scotland) are special areas that are overseen by the Department for Levelling Up, Housing and Communities.

Government hopes these sites will create an attractive business environment with the aim of producing high quality jobs in new industrial and economic sectors of the future, such as renewables.

Some of the tax advantages on offer at Freeport sites include stamp duty Land Tax relief; enhanced capital allowances; employment tax incentives and National Insurance Contributions reliefs on low paid employees; business rates relief for 5 years; simplified import and export procedures; deferrals and exemptions from duty payments; and VAT suspension within customs sites.

As well as the tax breaks, Freeports will allow certain specific developments without requiring planning permission.

Port In A Storm 

At present, there are eight sites in England – East Midlands Freeport (East Midlands Airport); Freeport East (Felixstowe and Harwich); Humber Freeport (Immingham, Hull, Grimsby and Goole); Liverpool City Region (Liverpool Waters and Wirral Waters); Plymouth and South Devon (Devonport); Solent (Southampton and Portsmouth, Southampton Airport); Teesside Freeport (Teesside, Hartlepool and Teesside Airport); Thames Freeport (London Gateway, Tilbury and Ford Dagenham).

There are also two in Scotland and two in Wales – Forth Green Freeport (Grangemouth, Rosyth, Leith, Edinburgh Airport and Burntisland); Inverness and Cromarty Firth Green (Inverness, Cromarty Firth, Nigg and Inverness Airport); Anglesey Freeport (Holyhead, Anglesey Prosperity Zone, Rhosgoch and M-Sparc); Celtic Freeport (Milford Haven and Port Talbot).

Policymakers in Northern Ireland are working with the government to establish a Freeport.

The SNP-led Scottish government has called the sites ‘green’ Freeports, because bids had to include plans for lowering carbon emissions.

However, the SNP’s government partners, the Scottish Greens, has said there are “no hard requirements” to meet climate targets. It also alleged that internationally, including in the EU, Freeports are linked to “crime, money laundering, smuggling, and low wages”.

Mixed Reception 

The government’s own Office for Budget Responsibility has said Freeports would have such a small economic impact it would be impossible to measure. It also concluded that economic activity would just be displaced from other parts of the country.

It is a view that is shared by the Institute for Fiscal Studies (IFS), which noted the evidence from enterprise zones in France and the US, that share several key features with the UK’s Freeports, suggests that the package of tax incentives on offer will likely increase investment and employment but a significant part of the increase in activity in enterprise zones is displaced from neighbouring areas.

The government and the Freeports are more optimistic. The English Freeports expect to create more than 200,000 additional jobs between them.

The IFS concluded: “Our reading of the evidence is that the Freeports programme will likely attract additional investment and jobs to Freeport areas, potentially boosting incomes and reducing poverty for local residents. However, part of this activity will be displaced from elsewhere in the country, and while measures are in place to mitigate this, it is unclear at this stage both how successful they will be, and how large a proportion of activity will be displaced or deadweight as opposed to genuinely additional.”