finance

Scotland goes its own way on freeports



The Scottish Government has announced that it will progress plans to develop a ‘green port’ model designed to meet the specific needs of Scotland’s economy.

A statement from Business Minister Ivan McKee explained that Westminster representatives were not willing to commit to Holyrood’s fair work conditions and net zero specifications for the proposed free trade zones.

A letter from the Secretary of State for Scotland Alister Jack did not provide a firm UK Government commitment on payment of the real living wage and net zero conditionality, while also failing to provide equivalent set-up funding for Scotland to that offered for the English freeport model.

McKee said: “I have been clear that any model implemented in Scotland must include a firm commitment to conditionality around fair work and net zero.

“These are central tenets of Scotland’s future economy and principles we cannot compromise on.

“It is difficult to comprehend why UK Ministers would seek to dilute a strong commitment to fair work, including payment of the real living wage, when seeking to implement their freeport policy in Scotland.

“The Scottish Government therefore has no option but to take forward plans to further develop our green port model which meet the specific needs of Scotland’s economy.”

Following “productive discussions” with the Chief Secretary to the Treasury, the Scottish Government was ready to publish a joint green port bidding prospectus for Scotland in March, but this has now been delayed again.

Secretary of State for Scotland Alister Jack had argued that if Scotland were to develop the freeports alone, the Scottish Government would only have enough funding for one site, while tax rules would leave Scotland’s versions at a competitive disadvantage.

The letter from Jack to McKee set out the UK Government’s offer for Scottish freeports, but explicitly stated that any reference to the real living wage be removed from bidding requirements.

The “very generous offer” included tax relief of up to £120m over five years at the two sites, with capital allowances, employers’ national insurance contributions and customs benefits set to be exempt from tax.

Funding would have been allocated through the Barnett formula, with approximately £5m having already been provided to the Scottish Government and an additional £13m anticipated to set the projects up.

Jack added that the location of the freeports would have been based on a “robust and impartial assessment of bids”, with a Scottish Government minister invited to sit on the decision panel.

The letter stated: “We have an outstanding opportunity before us to work together to deliver a programme with huge potential to grow the Scottish economy and create high-quality jobs.

“I believe the people of Scotland will be unforgiving if we fail to seize it, the consequences of us not working together are clear – our chances of delivering two freeports rather than one are vastly reduced.

“Should the Scottish Government not agree to become an investing partner in the scheme, the strong likelihood is that the seed capital available would support the creation of only one freeport.

“In addition, the absence of Scottish Government support would deny the Scottish freeport a full array of benefits, such as reductions in Land and Building Transaction Tax, putting it at a competitive disadvantage compared with freeports in England.”

The previously-proposed Scottish model adapts England’s plan, where companies inside the sites will be offered temporary tax breaks.

Goods that arrive into them from abroad are exempt from tariffs that are normally paid to the government. These taxes are only paid if the goods leave the freeport and are moved elsewhere in the UK.

In May, the UK Government confirmed that freeport employers will be able to pay less national insurance for all new workers, from April 2022.

Freeports are usually located around shipping ports, or airports. England’s eight new sites are set to be at East Midlands Airport, Felixstowe and Harwich, Humber region, Liverpool city region, Plymouth, Solent, Thames and Teesside.

A UK Government spokesperson said: “The UK Government’s freeport model embraces the highest employment and environmental standards.

“It is disappointing that despite strenuous efforts to work together, the Scottish Government is choosing not to work with us to bring freeports to Scotland.

“There is a strong appetite from businesses and it would boost the economy and create jobs – we will continue to work to ensure that Scotland can enjoy the benefits of the model.”

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