A freeport is a designated geographical area which can benefit from concessions on customs, taxation and planning advantages, and reduced bureaucracy. The Government’s intention is to establish freeports in the UK, and it announced the locations of freeports in England in March 2021. Our scrutiny has focused on the objectives of the freeports policy and the package of measures available within the chosen sites.
We commend the Government’s ambition to increase trade and investment across the UK through its freeport policy. It remains to be seen how successful freeports will be at achieving this objective. We welcome the Government’s clarity on its objectives for freeports and the related outcomes freeport operators must deliver against. Progress made toward meeting these objectives and outcomes must be measurable and monitored, and the Government should set out in further detail the metrics that will be used to measure success against these objectives and outcomes.
Now that freeport locations in England have been announced, HM Treasury should promptly publish an impact assessment for the policy. This should include estimates for economic growth, increased trade and investment, and job creation, as well as an analysis of the impact on different sectors.
Further, we recommend that the Government commission a full, independent evaluation of the implementation of the freeports policy, to take place within five years of the establishment of the first freeports. This should include: a review of the bidding process and suitability of locations chosen; an assessment of progress towards meeting the objectives and outcomes set out in the bidding prospectus; a measure of new economic activity and job creation generated by the policy; an assessment of the impact of the policy on different sectors; an assessment of what economic displacement, if any, has occurred due to the policy; and a value for money analysis including comparison with the findings of HM Treasury’s impact assessments.
We welcome the flexibility the Government has demonstrated on the final number of freeports. There were eight successful freeport bids for England, and we assume that this means the total number of freeports in the UK will likely exceed ten, given the Government’s intention that at least one freeport will be established in each of the devolved nations.
To succeed, the freeports policy will require extensive cross-departmental co-ordination. HM Treasury and the Ministry of Housing, Communities and Local Government have responsibility for the policy, while other departments will play a role in the operation and administration of freeports. We are concerned that, in light of the disagreement between HM Treasury and the Department for International Trade about which department was best-placed to give evidence to our inquiry, the necessary cross-departmental collaboration and clear accountability required to implement the policy is absent. The Government should set out how it will ensure effective accountability and cross-departmental collaboration in the implementation of the freeports policy. We recommend that the Department for International Trade has oversight of the policy, and administration of freeports, to support businesses to grow internationally.
The objective to establish freeports as national hubs for global trade and investment across the UK is of particular interest to us. This objective, and the Department for International Trade’s role in supporting businesses to grow internationally, means that it should have a central role in the development and implementation of the freeports policy, yet this appears to have diminished over time. The Department for International Trade should provide further information about how it will support the Government’s objectives for freeports and set out its approach to freeports within its export and investment strategies. In addition, we would welcome clarity from the Department on how the new Office for Investment will be utilised to attract investment to freeports.
The package of incentives associated with the UK freeports policy distinguishes it from the traditional freeports model and we welcome the range of measures the Government has committed to. Freeports focused solely on tariff benefits would be unlikely to be successful in the UK.
It is not possible to eradicate fully the risk of economic displacement associated with freeports. To minimise it, the Government will need to be careful to distinguish between new economic activity and economic activity moving to a freeport from elsewhere. We recommend that the Government devise a framework for assessing economic activity occurring at freeports, distinguishing between that which is new and that which is relocated.
We note the security risks that accompany freeports. We welcome the steps the Government has taken so far to address these in its consultation and bidding prospectus. It is encouraging that freeport operators will be required to comply with the OECD’s Code of Conduct for Clean Free Trade Zones and that the Government does not intend to authorise the use of freeports for high-value storage. Nonetheless, these risks will require ongoing monitoring and enforcement, and the Government should set out how it will seek to do this.
We support the Government’s intention to establish a freeport in each of the devolved nations but acknowledge that this is a decision for each of the devolved governments. We are eager that the policy is implemented in a manner that brings increased trade and investment to all parts of the UK.
We received concerning evidence from the devolved governments about the UK Government’s engagement with them in the development of this policy and their access to the information underpinning the policy. While the development of the freeports policy in the devolved nations is ongoing, we recommend that ministers and officials intensify engagement and information sharing efforts to ensure that the devolved governments have access to all the information necessary when making policy decisions.
We support the devolved governments’ call for an appropriate funding allocation. It is important that freeports in the devolved nations are not disadvantaged due to the way in which funding is allocated. We call on HM Treasury to ensure that funding available to freeports in the devolved nations corresponds with awards in England.
The freeports policy documents published to date do not clearly set out the Government’s proposals for the long-term oversight and governance of freeports. We call on the Government to publish its proposals in this area so that there is transparency about the oversight of freeports.