93.The Government’s publications on the freeports policy set out the expectations for governance at individual freeport sites. The bidding prospectus stated that freeports “will ultimately require a per-Freeport governance structure overseeing each selected Freeport location” and bidders were required to set out their plans for a freeport governance body to oversee their freeport. It set out the requirements and minimum functions for these bodies, and stated that they would be accountable for the effective delivery of the freeport according to a set economic strategy. This would include co-ordinating the parties on the site, marketing the site and monitoring the security risks. The relevant local authority, or authorities contained within the governance body, would be accountable to MHCLG for the expenditure and management of public money. Minister Hall told us the successful bidders would need to meet core standards and that the experience of enterprise zones suggested that such standards were “absolutely crucial for those successful place-based type interventions”. In addition, the Government indicated that a small amount of short-term revenue funding would be made available to successful bidders to assist with any governance set-up costs.
94.While we did not take evidence on the specific governance requirements for freeport operators, we heard from Alex Stojanovic, of the Institute for Government, that governance was an area in the consultation requiring improvement and that:
There needs to be someone who is responsible for not only monitoring the success of the freeport according to its objectives but also monitoring the risks and whether it is being used as a tax haven or being used for smuggling and so on. I think there needs to be some investment in that and other freeports that exist that are successful have the authorities to do that.
He cited examples of how freeports operated internationally:
In Jebel Ali and in Singapore they set up a specific regulatory authority that helps to improve the success of those areas by interfacing between the operators and the many different departments in central government that still have an ongoing role to play. That is another important factor. It is not the case that you just lower taxes or provide some incentives and that is it. It requires sustained, ongoing investment probably from departments on an ongoing basis. That will be really important.
He later added:
I think it is quite important that we look at how the successful models have been run. They often set up a whole government authority that is given the task of monitoring the developments of the authority, but the private sector tends to run it. It seems a bit counterintuitive when you are talking about freeports, wanting to reduce burdens and so on, but looking practically at how the successful examples have developed and how they are practically run is important.
95.We heard a range of views regarding the long-term oversight of freeports by the Government. This included whether a single department should have overall responsibility for oversight or if an oversight body should be established. The UK Free Trade Zone Association said the consultation was “largely silent on who the Regulator for Freeports might be”. It advocated for the creation of a regulatory body which would regulate enterprises that joined a freeport and coordinate with agencies. Minister Evans, of the Welsh Government, highlighted that any proposed governance arrangements and division of responsibilities would also need to be agreed with the devolved governments. She indicated that this should include:
[ … ] a head of terms to set out the clear roles and responsibilities for Welsh Ministers, the Secretary of State for Wales and wider UK Government Ministers, including the agreed governance arrangements around bidding and implementation. Also setting out the key principles alongside each of our parties’ roles and our responsibilities and our powers, so essentially proper clarity and proper engagement, and then an understanding of what is expected of each partner.
96.Charlotte Morgan, of Linklaters, told us that there were pros and cons to the creation of an oversight body or to allocating lead responsibility for co-ordination to one department. Of establishing an oversight body, she contended:
There is also some evidence—and you see this a little bit in the new towns work that has been done particularly in the planning space—that if you can create something that has a little bit more of its own entity itself, it can also become a huge advocate for freeports more generally. It can also perform an advocacy role as well as an oversight and monitoring and co-ordination role. It can also provide that outreach and advocacy for freeports, which if you think about their impact on international trade that could be a very useful additional function for them to perform. I do not think you have to do it. There are pros and cons of doing it, but one of the big pros would be this outreach function, although that equally could be done by the Department for International Trade.
She cited new towns legislation as an example of a model the Government could draw on in designing an oversight body. Dr Anton Moiseienko, of the Centre for Financial Crime and Security Studies, concluded that freeports would involve a lot of disparate activities and proposed that the Government undertake a mapping exercise of these to determine how they fit into the proposed approach. Charlotte Morgan agreed that this could help ensure that “nothing falls through the cracks” and that each activity was monitored.
97.The Government confirmed its intention to establish “a cross-Whitehall governance body to oversee the implementation of Freeports as a whole” in a freeports question and answer document published during the bidding process in January 2021. The details of this were not provided in its consultation response or bidding prospectus. In addition, the Government has indicated that HMRC and Border Force will authorise customs sites and monitor activity within tax sites. In evidence, Minister Hall confirmed that the freeports programme for England would be governed cross-departmentally. He outlined the present form of this and said its role would be reviewed:
We have input from all Departments involved in the freeports competition that have been listed and we discussed earlier in the delivery of freeports. For the competition, we already have a programme board and that is chaired by a senior civil servant and includes senior civil servants from all the key Departments that we discussed previously. We will be reviewing the role of that board for the delivery phase itself.
He said the Government was considering if the programme board should be a statutory body as it completed its review and moved through the policy development.
98.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 following its review of the programme board so that there is transparency about the oversight of freeports. Further, this would provide clarity to freeport operators about who will oversee their operation and how this will be carried out.
257 ; see also
260 UK Free Trade Zone Association ()
261 UK Free Trade Zone Association ()