UK freeports Contents

Conclusions and recommendations

Introduction

1.While we acknowledge the apologies from the Chief Secretary to the Treasury and Minister of State for Regional Growth and Local Government during their appearance before us, we find this episode of evident confusion and apparent unwillingness to appear before us extremely regrettable. Aside from hindering the important role Parliament plays in scrutinising the Government, this unwillingness caused substantial delay to our evidence-taking, and to the preparation of this Report. (Paragraph 9)

2.We do not consider this Report the conclusion of our work on freeports. We intend to continue to scrutinise the policy and to question ministers as freeports become operational. (Paragraph 10)

Objectives and evaluation

3.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. (Paragraph 22)

4.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. We recommend that the Government, or the cross-Whitehall governance body, set out in further detail the metrics that will be used to measure success against these objectives and outcomes, and how it will report on progress made annually. (Paragraph 23)

5.Now that freeport locations in England have been announced, we recommend that HM Treasury 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. Such an assessment would aid a full evaluation of the policy in due course. (Paragraph 24)

6.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. The findings of this evaluation should be published promptly. The evaluation 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. Those carrying out the review should be engaged at an early stage to ensure the information collated by freeport governance bodies, local authorities and others is relevant to, and can support, this evaluation. (Paragraph 27)

Design and implementation

7.During our inquiry, we heard a range of views on whether the number of freeports to be established should be capped. 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. (Paragraph 33)

8.Our evidence emphasised the importance of transparency in the bidding and allocation process. We welcome the publication of the decision-making note for bids in England. We recommend that the Ministry of Housing, Communities and Local Government establish a formal means to give feedback to unsuccessful bidders. (Paragraph 36)

9.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. We recommend that, in its response to this Report, the Government 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. (Paragraph 42)

10.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. (Paragraph 43)

11.We recommend that, in response to this Report, the Department for International Trade 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. We also recommend that the Department for International Trade set out how it will tailor its business support and trade promotion activities to the businesses located at freeports. (Paragraph 44)

Incentives and risks

12.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. (Paragraph 59)

13.Investment in freeports will also be critical to their success, particularly in the areas of infrastructure and connectivity. Increasing connectivity for both the freeport, and the wider area within which it is located, should be a key consideration in the allocation of seed capital funding. (Paragraph 60)

14.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, or the cross-Whitehall governance body, devise a framework for assessing economic activity occurring at freeports, distinguishing between that which is new and that which is relocated. This framework should be used by freeport governance bodies to collect relevant information on economic activity which can later be incorporated into an independent evaluation of the policy. (Paragraph 66)

15.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. We recommend that the Government set out how it will seek to do this in its response to this Report. (Paragraph 70)

16.Developments in the UK’s subsidy control regime could impact the types of support available through the freeports policy and this will require ongoing monitoring. (Paragraph 73)

17.We note the Government’s assurances that the policy will maintain the UK’s high labour and environmental standards. We ask that, in response to this Report, the Government set out in further detail how it will seek to monitor this. (Paragraph 76)

Freeports in the devolved nations

18.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. (Paragraph 87)

19.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. (Paragraph 88)

20.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. (Paragraph 89)

21.It is clear that the Northern Ireland Protocol will impact the terms on which a freeport can be established in Northern Ireland. The Government should set out, in its response to this Report, its view on how the freeports model will need to be adapted in Northern Ireland to comply with the terms of the Protocol. (Paragraph 92)

Governance

22.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. (Paragraph 98)




Published: 20 April 2021 Site information    Accessibility statement