Losing control? The spectre of freeports

It has been quite the time for freeports. For a policy the Conservatives are keen to champion yet simultaneously sweep under the carpet, having so much attention drawn to Rishi Sunak’s pet policy in the shape of Teesside mayor Ben Houchen’s freeport misadventures must be, at the very least, awkward.[1][2]

Amidst the alleged bonanza of ‘Brexit benefits’ the British people were sold was the tantalising prospect of freeports, customs havens to boost investment and trade. Of course, the UK had freeports while a member of the EU, the last ones closing in 2012 after David Cameron let the legislation expire. It became clear there was no advantage to UK freeports over any others in the world and they were a significant drain on the tax system. Subsequent proposals for new UK freeports[3] actually offer very little benefit over those we used to have – they still need to comply with WTO rules and operate in line with the UK/EU trade agreement. 

Around 80 “free zones” operate across the EU[4] but instead of providing security, many have been known as fronts for criminal activity[5] and the European Parliament called for EU freeports to be scrapped in 2019 following a report[6] into tax evasion and money laundering.

The government’s argument is that freeports “promote regeneration and job creation as part of the Government’s policy to level up communities[7]”. Far from levelling up, critics argue that instead of creating new opportunities, freeports run the risk of displacing existing investment and jobs[8].

The thin end of the wedge?

A more sinister idea is the allegation that freeports could develop into charter cities – privately owned and operated cities outside of UK state or local government control, with their own private legal system, healthcare, police and more. While this is largely the subject of conspiracy theories, the concept’s support from dark think tanks and lobby groups, in this age of arguably the most right-wing UK government on record, provides a worrying prospect. Indeed, the existence of the City of London Corporation[9], with its own police force and without the oversight of a Police & Crime Commissioner, supports the view that such ideas are possible.

“Why would any government cede control of vast swathes of its sovereign land in this way?” asks Dr Matt Prescott, an environmental campaigner. You may well ask, too.

Local impact in the South

Against this backdrop, the UK government quietly marches forward creating eight sites across Britain and Northern Ireland including a vast area of the Solent, swallowing up parts of the New Forest and Isle of Wight and along the M27 corridor. This got the government green light in December 2022. The outgoing Levelling Up Minister Dehenna Davison called it a “shot in the arm” likely to create “tens of thousands of new jobs”. However, there is little public awareness. We approached a number of local business owners, none of whom knew any more than the vague possibility of it happening.

Julia Laursen, a member of the Green Party on the Isle of Wight, believes the potential impact on the ecosystem of the island cannot be underestimated. 

“We are not being given the full picture of the impact this could have for the Isle of Wight. In Europe, these freeports have created environmental damage and encouraged corruption and criminal activity. That is not a vision that many Islanders share.”

There is scepticism of the proposed commercial benefits. Instead of encouraging growth in the real economy, there is a fear that the zone will actively quash inward investment for local small businesses.

The Solent Freeport proposes to encompass a large chunk of one of Britain’s most ancient forests, taking in picturesque countryside tourist locations like Beaulieu.

Southampton’s port operator has not responded to a request for comment by Sussex Bylines. The port has previously made great fanfare of the perceived benefits, writing in 2021 that the freeport is a “‘once-in-a-generation’ opportunity to level-up local communities, turbocharge post-Brexit trade and invest in a net zero future”. This is disputed by academics, including Peter Holmes, Fellow of the UK Trade Policy Observatory:

“Freeports currently offer few (new) benefits for UK exporters. And even where there are benefits, trade partners could use anti-subsidy measures to offset any perceived unfair advantage from Freeports.”

Dr Jonatan Echebarria Fernandez of City, University of London Law School is not optimistic[10], ironically, due to the provisions of the EU-UK Trade and Cooperation Agreement (TCA):

“[It] does not include tax matters in the dispute settlement mechanism. However, the Parties shall observe broad principles that may have a ‘material effect’ on trade and investment… and agreed to follow international standards to avoid tax evasion, such as the Base erosion and profit shifting (BEPS) initiatives of the Organisation for Economic Co-operation and Development (OECD).”

That suggests to a general public largely ignorant of even the existence of these amorphous regions that, far from taking back control, the operation of freeports may very well be subject to the watchful eye of the European Union to ensure no further detriment to EU trade. 

The recent review[11] into the operation at Teesside shows there are legitimate concerns over governance and value for money. With public attention focused elsewhere, what checks are there on the rights and powers being transferred to these corporations? Years on from their much-touted reintroduction, quantifiable and reportable benefits are few, if any, and an air of secrecy envelopes a possibly more sinister potential.

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References

  1. ^ sweep under the carpet (www.theguardian.com)
  2. ^ pet policy (cps.org.uk)
  3. ^ new UK freeports (researchbriefings.files.parliament.uk)
  4. ^ across the EU (taxation-customs.ec.europa.eu)
  5. ^ criminal activity (www.theguardian.com)
  6. ^ report (www.europarl.europa.eu)
  7. ^ promote regeneration and job creation as part of the Government’s policy to level up communities (commonslibrary.parliament.uk)
  8. ^ displacing existing investment and jobs (whatworksgrowth.org)
  9. ^ City of London Corporation (en.wikipedia.org)
  10. ^ not optimistic (www.city.ac.uk)
  11. ^ review (www.theguardian.com)

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