Freeports risk being ‘killed off’ by officials in Treasury

Ministers say potential benefits of the new zones will be stymied by a lack of ambition from civil service

‘We have assumed themain the main effect of freeports eeports will be to alter the location ocation rather than the volume olume of activity’

RISHI SUNAK has been accused of allowing a key plank of the Government’s post-Brexit strategy to be watered down by Treasury mandarins.

Senior ministers claimed that officials had effectively “killed” freeports, the low-tax zones that Mr Sunak had said would provide an “unprecedented economic boost”.

Ministers and industry figures have told The Sunday Telegraph that the potential benefits of the new zones will be stymied by a lack of “ambition” in the tax cuts and planning relaxations offered to individual freeports, as well as by an artificial cap that will limit the overall number to 10.

One senior minister said: “The Treasury has killed freeports.” Another senior Tory claimed that Treasury officials opposed the policy because they saw all proposals as “a zero sum game”, and that it was one of many across Whitehall in which measures had been deliberately blocked or delayed by civil servants.

The warnings come after the Government announced that the first freeport, on Teesside, had begun operating on Friday. The launch was first revealed in documents accompanying Mr Sunak’s October Budget statement, but he neglected to mention freeports in the statement itself despite placing significant emphasis on the policy during previous speeches.

The Government said eligible firms that based themselves in the designated Teesside zone could benefit from tax breaks including business rates and stamp duty relief. A paper written by Mr Sunak in 2016, before entering government, talked up the positive effects of more radical changes, including sweeping corporation tax cuts, in equivalent zones in China and Brazil.

Boris Johnson and Mr Sunak have said they want freeports to act as hubs for global trade and investment in the UK, as well as helping the Government to achieve its ambition of “levelling up” the economy outside of London.

But Treasury officials have privately claimed that the perks in freeports will simply result in less tax revenue and “displace” existing isting investment from elsewhere in the he country. An Office for Budget Responsibility nsibility assessment published alongside ide last month’s Budget stated: “We have ve assumed that themain the main effect of the freeports eeports will be to alter the location rather r than the volume of economic activity. y. So the costs have been estimated on the basis of activity being displaced from m elsewhere.”

In his March rch Budget, Mr Sunak announced eight ight freeport locations, including Teesside, sside, Humber, Liverpool, and Solent. Ministers nisters have been in talks with the Scottish sh and Welsh administrations about setting tting up freeports in the devolved nations, ons, amid resistance from Labour and the e SNP.

But Richard d Ballantyne, the chief executive of the he British Ports Association, who sat on the Government’s Free Ports Advisory y Panel, said: “We’ve got about 140 locations ations across the country that handle freight. eight. If the Government does agree with h this policy, why is it just restricting it to eight now and maybe two or three more?

“I think there re is some reservation in parts of Government rnment about the loss of tax revenue that at these zones may create and there are e some understandable concerns they y could just stimulate the movement and nd transfer of activity instead of new w investment. But these ports are competing peting on an international level with European opean ports.”

Mr Ballantyne ne was “underwhelmed” by the planning ng relaxations offered to freeports. He gave the example of an operator that wanted to build new facilities to fit or service ervice wind turbines for offshore wind farms.

He said: “If f you want to respond to those opportunities unities quickly you don’t want to go through rough a convoluted planning process.”

A Government ent spokesman said: “We are delivering g on our ambitious freeports agenda, , with the first tax sites designated earlier rlier this month.

“These sites es are able to combine attractive tax incentives for investors and exporters with planning measures and co-ordinated ated infrastructure programmes, helping ping us to level up across the UK.”