The Conservative UK Government
and the Labour Welsh Government both
want to claim their share of the credit for the granting of freeport status
to two areas in Wales, and in the case of the one in Holyhead, the Plaid-run
Ynys Môn council is staking
its own claim for a share of the praise as well. It’s understandable that
politicians want to claim credit for delivering benefits to their constituents,
and clearly Wales needs a bit of ‘levelling up’, but I wonder if the enthusiasm
all round is quite as justified as any of them seem to believe. Unanimity
amongst politicians is either a very good sign or a great big red warning light;
rarely anything in between. In this case, it brings to mind the old saying that
‘whilst success has many fathers, failure is a bastard’. Whether those claiming to have been part of the fathering process now will still be doing so in a few years time remains to be seen.
There is nothing new about the
idea of freeports; there are around 80 in the EU and the UK had seven as well
before the (Conservative-led as it happens) government abolished them in 2012.
It’s not true (as Sunak declared) that this is some sort of Brexit dividend;
that the UK could not have set up freeports whilst it was a member. It’s not
entirely untrue either – the EU is taking an increasing interest in the
operation of freeports, and setting tighter rules about what benefits they can
offer, which might have constrained the detailed rules around the new ones. The EU is concerned
about the potential for tax evasion, corruption and crime, all of which seem to
have been a feature of freeports in the past, along, of course, with money-laundering.
In theory, there is a customs border around every freeport, ensuring that goods
brought legitimately into the freeport without paying customs duties are not
then taken illegitimately into the wider economy. In practice, enforcement of
that border is patchy at best – creating one of the many opportunities for criminal
activity.
Even assuming that the new
Welsh freeports manage to avoid all of those concerns, and run as they are
intended to with everyone following the rules, the extent to which they provide
real long-term economic advantage to the country as a whole is open to
question. The UK Government’s own Office for Budget Responsibility has said
(referred to here)
that the proposed freeports in England are likely to reduce government revenue
by around £50 million a year because of the tax breaks granted. If the extra
economic activity is sufficiently large – and occurs in the places that need it
most – that might be a price worth paying; it’s certainly not a reason in
itself for not having freeports. But the OBR also points out that historical
evidence suggests the "main effect" of freeports will be to move
economic activity from one place to another. And it was largely that factor
which led the Cameron government to scrap them.
It’s understandably difficult
for any politician to do other than welcome a boost for the area which he or
she represents, and taking a wider view can be hard. But is economic growth in
Ynys Môn or Pembrokeshire, much-needed as it may be, really a boon to Wales it
if merely shifts economic activity and jobs from Flintshire and Carmarthenshire, and
reduces the income of national and local governments in the process? It’s a
question which doesn’t even seem to be being asked in the rush to jump on the
bandwagon.
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1 comment:
We are back to the conservative Enterprise Zones, where former industrial sites, like ex steel works were made tax free and regulation free zones to stimulate economic development. Instead they became retail and warehousing outlets, creating negligible jobs. A good example was the Merryhill Centre near Dudley (called merry hell by locals), which became a vast retail park, and sucked all the high street multiples out of Dudley - creating a ghost town full of £1 shops and charity shops and not much else for a good 10 years.
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