Compass Money: UK Unveils New Freeport Program
U.K. Chancellor Rishi Sunak unveiled plans to open eight new English freeports on March 3, an idea he has championed for more than five years. (Wikimedia)
U.K. Chancellor Rishi Sunak unveiled a new plan to create eight English freeports in a speech to the House of Commons on March 3. Proponents of the initiative argue that it will bring sorely needed investment to regional economies and create new, green industries. Detractors, though, respond that under-regulation will result in poor working conditions and the rich using the freeports as tax havens without actually creating any economic growth.
Freeports are economic zones designed to attract investment by allowing companies to import product components and raw materials tariff-free, only paying tariffs when the finished products, manufactured in the freeport, are sold in a domestic market. U.K. freeports would also feature low taxes and regulations, offering companies even more incentive to set up shop.
Over the course of his speech, Sunak laid out his vision of how regions like Teesside, one of the ports whose bid was approved for a freeport, would be changed for the better under the new proposal. “Now, when I look to the future of Teesside, I see old industrial sites being used to capture and store carbon; vaccines being manufactured; offshore wind turbines creating clean energy,” he said.
Sunak also contended that this policy is only possible now that the U.K. is out of the EU. There are still about 80 freeports in the EU, but those that exist are under pressure from the European Commission, which believes that they are being used for money laundering and tax evasion.
Indeed, detractors of the freeport policy often argue that the lack of regulation and non-existent tariffs make freeports ideal locations to engage in these kinds of crimes. Peter Dowd, shadow chief secretary to the treasury and member of the opposition Labor Party, even went so far as to accuse “Boris Johnson’s Cabinet of the super-rich, for the super-rich” of wanting “to turn this country into a tax haven—as payback for Tory funders and their mates.”
Union leaders such as Mick Cash, the Rail, Maritime and Transport Workers union general secretary, have also expressed concerns over proposed plans that would allow companies to not pay their employees’ national insurance contributions for new jobs. While the government has insisted that it will prevent abuse of this system, Cash says that the proposal would “create a two-tier workforce and turn these regions into bargain basements for multinational companies to enjoy increased profits at the expense of workers’ safety, employment rights, and public services.”
Detractors further argue that the freeport policy would not create any real economic growth, but would merely move money from some regions in the U.K. to others, as a recent report by the U.K. in a Changing Europe think tank suggests.
The U.K. government insists that there will be sufficient regulation to deal with these issues, and it maintains that the freeport program will be an important step in the effort to “level up” the British economy after its record slump resulting from the COVID-19 pandemic.