That is the question being asked, as one of the government’s flagship policies comes under renewed scrutiny, with some claiming it could eventually lead to self-governing maritime city-state. Singapore-on-Humber anyone?
The current government pushed the accelerator pedal on freeports after the 2019 general election. Then just over a year ago, Rishi Sunak announced that eight new freeports, including one for the Humber, would be created following a bidding process. However, the issue has only recently started to gain traction on social media.
So, what are the current proposals for a freeport here and why have they suddenly become a big taking point? Here’s a recap on what’s been happening locally and how some of the more extreme theories about them are now circulating.
Freeports and the 1980s
It’s worth pointing out that freeports in the UK aren’t new. Six operated from the 1980s onwards until 2012 when the government decided not to renew their licences. They largely acted as designated economic zones in which certain customs rules, including taxation, did not apply on goods while in that particular area.
All but two were based at ports with the exceptions being Birmingham and Glasgow’s Prestwick Airport. It was generally felt they simply ended up encouraging existing firms to move from other areas rather than being places where new jobs were created.
The new-look freeports
The current version of freeports still includes simplified customs and tariff procedures. This involves not having to pay duties on imports until they leave a zone either as imports within the UK or as re-exports to another country.
Where they differ from the previous model is on wider taxation. The new freeports will allow firms to claim national insurance and other tax reliefs for an initial three years, effectively lowering their operating costs. Critics of tax breaks say they do nothing to help to bolster the country’s overall public finances.
The other difference from the 1980s is the size of the new freeport zones. The government is allowing each freeport to cover a 75-kilometre zone (extended from the previous limit of 45km) to enable several locations within that area to come under the umbrella of the companies being set up to run them.
Who is in charge?
The successful bid for the Humber Freeport was led by Associated British Ports (ABP), the main port operator on the Humber. It was supported in this by the region’s four local councils and, initially, the Humber Local Enterprise Partnership (LEP) until it was wound down last year and replaced by two separate LEPs on either bank of the estuary.
Final government sign-off on the business case for the Humber Freeport is still awaited. Once in place, a new company will formally be established to run it with North East Lincolnshire Council currently acting as the accountable body responsible for its legal and financial oversight.
The proposed company will be led by a new chief executive and a small team of staff. Its board will include:
- an independent chairperson
- the leaders of the four local councils
- a representative from ABP
- two representatives from the LEPs
- four representatives from businesses operating with the freeport zone
- a representative from the Environment Agency on behalf of other statutory bodies such as Highways England and Natural England, and
- one so-called ‘innovation’ stakeholder expected to be drawn from an education or science sector.
Although technically covering a large area, the company’s initial focus is expected to be on three so-called tax sites – Hull East, Goole and the Able Marine Energy Park on the South Bank. These will all offer relief from stamp duty, land taxes, business rates and employers’ national insurance contributions for new businesses in the first three years of being operational. They will also have access to enhanced capital allowances for investment in machinery and equipment.
On the North Bank, the Hull East site includes several parcels of undeveloped land, including ABP’s Humber International Enterprise Park between Saltend and Paull, the Yorkshire Energy Park near Hedon, the Saltend Chemical Park and the eastern end of the existing Port of Hull estate at Queen Elizabeth Dock.
At Goole, the tax site sits to the west of the new £200mn Siemens rail factory and is aimed at potential related supply chain companies as well as taking advantage of its location next to the M62 motorway.
In addition, all four main ports on the estuary – Hull, Goole, Grimsby and Immingham – have been identified as customs zones where both port operators and companies will be able to defer tax duty and import VAT on goods. Other sites also included under this banner will include Goole’s potential rail supply chain cluster and the steelworks at Scunthopre as well as several smaller shipping terminals along the Humber.
Finally, there are two identified ‘seed capital’ sites which could share up to £15mn worth of government funding for land purchase or new infrastructure such as roads or drainage as part of any final agreed business case. Of these, the priority is for an industrial cluster on the South Bank while the other includes part of Hull’s western docklands which is also the subject of a new council masterplan mapping out future potential development options.
The new freeport company will be able to retain business rates at the different sites for at least 25 years and receive direct grant funding from the government and other agencies. The Humber bid proposed delegating the control of public money to a ‘public funds’ committee consisting of its four local council members. The re-distribution of retained business rates would also require the committee’s approval.
Spending by the company would be restricted to the various designated sites within its overall area however, as it is starting from scratch. The four local councils have agreed to provide a pooled loan believed to be worth at least £3mn to ensure the new company is initially financially viable.
Despite initial hopes of securing early approval leading to the new company being established by the end of last summer, the Humber Freeport business case has yet to be signed off by the government. It’s believed delays have been caused by a re-think over financial forecasts for the new company following a decision earlier year by South Korean offshore wind farm tower manufacturer SeAH to drop plans to build a new factory at the Able Marine Energy Park site.
That decision put a question mark over projected business rate revenue from the site and could yet mean an alternative tax site on the South Bank being considered. As negotiations continue behind closed doors, it’s hard to work out exactly what is going on with little being put into the public domain at council level.
The most recent update was given to Hull councillors last month by the city council’s director of economic development Alex Codd. He said:
“In terms of the freeport, we are still in discussions with the civil servants in central government. There has been significant movement by ABP and the four Humber authorities that should lead to the business case being finalised and signed off within the next couple of months.”
The recently agreed extended boundary will allow the Goole tax site to be included in the Humber Freeport.
The current debate over what freeports might eventually evolve into can partly be traced back to an uncredited blog from 2010 on the website of the right-wing lobby group the TaxPayers’ Alliance (TPA). It championed the concept of ‘charter cities’ being promoted at the time by American economist Paul Romer, who was recently hailed by Sunak as one of his inspirations while a student at California’s Stanford Business School.
Thanks to the Tory leadership contest, that link has suddenly turned the issue into a major talking point on various social media platforms.
Romer had cited Hong Kong and Singapore as examples of charter cities, where city-sized areas in developing countries could become self-governing entities in their own right with few tax and economic regulations, no minimum wage legislation and no social benefits for people living there. In addition, the rule of law – both criminal and civil – would be outsourced to a private company from the developed world.
The TPA blog mused over bringing the idea to the UK to “reconstitute dying coastal cities”. It added:
“Take Hull. Given its prime location facing Europe, we’ve long believed it has huge potential and yet it has failed dismally to exploit it. Suppose it became our own version of a Charter City – minimum wage and working hours regulations abolished, social benefits for working age citizens abolished (maybe a five-year phased withdrawal), central government economic and planning regulations abolished, no more central government assistance but a 10 percent flat rate income tax, 10 percent Corporation Tax rate and no capital gains tax.
“Public spending as a percentage of GDP would obviously fall sharply, and those that depend on public spending would certainly feel the squeeze (although welfare recipients could be given the option of staying on benefit if they relocated outside the city). But against that, Hull would attract entrepreneurs and private investment on an unprecedented scale – and with its easy European access, much of the inflow would come from overseas. There would soon be jobs for all.”
Could that really happen here? Many would suggest it would take a leap of imagination for it to become reality, but in a post-Brexit world where the two current Tory leadership contenders are pledging more deregulation in expanded economic zones, some are now starting to wonder. Reacting to a post on the issue on Twitter this week, city council leader Mike Ross said: “Came up in a meeting today. General view was this was not something we would welcome!”
Liz Truss is the current poster girl of libertarian right-wing politicians, think-tanks and lobby groups. Currently favourite to become the next prime minister if the polls are to be believed, she has promised to create “full-fat freeports” by turning even more areas into business-led low-tax investment zones. Meanwhile, Sunak continues to champion freeports as his big idea without much mention of their earlier incarnation under Margaret Thatcher.
As yet, neither has spoken about future employment rights in their versions of freeports. But some fear the real push for more free-market enterprise is being driven by the same libertarian think-tanks and lobbyists who supported Brexit and its seismic shift away from the rules and regulations of not just the European Union, but also, potentially, the European Court of Human Rights.
Could we see a Singapore-on-Humber?
Expansion of the current proposed Humber Freeport is certainly an aim. Its website says: “It is our ambition that if the Humber Freeport is successful it will grow over time.”
However, that would require government approval and any further move towards a charter city model would almost certainly need new legislation being passed to enable it to happen. Meanwhile, many people overlook the fact that port estates already operate in many ways beyond conventional rules which apply to the rest of us.
For example, some port operators enjoy permitted development rights allowing them to carry out certain construction work without having to obtain planning permission from the local council. Usually, this applies to new facilities for the purposes of shipping or in the discharging or loading of goods.
You don’t have to look very hard to see a recent case study either. The new 171ft high silo currently being built on Hull’s William Wright Dock did not need prior planning consent. Similar permitted development rights at non-port freeport sites would seem a more likely first step towards greater autonomy than a fully-fledged Singapore-on-Humber where workers’ rights end at the boundary line.