Plan for trading zones

Johnson presses case for Singapore-style free ports across UK

Prestwick airport

Prestwick Airport was a free trade zone

Boris Johnson aims to set up ‘tax efficient’ free ports across the UK to help stimulate trade in the regions and nations.

Free ports, or free trade zones, operate without the restrictions of normal tax and customs rules, allowing firms to import and export goods. Those companies operating in the zone pay lower taxes, such as reduced VAT and lower rates of employment tax.

The Prime Minister believes they could create jobs, particularly in low growth areas, although opposition parties warn that they may also attract money launderers and tax dodgers.

An advisory panel that will look at setting up as many as 10 such ports will be unveiled today by International Trade Secretary Liz Truss during a visit to  north east England, where the Mayor Ben Houchen has championed the concept.

They have helped bring economic success to places such as Singapore and Hong Kong and Mr Johnson says Britain’s membership of the European Union has held Britain back from similar benefits.

Seaports and airports will be able to apply for free port status, to be set up after the UK is due to leave the EU on 31 October.

Port of Tyne, Milford Haven and London Gateway have expressed an interest in the bidding process, according to the government. The Scottish Government has given no indication of its interest, although Prestwick Airport was one of seven free trade zones which included Liverpool, Southampton, the Port of Tilbury and the Port of Sheerness at various points between 1984 and 2012, when the legislation establishing them was not renewed.

With Prestwick Airport up for sale, the idea could stimulate interest among potential buyers.

Ms Truss said the move would create “thousands of jobs”, adding: “Freedoms transformed London’s Docklands in the 1980s, and free ports will do the same for towns and cities across the UK.”

Rishi Sunak, who replaced Ms Truss as Chief Secretary to the Treasury last week, has been another champion of free ports, saying they could create more than 86,000 jobs in Britain.

“We will focus on those areas that could benefit the most, as we look to boost investment and opportunity for communities across the country,” he said in a statement.

Mr Johnson embraced the free port idea while campaigning for the Tory leadership and is keen to see half a dozen around Britain.

Critics say they simply defer the point when import tariffs are paid, which then still need to be paid at some stage.

Around 135 countries, mostly in the Far East, have free trade zones and there are said to be about 3,500 worldwide.

There are around 80 free ports in the EU, mostly in nations that joined the bloc after 2004. Countries must respect EU state aid rules and cannot financially support manufacturing firms located in the areas.

The EU does not encourage them, arguing it creates unfair competition between firms operating within them and those adhering to normal EU rules.

Eamonn Butler, from free market think-tank the Adam Smith Institute said the zones would set the UK “on the right course” after Brexit.

He said they “provide safe harbour for trade in turbulent times and show that hi-tech hubs of enterprise, low taxes, deregulation and trade without restriction can rebalance the economy”.

Responding to the government announcement, shadow international trade secretary Barry Gardiner said the planned UK zones did not constitute new investment.

“It is a race to the bottom that will have money launderers and tax dodgers rubbing their hands with glee,” he said.

“Free ports and free enterprise zones risk companies shutting up shop in one part of the country in order to exploit tax breaks elsewhere, and, worst of all, lower employment rights”, he said.

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