What follows below was written in 2020, when Boris Johnson was Prime Minister. But Freeports are still the policy of the UK Government, so it is worth repeating today.

Boris Johnson and his Conservative government seem to be using the idea of Free Ports as a major idea in their industrial and economic strategy (if they actually have a strategy). But no one seems to be asking if Free Ports are a good idea and if they actually work or not.

So, I thought I would outline some thoughts and some background.

Professor Sir Peter Hall, who only died a year or two ago, spoke in 1977 about areas of cities which had minimum Planning Control – areas where there isn’t any centrally decided plan but were these areas could carry out any activity and do anything with minimal control. In other words without Local Council or central Government saying ‘you can do this but not that; and it must be done like this’. It was an exercise in non-planning, letting the market do what it wants.

This thinking was taken up by Margaret Thatcher when she set up Enterprise Zones.

These Enterprise Zones (EZs) were removed from the control of their local council’s planning policies; and they were given tax advantages and tax breaks such as not paying Business Rates for a long period of time. These Enterprise Zones were supposed to encourage redevelopment of closed down industrial sites such as steel works and docklands, and other industries. In practice some of them became the first out of town shopping centres which helped destroy nearby town centres.

In 1984 this was taken further by introducing Free Zones in areas of Birmingham, Belfast, Cardiff, Liverpool, Prestwick and Southampton. These Free Zones were treated as being outside the Customs Area of the EU, so that goods from outside the EU could be imported, stored and processed without paying import duties until the finished goods entered the EU market. These were discontinued in 2012 when the legislation ran out.

These Free Zones seem to be like the Free Ports proposed, although they may have the added benefits of Enterprise Zones (EZs) by being freed from local authority Planning control and regulation, and given tax advantages. They are also likely to be given tax payers’ subsidies by the government paying for infrastructure.

So, with Free Ports as a major part of the Conservatives’ plans we should be asking ‘Do Free Ports and Enterprise Zones work?’

Research into previous EZ’s found that in the main they did not create new jobs – the jobs were just transferred from somewhere else.

These jobs, which weren’t even new and additional jobs, were expensive to the public purse – £17,000 per job at mid-1990s prices.

It wasn’t the streamlined planning regime (ie getting planning permission) which attracted businesses to these zones – it was mainly the Business Rates Relief and capital allowances which applied in these zones – all this translated into higher rents, so mainly benefited the landowners and developers. Of course this also means that the landowners of the sites from which these businesses and jobs came had sites which dropped in value.

I think it would be interesting to learn who owns the land where these Free Ports are going to be and how they view paying tax in the UK. Many of the UK’s existing ports (where presumably some of the Free Parts will be) are owned by overseas based companies, or even foreign states or oligarchs who don’t like paying UK taxes.

The What Works Centre for Local Economic Growth researched evidence on Enterprise Zones (EZs) and found that in the main any jobs there were not new jobs or new businesses, but were old jobs relocated from elsewhere. In some circumstances there may be justification in displacing jobs and businesses from one location to another (for example, where lack of infrastructure is holding back policy objectives) – but in these circumstances this must be the explicit aim of the EZ or Free Port.

Pressure groups and lobbyists have made claims about the benefits of EZs and Free Ports but they are based on very dodgy assumptions. For example, by looking at employment in EZs in the USA; assuming that every job there are new jobs with none displaced from elsewhere, and then scaling this number down to account for the size of the UK.

The World Bank found that little is known about the effectiveness of Free Ports– successes are highlighted but failures ignored. It does seem clear that what is more important than having EZs or Freeports is the success of the national economy. Bigger zones do better than small ones, as do low tech low skilled labour-intensive ones. But any growth is hard to maintain over time.

Also Free Ports can aid and assist money laundering and the storage and hiding of stolen goods. It has been said that Geneva Free Port is used as a store for 1 million looted and stolen art works.

We all (including the UK’s opposition parties) need to fully understand the evidence about Enterprise Zones and Free Ports so that Boris Johnson and his Government can challenged on their polices where they don’t make sense. And on the whole Freeports don’t make sense, and to me it seems that we are going to have a policy based on an idea which is being pushed by lobbyists to benefit solely their clients.

(Remember, the above was originally written in 2020 – under a Tory Government, but Free Ports are still Government policy. Additionally there are concerns that Free Ports may become Charter Cities, where the land is owned by private companies, and the laws and rules are also set by them – including companies owned by foreign entities and even foreign governments, rather than by the UK Government or democratically elected local councils).

Steven Boxall
Political Education Officer
Bexleyheath and Crayford CLP