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Welsh government throws doubt on Freeport plan

[ July 16, 2021   //   ]

The Welsh government has written to the UK Government asking for an urgent discussion to determine how to resolve issues over freeports, warning that, without a workable solution, “we will need to move forward and dedicate our focus to supporting the economy in Wales in alternative ways.”

In a statement on 15 July, the Welsh Government said it recognised the potential benefits of freeports, and remains open to establishing them in Wales with devolved policy levers. However, it has concerns that they could displace economic activity and undermine employment and environmental standards.

The Welsh government also had to be confident “that the potential negative impacts of the UK Government’s approach are mitigated,” not least because “an open-ended commitment by the Welsh Government to match the UK Government’s offer on Non-Domestic Rates and Stamp Duty (Land Transaction Tax in Wales) would present a risk to Welsh tax revenues.”

In February 2021, the Welsh administration wrote to the UK Government calling for joint decision-making – including setting the criteria for bids, assessing bids and awarding freeport status. It also called for a fair funding settlement – that neither disadvantages freeports in Wales nor requires it to divert millions of pounds away from other priorities. (On average, Freeports in England are expected to receive £25 million each in direct financial support.)

However, in the five months since sending the letter, “there has been little in the way of substantive engagement on the implementation of freeports in Wales” although in the March 2021 Budget the Chancellor announced the locations of eight freeports in England.

The Wales Government added: “The continued ambiguity has magnified the unstable position of many of our ports and businesses. It has led Welsh organisations, including local authorities, to start dedicating resources…developing plans for freeports in Wales when there is no guarantee that any will be delivered.”

The previous week, it had written  to the Chief Secretary to the Treasury seeking clarity on the UK Government’s position, but the response received said very little, it said: “We are disappointed to say that the UK Government has once again failed to set out a clear proposal on how we can take these discussions forward. It is becoming more apparent that the UK Government is unwilling to invest in its policy priority within Wales.

“The UK Government has already determined the average level of seed funding available to freeports. Despite this, they are unwilling to commit the same level of funding for a freeport in Wales. The UK Government is also pressuring the Welsh Government to redirect its resources to deliver a UK Government policy priority. This approach is unacceptable to us, and we have made clear that freeports are place-based interventions and population-based funding formulas are not appropriate. We cannot accept an arrangement whereby freeports in Wales are treated less favourably than those in England.

“Our view remains that the UK Government should act in the interests of the UK when delivering its commitments and not try to squeeze resources out of devolved administrations during periods of unprecedented challenge.