I wrote this in July, but since Freeports are supposedly to be one of the big advantages of Brexit (even though they are possible within the EU) it seems worth sharing it again. I would add when doing so that the government admitted in conversation at the time that the plans they had announced provided limited explanation of their intentions, and I was encouraged by the Treasury to consider all possibilities. I did, in my paper, and fear the worst:
One of Rishi Sunak's big plans for the UK is the introduction of so-called 'freeports'. He has been promoting them for a long time, and long before entering government. The government has said of their plans:
The government is working to boost economic activity across the UK, ensuring that towns, cities and regions across the country can begin to benefit from the opportunities of leaving the EU. As part of this work, the government aims to create up to 10 freeports in locations across the UK.
And they added:
The government wants to establish freeports, which have different customs rules than the rest of the country, that are innovative hubs, boost global trade, attract inward investment and increase productivity. In doing so, the government wants freeports to generate employment opportunities to the benefit of some of our most deprived communities around the UK.
The government has the following objectives for UK freeports:
- establish freeports as national hubs for global trade and investment across the UK
- promote regeneration and job creation
- create hotbeds for innovation
The government has drawn on evidence from successful freeports around the world to develop a UK freeport model. The proposed model includes tariff flexibility, customs facilitations and tax measures. We are also considering planning reforms, additional targeted funding for infrastructure improvements and measures to incentivise innovation.
I was asked by the Fair Tax Mark to look at this issue and draft a response for then, which has now gone in. But I also wrote a much longer version, which is available here.
The summary of my submission says:
This submission details considerable concerns relating to the freeports that the UK government is proposing to create. These concerns relate in particular to:
- The significant money-laundering risks that they will create that are unavoidable without a comprehensive reform of the enforcement processes relating to UK company law;
- The extensive risk of tax avoidance activity because of the uncertainties that freeports will create with regard to a range of taxes including corporation tax, value added tax, income tax and social security;
- The inability of the freeport proposal to address the government's concerns with regard to stamp duty land tax, business rates, research and development credits and other related issues;
- The absence of any apparent economic need for freeports;
- The risk to UK tax morale that they will create;
- The threat to the UK's international tax relationships that they will pose;
- The challenge to the international consensus on ending the harmful race to the bottom in tax matters that they represent.
In our opinion none of these issues can be addressed by modification to the proposal made and as such we suggest that the proposal to create freeports should not be preceded with.
The submission is of thirty pages and highlights a great many issues, because as became apparent in discussions I had with the Treasury and others during the submission process, it is deliberately scant as to the proposals to provide the government with maximum opportunity to introduce ideas without prior notice having claimed a consultation has already been done.
My fear, to be blunt, is that the aim is to introduce tax havens in the UK.
It's an issue I will come back to, but for now I offer these paragraphs from the submission on which this proposal is not needed:
Economic need
We understand that the Government's intention in promoting freeports is to encourage increased economic activity in the UK. It intends to do so by providing incentives through the tax system and by relaxing other regulation.
There is little evidence that freeports have ever achieved this goal for a government. There is quite strong evidence that, at best, freeports relocate activity at cost to a government.
In addition, there is no evidence at all at present within the UK that there is a shortage of capital available for investment purposes. There is, for example, regular and informed comment on the pages of the Financial Times and The Economist on the existence of a savings glut, which savings are not put to use by investors. What is more, that capital is available at incredibly low cost, meaning that the hurdles to be overcome before investment can take place have little, if anything, to do with the cost of finance, which is all that can be influenced by reduced taxation and a reduction in the cost of regulation within freeports. In that case there is very little economic evidence to suggest that freeport creation will address any known economic problem: it would seem that all desired economic activity in the UK is currently being funded at very little capital cost without the assistance of freeport arrangements. The economic rationale for such arrangement is, then, very hard to discern. The government has not stated what they are in the current economic environment. We would very strongly suggest that this be done before any legislation is presented to Parliament so that proper appraisal of the proposal can be made.
Regulatory need
We have one final observation to make. The logic of freeports is that there must be regulatory failings in the UK that requires that they exist. The consultation document does not specify these failings, but if they exist it is logical that the whole country enjoy the benefit of reform rather than just some selected areas. We would therefore suggest the government address this broader issue rather than introduce freeports if they think there are regulatory issues requiring attention.
We do not need ten new tax havens in the UK. So why is the government intent on creating them?
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“We do not need ten new tax havens in the UK. So why is the government intent on creating them?”
Two answers here I’d argue. There’s the objective one that world global trading is in a mess because of Barge Economics and needs solutions, freeports being but one stab at this. Then there’s the subjective one that in fact drives Barge Economics but really underlies the use of money or rather attitude to it and this is a schizoid one.
A schizoid personality is one that oscillates between starvation for another person and refusal to eat. So in terms of a country’s currency, its need for a medium of exchange, there’s the desire especially by the wealthy to personally profit from its creation or supply supply whilst at the same time there’s also a refusal to recognise that taxation is a vital part of driving the currency because it maintains value short term. The schizoid wealthy, however, especially try to minimise or evade paying taxes. Look at the history of the English evolution of their currency and you’ll see both of these two “personally beneficial” factors in play.
Interestingly at the start of your article you misspelt “Brexit” as “Brecut” but this made me realise Brexit ought to have always been called “Breakup” because those with a schizoid personality disorder make for difficult partners because of their problem with commitment. The partnership always teeters on the brink of breakup!
Agreed
Inward investment into the UK so called freeports won’t be attracted now there is no advantageous access to the EU market (the most desirable in the world)..
Precisely…
So it will just be relocation within the U.K.
Useless, and undermining, but good for tax abuse industry
My view is that freeports are just a big ‘Fuck You’ finger to the EU. It is an aggressive policy aimed ay threatening the EU and irritating them. I expect a lot of trouble to be honest. I understand the domestic interior benefits to tax abusers in the UK and accept that argument – but this is also an outward facing and hostile policy too towards Europe.
If we just realise that we are living in a real world, we know that the EU has its own domestic detractors and their are people/businesses in the EU who may well want to take an interest in the English free ports.
The ERG knows this – they can smell blood in the water believe you me. Just like a stone mason makes a crack in the rock to slowly open it up to eventually break off a piece. There is nothing more the ERG will want to report back on as EU based companies making use of these of these ports. And let us be honest – ever since Thatcher, the Tories have been good at using the lowest common denominator – self interest – to undermine anything that is distinctly collaborative or even in its benefits to society.
I often wonder what smuggling will be going on once these freeports are established and whether or not they will be used as a back door of U.S and Chinese goods (to name a few).
I mean, just think of the characters involved: Daniel Hannan, Jenkin, Rees-Mogg, Francois, Baker, Redwood, Cash, Brigden, Duncan Smith – I’m sorry but they are all completely driven by petty prejudices and rather than freeports, they should be called just that – ‘Petty Ports’ – because that is EXACTLY what they are.
🙂
Do you think that in general the UK would benefit from planning being more or less liberal?
And if you can avoid thinking about who would be doing the tightening or the liberalising and whether they are nice people that would be helpful. After all, the Sissons and Brown analysis of enterprise zones is that the boost to the economy is neutral with respect to any tax advantages, but there are benefits that do accrue because . . . . well I’m sure you’ve read their analysis.
I am not convinced there are any benefits at all
And ‘liberal’ planning environments inevitably trash a part of the planet for short term gain
Rentierism at work then
I really struggle with Larry Elliott’s Brexit view of the world. I can’t for the life of me understand how those former Labour voters are gung-ho for the Tory government’s zero tariffs and Barge Economics when as he says the UK’s been running a trade deficit on goods since the early 1980’s. That’s nearly four decades!
https://www.theguardian.com/politics/2020/dec/27/why-boris-johnson-perfectly-happy-own-brexit-trade-deal
https://www.theguardian.com/business/2018/apr/08/why-the-uk-trade-deficit-with-the-eu-is-woeful-and-widening
I also struggle with Larry’s view
He knows I do
We’ve discussed if often and I have never got it
So we are friends despite the differing opinions
I’m in debt to Larry for enabling me to see the light as regards the Euro – his verdict has proven to me to be right over time.
However, he seems to be thinking here like your typical economist on this subject matter and also making the mistake of over-simplifying matters like many economists tend to.
There is no such thing in my view as a simple ‘A’ and ‘B’ group over BREXIT – there are other groups of sentiment too. For example I know people who have purchased property in the Euro zone and would qualify as beneficiaries of the liberalisation but still hate the Tories and the BREXIT extremists as all they have done is made their relationship with Europe harder. These people stand to adopt the nationality of the country they expanded into and have become mortal enemies of the Tory party and any other party supporting BREXIT. And there’s thousands of them.
Larry also makes another error typical of contemporary economists in that his focus is too (well) economic, too narrow – Rafael Behr’s recent Guardian article I think entitled ‘The BREXITEERS Never Understood that the EU was about Peace’ was very accurate.
However, Larry does score another point: the diminution of the EU’s social chapter and its inability to look after the losers from the liberalisation in the Euro zone. This is where the New Right has come from across Europe – there is no doubt about that and it is an EU failing (look how it could not at first deal initially with the effects of 2008).
In the UK, things are more complicated as firstly with New Labour we had ill-advised Clinton style social security reforms and secondly for the last 10 years we’ve had really vicious austerity courtesy of the Tories. This austerity has actually been blamed on the EU even though we know that the UK has not signed up 100% to EU practice yet it is portrayed that we have.
The UN Rapporteur for Poverty did not visit Holland or France and deliver his shocking verdict. But the EU got the rap in British society for cruel Tory austerity because the Tories ensured that they did,
Having said all that, the EU needs to get its act together on the social front. But I am not hopeful since the Neo-lib bent in the Euro-zone actually comes from it being embedded in the member states – not the zone itself.
What many Englishmen do not realise however is that if they are not going to be winners in the post-BREXIT world, they will be worst losers than they would be if still in Europe. European federalism was seen as a major threat to a feudal-based party political system in the UK – something that actually united parties across party lines.
Englishman do not like to share their rule – they want exclusive rights – rich Englishmen especially.
The Groan was flagging the ‘Freeport’ idea through another trusted heavyweight, Simon Jenkins, last year.
https://www.theguardian.com/commentisfree/2019/feb/22/city-free-port-brexit-deal-bankers.
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All the chatter and narrative is about ‘passporting’ or rebalancing away from financial services! The coal mines aren’t going to reopen and restore generations of deadly work, the fisherman aren’t going to suddenly head back to the dangerous seas risking whole families in a rickety boats. Any quotas gained will end up in the hands of a few who will happily sell them to the Dutch super trawler that catches a quarter of all the fish !
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Why is Starmer being encouraged to slash our wrists in a public display of fealty? That now must be the main question – worrying about what the controlled MSM will say is pointless – the MSM must be bypassed by grassroots activity. Any resistance or ‘revolt’ will Not be Main Streamed. That does not mean we must comply because LauraKoftheCIA and her menagerie of Mocking birds should be respected let alone believed.
The Freeport’s will work in the divide and rule, I’m alright Jack, scab mentality installed on the populace through the Thatcher and Murdoch years.
It really requires a robust response – words are not enough.
Let’s not play their game and call the not-so-new or much of a secret setups as what they were originally named.
Pirate havens.
‘ports or harbors that are a safe place for pirates to…spend their plunder, avoid capture, and/or lie in wait for merchant ships to pass by. The areas have governments that are unable or unwilling to enforce maritime laws. This creates favorable conditions for piracy. These havens were often near maritime shipping lanes…some were established by governments who employed privateers to disrupt the overseas trade of rival nations. (From wiki)
Or as Mutti has said very directly – she does not want a Singapore on Thames (or that other old thieves den HK) parked 30 miles off the coast of Europe.
Call me a traitor if you want, but neither do I.
It is the Ancient pirates who are turning Britain into so much salami sliced areas that they hope will mean the break up of the Union becomes moot.
Institute for Public Policy Research arguing future workers and environmental protection weakened under Brexit Deal:-
https://www.ippr.org/files/2020-12/agreement-on-future-relationship-ippr-assessment-f.pdf
Sorry, but whats Barge Economics?
Wikipedia suggests its something to do with flat bottomed boats on inland waterways which clearly it isnt in the context of these discussions
Barge economics, as I understand it, refers to the concept of businesses putting all their plant (factories) on barges, which could be moved round the world to wherever the best deal could be had – proposed originally by Jack Weich of General Electric – see http://thomaspalley.com/?p=87
The most dreadful implication of Brexit is that it does not merely signal Britain leaving the EU, but setting out to destroy it. You think that absurd? We are already far beyond absurdity. Throughout the negotiations the British attempted to circumvent Barnier and Von Der Leyen, and turn it into an old-fashioned 19th century carve-up between Berlin, Paris and London. That failed, but Freeports and the British Brexiteers wish to ‘Balkanise’ Europe (to use a term from 19th century realpolitik that best serves what is intended); and pick off the isolated fragments of the fracturing corpse, to exploit at leisure; like a vulture. It is what we do best.
I suspect you are right
And I too see that intent – knowing who is behind all this.
The ERG and Boris know only too well that the seeds of the EU’s downfall lie within itself. Kicking a few doors in would help actually the Euro-zone is be-set with problems. These modern Tories are the arch-opportunists after all.
The only thing in my view that will prevent that is some form of Euro-wide anti-fascist policy aimed at nullifying discontent in the Euro-zone.
The question is, does the ECB have the imagination to create something like that? Because it will take money.
I’d like to see the Euro currency dealt with to be honest. But that needs to be long term aim – not at the moment.
The biggest problem with the English Left is the obsession with GREATNESS associated with a habitual ignorance of the dynamics of finance capital and it’s Faustian dramas played out via Brexiteering within the orbit of moribund and parasitic illusions of ruling class in Little England. Perhaps the Jewel in the Crown under Modi will lend a helping hand to Boris. In the meantime, say, 20-50 years Black Afrika will wake up and get rid of all forms of imperialism from it’s lands. De-Colonise your minds and hearts.
In the final analysis the days of Great Britain as a rule maker while colonising the peoples’ of the Global South’ can never be reinvented despite the Faustian jingoism of English Nationalism. Consumer remains the arbitrator while finance capital plays the joker.
Fictitious Capital accumulation ultimately rests on surplus value extractive by productive capital in the real economy. This explains the exponential influence of China in ‘post corona’ era. Without exporting British finance capital to former colonies in the form of FDIs, Little England may end up as a little island after the inevitable break up of United Kingdom via Independent Scotland closer to EU.
https://alastaircampbell.org/2020/12/the-brexit-revolutionaries-have-barely-begun-britain-needs-to-wake-up-fast/
An interesting read, courtesy of National Preservation of all places
Worth reading
I don’t like Campbell at all. But this is really good.
I’ve noted the abuse of language in this extreme version of Toryism for some time now – so they even have to hyper-individualise the term ‘sovereignty’ now, and claim it for their warped view of the world.
The problem that Rees-Mogg Snr did not anticipate was how his ‘born into it’ son would grow to be someone totally unlike those who made the Britain RM Snr wants the country to return to.
The old Tory grandees were wealthy and knew how to protect it. But there was also a paternalism about them that meant that they also took responsibility for ‘the Estate’ and ruled with this in mind. They were greedy maybe but they were not cruel or indifferent. After all – that made us all look bad.
The north American capitalism that Thatcher introduced however changed all that because it changed the points of reference and the moral compass of the rich. Even I think von Hayek noted towards the end of his life, Neo-liberalism might not have worked well in the UK because of the class system.
Most of the riches conferred on people like Rees-Mogg Jnr is simply money that had belonged to a wider group of people in society – workers, middle-managers – money that modern finance has made easier to take off people to give to others who are already rich. The old ‘one-nation’ Tories didn’t seem to mind sharing a little. Rees-Mogg’s generation do mind because there is a religiosity to their drive to just accrue more (they’re worth it, and it is how God himself wanted things to be – RM Jnr and his like are the chosen ‘few’).
The other thing that strikes me is that we still now are told that it is the Left where all the Trots and Marxists sit fulminating on under-hand revolutionary tactics that will affect our way of life (whatever that is).
But this vignette from the historical record tells us something that I and many other have alluded to – that it is the extreme Right that has been planning for this moment for a long time – not the Left; it is the extreme Right who are behaving in an Orwellian manner – not the Left. It is the extreme Right who are anti-democratic and want to eat all the pies.
Dear me – when we will bloody learn eh?
If you are able to go and live somewhere else, my advice is to get gone. There HAS been a coup in this country after all.
Scotland….is my most likely destination
I feel like this might be a pretty dumb question but hey;
Wont the EU just black list us now their new anti tax avoidance measures are coming into play?
Surely if we undermine them and attempt to drag them down with more tax haven activity they’ll simply put limits and fees on anything else the country wants to trade with them?
It bwould be good if they did
But blacklists rarely work without political backing
That’s why the Cide did work and the EU blacklist and OECD measures do not
Thet are not equivalent
Do freeports look good? Yes (Britannia unchained, freeing animal spirits, levelling up etc, etc)
Do freeports help the chumocracy? Yes
Issue solved. Simples. Keep calm and crony on.
Are we familiar with the term, Charter Cities? Like the old City States https://bakerstreetherald.com/
There’s a growing concern in some quarters that this is what’s planned and is the momentum behind Brexit. Whole areas (Anglesey, for instance) where the laws of the exterior land (and relevant treaties) don’t apply could be used for sweatshop-style manufacture, no workers rights, all the usual swivel-eyed loon yada. I wonder if this is what Raab’s been up to in India, arranging for cheap techies to come here and work on minimum wage in such areas. More on Charter Cities here, from, alarmingly, the TPA which means Elliott of course.
https://www.taxpayersalliance.com/charter_cities_f1_qrrrebspo_1e_acnz6xzb7l0
Mr Kruse,
The TPA site to which you supplied the invaluable link is so carried away it has decided that Charter Cities, which it confesses applied to developing countries was actually applicable to Britain’s declining cities; notably Hull – because it conveniently links to Europe (in spite of the fact we have left the EU). They approve the non-applaince of standard tax and regulations, but insist on the rule of law; citing the Empire as an exemplar of how to deliver standards.
It is remarkable with what facility the self-appointed representatives of ‘taxpayers’ (I do not recall asking them to represent me), eagerly seize on any opportunity to pay no taxes at all, entirely free from regulation or inspection.
I think you may be onto something here Bill
They were being promoted by the TPA in the days when Matthew Elliott was there…which is worrying
It is about greed.
We have a group in society who will never have enough. It starts with money but moves on to power. That is why so many millionaires are sitting in the Commons.
We have moved forward very little from the feudal system. A few more crumbs may fall from the table but only enough to prevent real change.
We still live in a World were a dozen people have more wealth than the poorest 50% of the planets population. Unlike the greedy that wealth denial shatters life – health, life expectancy, infant mortality, etc etc