It has been claimed that Mr Sunak has allowed UK Treasury mandarins to water down the Government’s freeport strategy. Government ministers have claimed the benefits of the new freeports will be restrained by a lack of “ambition”. The ministers said the planned tax cuts and planning relaxations for these zones were being watered down.
One senior minister told the Sunday Telegraph: “The Treasury has killed freeports.”
A senior Conservative Paty minister claimed Treasury officials opposed the policy because they saw all proposals as “a zero-sum game”.
The minister added that officials in Whitehall had deliberately blocked or delayed by civil servants who were preparing proposals for UK freeports.
Mr Sunak, in his October Budget statement, neglected to mention freeports themselves, despite placing significant emphasis on the policy during previous speeches.
One of the UK’s freeport locations in northern England, the Teesside zone, could see businesses that were set up in the area as being able to benefit from tax breaks including business rates and stamp duty relief.
Both Boris Johnson and Mr Sunak have previously stated they want freeports to act as hubs for global trade and investment in the UK.
The Prime Minister and Chancellor had promoted freeports in the UK as being able to help Britain’s ambition of “levelling up” the economy outside of London.
But Treasury officials said so many freeports will result in less tax revenue and “displace” existing investment from elsewhere in the UK.
Whitehall officials worry that freeports will draw existing firms from other areas in the UK to the newly designated zones, causing a displacement in the economy.
An Office for Budget Responsibility assessment published alongside last month’s Budget stated: “We have assumed that the main effect of the freeports will be to alter the location rather than the volume of economic activity.
“So the costs have been estimated on the basis of activity being displaced from elsewhere.”
Concerning the effects of freeports on the UK economy, Richard Ballantyne, the chief executive of the British Ports Association, who sat on the Government’s Free Ports Advisory Panel, said: “We’ve got about 140 locations across the country that handle freight.
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“If the Government does agree with this policy, why is it just restricting it to eight now and maybe two or three more?
“I think there is some reservation in parts of Government about the loss of tax revenue that these zones may create and there are some understandable concerns they could just stimulate the movement and transfer of activity instead of new investment.
“But these ports are competing on an international level with European ports.”
In 2016, when Mr Sunak was a backbencher, he was extolling the virtues of “the freeports opportunity”.
The first modern freeport opened in Ireland 60 years ago.
Freeports are designated areas, usually surrounding a harbour, airport, or railway hub, which have a different customs regime from that of the country in which they are located.