Written Statement: Freeports in Wales

The Welsh Government recognises the potential benefits of freeports, and we remain open to the prospect of supporting the establishment of freeports in Wales with devolved policy levers. However, we have longstanding concerns that they could displace economic activity and undermine employment and environmental standards.

As a responsible Government, we need to see that freeports demonstrate value for money. We also need to have confidence 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.

For these reasons, we have consistently attempted to engage constructively with the UK Government and reach agreement on a way of implementing freeports in Wales which is consistent with our priorities and values as a Government.

In November 2020, the UK Government launched its bidding prospectus for England. This was the first time the Welsh Government had been able to see important details about the Freeports policy. The publication of the prospectus led to more constructive talks that we progressed in good faith towards a positive outcome for the policy.

In February 2021, we wrote to the UK Government setting out the conditions that need to be met for the Welsh Government to engage constructively further, namely:

• Joint decision-making between the Welsh and UK governments - including setting the criteria for bids, assessing bids and awarding freeport status.
• Conditionality – to ensure the implementation of freeports reflects Welsh Ministers’ values and priorities, particularly regarding environmental standards, fair work and social partnership.
• A fair funding settlement - that neither disadvantages freeports in Wales nor requires us 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.

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

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 at risk, developing plans for freeports in Wales when there is no guarantee that any will be delivered. Therefore, last week, we wrote to the Chief Secretary to the Treasury seeking clarity on the UK Government’s position.

This week, the Chief Secretary to the Treasury responded to our letter, saying very little. 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.

We have today written again to the UK Government asking for an urgent discussion to determine how we can resolve these issues and provide the clarity needed to end this sustained uncertainty. If we cannot reach a workable solution, we will need to move forward and dedicate our focus to supporting the economy in Wales in alternative ways.