Receive free updates on the Scottish economy
We will send you a MyFT Daily Summary e-mail bringing together the latest news from the Scottish economy each morning.
The UK government plans to move forward with the creation of at least one free port in Scotland despite objections from the decentralized Scottish government.
A UK official familiar with the move said on Friday it reflected his frustration and disappointment at Edinburgh’s refusal to back its vision of Special Trade Zones with favorable tax and other policies, which Prime Minister Boris Johnson said , will offer “transformational” benefits.
But plans to proceed without the approval of the Scottish National Party’s independence government in Edinburgh will fuel accusations that London is increasingly willing to bypass decentralized administrations, an approach some have dubbed “tough unionism”.
SNP ministers and the pro-union Wales Labor government both expressed concern over the economic effects of the UK’s freeport plans and jointly warned in July that any unilateral action to establish them in their countries would “undermine decentralization”.
Edinburgh insists that any free port must contribute to efforts to improve wages and tackle climate change, goals it calls “central principles” of its economic policies. But Alister Jack, the UK’s Tory Secretary in Scotland, declined to include real living wage commitments and net zero carbon emissions targets in the freeport plan.
Rather, Edinburgh plans to develop an alternative ‘green port’ model despite a separate Scottish regime that may have limited impact on trade competitiveness, as powers over tariffs and customs regulations, VAT and national insurance are all booked in London.
Yet the unilateral establishment of a free port in Scotland by the UK could also be complicated by the decentralized government’s ultimate control over local tax planning and policy.
British officials hope the successful establishment of eight free ports in England announced in the March budget will increase pressure on SNP port ministers and local leaders to drop their objections.
UK officials insist that the jobs created by the zones are likely to be relatively well paid and subject to high environmental standards.
“We tend to view the objections raised by the Scottish government as red herrings,” said the official familiar with the plans. “Our door remains open if there is a change of mind.”
Many economists and business analysts are skeptical of the benefits of free ports, saying that in relatively open economies they tend to displace activity rather than expand it. The UK had seven free ports between 1984 and 2012, but closed them over fears they would be used for tax evasion purposes.
Scottish Business Minister Ivan McKee said on Friday that Edinburgh had tried unsuccessfully to work with the UK government on the basis of a “joint draft green ports tender prospectus”.
“We are not ready to implement a port model that [does] not include a firm commitment to fair and net zero work [emissions]”McKee said.
While the Scottish government had no choice but to pursue its own green port program, it was awaiting details of the British proposals, he said.
As a sign of concern over free ports within the ruling SNP, delegates to its fall conference last month backed a motion that called for strict conditions to be attached to such areas, which in the past had been “a haven for crime, such as money laundering and human trafficking”.