Rachel Reeves’ Budget will not introduce any new freeports – such as Teesport (Image: GETTY)
Rachel Reeves will not introduce any new freeports in Wednesday’s Budget, the Government has confirmed – even though Downing Street actually signalled the UK’s intention to create five more tax-free zones on Friday.
Instead, the Labour Party Chancellor will set out only the “next steps” for five existing freeports, which will receive formal approval to establish customs zones within their designated boundaries, officials have admitted.
Ms Reeves will also press on with plans for a separate “investment zone” in the East Midlands – initially proposed by the previous Conservative Party government last year.
The Government’s apparent willingness to continue the strategy put in place by the previous Tory administration was swiftly seized upon by Tory Mayor for Teeside Ben Houchen, who claimed the local Labour Party would be “furious”.
Downing Street’s announcement of “five new freeports” on Friday, made while Prime Minister Sir Keir Starmer was in Samoa at the Commonwealth Heads of Government summit, caused enormous confusion among port executives, Whitehall officials, and local mayors – none of whom had any prior knowledge of the plan.
READ MORE: Rachel Reeves accused of ‘crashing economy’ as she’s ‘worse than Liz Truss’
Sir Keir Starmer, pictured in Samoa (Image: Getty)
One official told the Financial Times: “It just was a total cock-up with the comms.” Downing Street has yet to respond to requests for comment on the matter.
Meanwhile, the Conservative Party has branded it a “humiliating u-turn that will once again damage the already shrinking business confidence in this country.”
Ms Reeves will nevertheless confirm continued support for the existing freeports scheme, a project championed by former Prime Ministers Boris Johnson and Rishi Sunak as a post-Brexit strategy aimed at attracting fresh investment.
Freeports offer special customs zones whereby imported goods can enter the country tariff-free, with duties payable only on final goods once they reach the UK market. Such sites also benefit from tax relief on hiring new staff and investment in infrastructure and machinery.
Fantastic to see this Government doubling down on the freeport policy I delivered for the Conservative Govt that is delivering for hard working people creating thousands of jobs across Teesside
I’m sure Teesside Labour will be furious… https://t.co/GJn8HyTDHk
— Ben Houchen (@BenHouchen) October 25, 2024
To date, seven freeports have operational customs zones. Ms Reeves is expected to announce that five additional sites, including Liverpool, Humber, and the Inverness and Cromarty Firth Green Freeport in Scotland, are now poised to fully activate their customs operations.
Officials have said that the Humber freeport will become fully operational, unlocking an additional £25 million in seed funding.
The Labour government is continuing to support the initiative despite research suggesting that the structure of UK tariffs offers only limited benefits.
So far, just six companies are utilising the customs zones at the eight freeports in England, according to data from HM Revenue & Customs, which has been shared with Whitehall departments.
Boris Johnson and Rishi Sunak pictured at Teesport when PM and Chancellor respectively (Image: Getty)
Speaking on Friday, Sir Keir said Labour was not approaching the issue from an “ideological view” and was committed to integrating them into the party’s industrial strategy, aimed at supporting high-growth sectors.
He said: “We looked at them, they are working well, I think they could work better, so rather than stand them down we’re going to go with it, we’re going to make some improvements so they could work even better.”
The Prime Minister explained that ministers will explore ways to “maximise the potential” of freeports by linking them more closely with the Local Growth Plans that the Government has requested from local councils as part of its broader growth agenda.
Each freeport has a defined area of focus. Humber is set to become a hub for rare earth metals processing, Teesside will lead offshore wind turbine manufacturing, and Plymouth and South Devon are looking into the development of autonomous maritime vehicles.
Ben Houchen greets Sir Keir Starmer earlier this year (Image: Getty)
To date, freeports have attracted £6.4 billion in investment, generating an estimated 7,000 jobs, according to government figures. The government also projects that low-tax investment zones in England will create 90,000 jobs by 2033, with an anticipated £10 billion in private investment.
However, economic studies on similar initiatives within the UK and abroad suggest they may simply divert investment from other regions, as opposed to creating substantial new inward investment.
When the policy launched in 2021, the Office for Budget Responsibility, the independent fiscal watchdog, expressed doubts about the economic impact of freeports, predicting it would be “difficult to discern even in retrospect.”
Posting on X, Mr Houchen crowed: “Fantastic to see this Government doubling down on the freeport policy I delivered for the Conservative Govt that is delivering for hard working people creating thousands of jobs across Teesside.
“I’m sure Teesside Labour will be furious.”
Express.co.uk has approached the Government for comment.
