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The Office for Budget Responsibility (OBR), a public body funded by the UK Treasury with the purpose of providing independent forecasts of public finances, has said that the UK government’s planned freeports scheme will have negligible economic benefit.

Freeports allow goods to be imported without customs duties and taxes, if they are being shipped on again. The government has granted tax breaks to eight English ports, ostensibly to boost trade and create more jobs, at a cost of £200 million.

Those ports will be at East Midlands Airport, and in Felixstowe and Harwich, the Humber region, the Liverpool City Region, Plymouth, Solent, Thames and Teesside.

Port of Liverpool
Credit: Gavin Allanwood

However, the OBR’s report found that the new freeports would simply alter the location of economic activity rather than increasing the volume.

The UK has had freeports before, until 2012 when the relevant law expired, and there are 80 “free zones” within the EU. However, EU free zones are relatively restrictive compared to others around the world, limiting tax incentives for companies.

Regardless, freeports including those in the EU have received criticism for serving as mini tax havens and enabling money laundering, as companies exploit loopholes.

In 2019, a special committee of MEPs found that EU freeports were being used for the illegal trafficking of high value goods such as artworks, as goods could potentially be traded on the premises while they were in storage, without tax authorities being notified.

Sources: The Independent, Full Fact

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