SCOTLAND is set to miss out on a second post-Brexit freeport after SNP ministers confirmed they have rejected UK Government plans and are intent on pressing ahead with alternative proposals.
Business leaders have called for assurances that the standoff between the two governments does not lead to "competitive disadvantage for Scottish businesses" compared to their rivals in the rest of the UK.
Centred around docks, airports or railway hubs, freeports are designed to encourage economic growth by exempting goods arriving in them from tax and customs charges.
Businesses based in and around the freeports can then use this lower-cost material to manufacture goods and export them again without ever paying the full tariffs.
But plans drawn up by SNP ministers want to alter the proposals to offer an incentive to operators who adopt fair work practices and play a part in ensuring workers are not left behind in transforming the economy to net zero – labelled green ports.
The Scottish Government has criticised the UK Government for failing to move on its position to oppose the green ports model - and will “take forward plans” to draw up its own scheme without the support of Westminster.
But SNP ministers were warned that rejecting the Westminster plans would likely result in Scotland losing out on being granted a second freeport – with plans now set to be brought forward for one facility north of the border.
READ MORE: UK Government to push ahead with controversial freeport in Scotland
At last weekend’s SNP conference, party members passed a motion saying freeports were “part of an agenda to undermine devolution”, and historically have been a “haven for criminality, such as money laundering and people’s trafficking”.
The Scottish Government’s Business Minister, Ivan McKee, has responded after the UK Government's Scottish Secretary Alister Jack presented the freeport offer for Scotland.
In a letter to Mr McKee seen by the Herald, the Scottish Secretary set out his “very generous offer from the UK Government” over the freeports – stressing that the plans would lead to officials implementing “the same reserved policies that are available to freeports in England for two freeports in Scotland”.
Mr Jack told his SNP counterpart that in order to be agreed, Scotland must use “the historic and globally-recognised freeport branding” and commit to “delivering a comparable tax offer in devolved policy areas as is in place for the English freeports”.
In response to Mr McKee's appeal for the real living wage to form part of the criteria, Mr Jack said “all references” to the initiative “must be removed and will not apply”, but added that “the bidding prospectus can refer to ‘fair work practices’ and taking these into account”.
He also told the SNP minister that if his government refused to sign up to the scheme, “the strong likelihood” is that the funding available “would support the creation of only one freeport” in Scotland.
READ MORE: Freeports: Devolution row erupts over UK plans that 'undermine' Scottish economy
But Mr McKee has insisted that “any model implemented in Scotland must include a firm commitment to conditionality around fair work and net-zero", adding these are “principles we cannot compromise on”.
He added: “The UK Government’s offer does not reflect this, provide fair set-up funding, or indeed recognise the vital role the real living wage plays in secure pay and employment contracts.
“It is difficult to comprehend why UK ministers would seek to dilute a strong commitment to fair work, including payment of the real living wage, when seeking to implement their freeport policy in Scotland.
“With just weeks to go before COP26, the UK Government should be working with us to help deliver a net-zero economy given both the Scottish and UK Government have statutory targets to meet on reducing our carbon emissions.
“The Scottish Government therefore has no option but to take forward plans to further develop our green port model which meet the specific needs of Scotland’s economy.”
READ MORE: SNP ministers stop work on Brexit checkpoint over funding row
A Whitehall source said the UK Government would now press ahead with one freeport in Scotland and aimed to have a site selected next year.
They said the SNP-Green administration’s decision meant Scotland would now miss out on the chance of a second freeport, with any ‘green port’ being little more than an enterprise zone offering very limited devolved tax breaks, principally lower LBTT.
Liz Cameron, chief executive of the Scottish Chambers of Commerce, said the breakdown between UK and Scottish ministers was "an incredibly disappointing development"
She added: "This situation should have been avoided and many businesses will view the lack of cooperation and partnership with dismay.
“The UK Government’s decision to move forward on its own, whilst disappointing, will be welcomed by many ports who have invested significant time and money in anticipation for bidding for the status.
"We need to receive details urgently of how businesses can bid and what the next steps are. We cannot afford any further delays especially when Scotland is already behind other parts of the UK, impacting on our ability to attract global investment.
We also understand the Scottish Government intends to pursue its green ports model. Business will need the detail of how this will operate and will urgently need confirmation from both governments that investment incentives will be mirrored across the UK to prevent competitive disadvantage for Scottish businesses.”
A Scotland Office spokesperson said: “The UK Government's freeport model embraces the highest employment and environmental standards.
“It is disappointing that despite strenuous efforts to work together, the Scottish Government is choosing not to work with us to bring freeports to Scotland. There is a strong appetite from businesses and it would boost the economy and create jobs.
“We will continue to work to ensure that Scotland can enjoy the benefits of the model.”
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