Decarbonising the UK: Role of Shipping Emissions

Michael Tomlinson Excerpts

Tuesday 14th September 2021 Westminster Hall

[The Lord Commissioner of Her Majesty's Treasury (Michael Tomlinson)]

First of all, may I apologise on behalf of the Minister who was going to respond to the debate, as both she and I were detained?

I congratulate my hon. Friend the Member for Rother Valley (Alexander Stafford) on securing this important debate. Not only in this debate but throughout his time in Parliament, he has championed this issue and similar issues, and I congratulate him, once again, on being at the forefront of the debate on these issues.

It is indeed London International Shipping Week and, as my hon. Friend has said, we are “Nelson’s nation”, so this debate is incredibly timely. The shipping of carbon dioxide and hydrogen can play an important role in ensuring a prosperous and sustainable future for British industry, and in supporting efforts to meet our domestic net zero targets.

We have already made huge progress in decarbonising the electricity sector. In 2019, greenhouse gas emissions were down by 13% on 2018 levels. However, it is right to say that, in order to reach net zero emissions by 2050, we must go further. That is why in March we published the UK’s industrial decarbonisation strategy. This document is the first to be published by a major economy and it sets out how industry can decarbonise in line with net zero while remaining competitive. Carbon capture, utilisation and storage, or CCUS, is one key abatement technology and it will be vital as we make this transition.

In May, we launched phase 1 CCUS cluster sequencing process. Its aim is to provisionally sequence those clusters that are most suited to deployment in the mid-2020s. This summer, we also published the UK’s first ever hydrogen strategy, which will put the UK at the forefront of the race to develop low-carbon hydrogen, driving innovation, jobs and investment to scale up the technology. CCUS and low-carbon hydrogen are vital to transform sectors such as steel, cement and chemicals, which lack viable alternatives to achieve deep decarbonisation. The UK can become a world leader in CCUS and low-carbon hydrogen, helping to create world-leading low-carbon manufacturing clusters. Connecting industrial clusters, such as those in south Wales, the south coast of England, the Thames estuary and the firth of Forth in the northeast of Scotland will be critical to enabling the decarbonisation of our steel, chemical and refining industries. That is where the shipping sector can be crucial in realising that vast potential. In our business model update, published in May, we indicated our desire to accommodate the shipping and the non-pipeline transportation of carbon dioxide and, as part of the cluster sequencing process, we asked clusters to include details of future carbon dioxide shipping capability in their cluster sequencing proposals.

Turning to the future direction, we recognise the importance of non-pipeline transportation and shipping for decarbonisation of the broader economy and allowing deep decarbonisation. We are currently working with industry and the devolved Administrations to understand how best to incorporate non-pipeline transportation and shipping within a UK carbon dioxide network.

This is an extremely important issue for the sector, but more importantly, for the planet. I apologise for missing the beginning of the speech by my hon. Friend the Member for Rother Valley, and I make a commitment that if there is any point that he raised in my absence, the Minister will address it directly in writing and leave a copy in the Libraries of both Houses. This is an extremely important issue, and I endorse my hon. Friend’s view that shipping will play an important role in reducing carbon dioxide emissions. I look forward to working across the House, and with the Minister, to ensure that the UK develops the appropriate infrastructure to enable new low-carbon technologies such as low-carbon hydrogen, and meet the challenges that we face.

Question put and agreed to.

Unregulated Accommodation: 16 to 17-year-olds

Michael Tomlinson Excerpts

Tuesday 15th October 2019 Commons Chamber

[Andrew Selous]

More data is always good. I will come on to suggestions about what local authorities need to do.

In 2018, the top six locations for episodes of missing persons accounted for one quarter of the overall number of missing episodes in Bedfordshire. Of those 1,049 episodes, 779—three-quarters of the total—came from these unregulated settings. The Centre for the Study of Missing Persons at the University of Portsmouth estimates the average cost of investigating a missing person at £2,400. That is a financial cost to Bedfordshire police of around £1.9 million caused by these unregulated homes. It means that the officers involved cannot respond to other serious incidents. What makes the situation worse is that most of those children are being placed in this substandard provision in Bedfordshire by local authorities outside the county.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

Has my hon. Friend come across Home for Good, a fostering and adoption charity, and its five-star campaign, which is looking not for five-star accommodation for young people, but for five-star care? If he has not come across it, perhaps he will look into it and encourage the Minister to do likewise?

[Andrew Selous]

My hon. Friend is absolutely right; like him, I am a huge admirer of Dr Krish Kandiah, and I will say a little bit about that charity and what it can do later in my remarks.

In three of the unregulated homes that I visited in September with the police, only three out of the 17 children there came from Bedfordshire. All the other children were from other local authorities. They had all gone missing on multiple occasions; one child, indeed, had gone missing 41 times. Local authorities sending 16 and 17-year-olds to Bedfordshire include Stockton-on-Tees, Peterborough, Sandwell, Cambridgeshire, Oxfordshire, Swindon, Windsor and Maidenhead, Manchester, Birmingham, Essex, Nottinghamshire, Devon, Enfield, Barnet, Hillingdon, Redbridge, Waltham Forest, Haringey, Ealing, Merton and Croydon. Some of those have lamentable due diligence in their placing decisions.

HMRC Impact Analysis: Customs

Michael Tomlinson Excerpts

Tuesday 8th October 2019 Commons Chamber

[Mr Speaker]

If the appetite of the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) remains unsatisfied by that ministerial reply, my counsel is that he should read the biography of Edmund Burke that the Minister penned, which is, at any rate, a stimulating read.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

How many businesses would be affected if we left the EU without a deal—a deal that some Opposition Members seem to be opposing?

[Jesse Norman]

As my hon. Friend will know, there are over 150,000 VAT-registered businesses that trade with the EU, and another 100,000, we believe, that are not VAT-registered. If they wish to continue to trade with the EU—that trade may be just part of their business—they will experience some effect. It would be impossible for me to improve on the Speaker’s last comment, but if I might direct my hon. Friend to my book on Adam Smith, he will see that economies are dynamic, as has been recognised since the 18th century. We would expect the dynamic effects of the change in our status to offset many of the concerns raised in the impact assessment.

Oral Answers to Questions

Michael Tomlinson Excerpts

Tuesday 1st October 2019 Commons Chamber

[Rishi Sunak]

I pay tribute to the Conservative Mayor, Ben Houghton, in Teesside for championing his community. He has been advocating a free port because he believes that such a phenomenon will create jobs in his area, drive inward investment and boost trade. I hope that the hon. Lady would welcome that for her community in Grimsby, where the seafood industry and Associated British Ports, the port employer, has loudly called for such free port status for her area. I hope that, when the opportunity comes, she will support her community in applying for that.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

My right hon. Friend is truly a champion of free ports, but will he agree to meet me to discuss the potential benefits for ports such as the port of Poole and the advantage for the wider region as well?

[Rishi Sunak]

I would be happy to meet my hon. Friend. I believe that it is his birthday today, so I wish him a happy birthday. I am happy meet him and his colleagues from Poole to discuss free ports. We believe that these should be opportunities for the entire country to take advantage of.

No-deal Brexit: Short Positions against the Pound

Michael Tomlinson Excerpts

Monday 30th September 2019 Commons Chamber

[Mr Speaker]

I gently remind the House that the thrust of the urgent question relates to short positions being taken against the pound. This is not a general, Second Reading-style debate on the merits or demerits of a no-deal Brexit, of which the House has treated before and doubtless will do so again. It is on the specific matter to which I have just referred, and I feel sure that our hon. Friend from the west country is a noted authority on this matter, on which he is about to expatiate.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

Thank you Mr Speaker, you are very kind. It is wonderful to see the Minister in his place, oozing calm and authority, in sharp contrast to the stoking of fears and division on the Opposition Benches. We have just heard about the risk to the economy, but the real risk to the economy is not Brexit nor yet a no-deal Brexit. The real risk is letting the shadow Chancellor anywhere near No. 11 or the Treasury.

[Mr Clarke]

I thank my hon. Friend for those kind remarks. It is clear that that would be the ultimate vote of no confidence in the British economy.

Oral Answers to Questions

Michael Tomlinson Excerpts

Tuesday 21st May 2019 Commons Chamber

[Mr Hammond]

I think the reasons behind the Brexit vote are complex, and it would be trite to stand here and try to identify them simplistically. Let me also remind the right hon. Gentleman of the contribution that his party’s Government made to the situation that we inherited, which caused us to have to make the tough decisions to which he has implicitly referred.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

Ten days ago, I met heads and chairs of governors from across my constituency at Corfe Hill School. Will the Chief Secretary to the Treasury meet me to discuss their specific concerns about schools funding, and the need for additional funding for our schools in Poole and in Dorset as a whole?

[Elizabeth Truss]

I would be delighted to meet my hon. Friend. We are looking at schools funding, alongside other funding, as part of the spending review. It is a public priority, and we are taking it very seriously.

Taxation of Low-income Families

Michael Tomlinson Excerpts

Wednesday 16th January 2019 Westminster Hall

[Jeremy Lefroy]

The hon. Gentleman makes an extremely important point. I shall refer to three reports today, but this one, “Make Work Pay: A New Agenda for Fairer Taxes” by the Centre for Policy Studies, suggests a tax and national insurance-free income of, I think, £12,000 a year, which is similar to what he suggests. I have a lot of sympathy for that. I would counsel against those who say that national insurance is a thing of the past and totally irrelevant; I believe in the importance of a social insurance contribution-based system, provided that it is progressive and proportionate, and I would not like to lose that, but I entirely agree with the principle of what he says.

Lest anyone wonder whether these high effective marginal tax rates are just an anomaly that, for some curious reason, only impacts one-earner, two-child families on 75% average wage, the point must be made that our high marginal rates are a problem for all family types: single parents, single-earner couples and dual-earner couples. One in three in-work families with dependants are likely to be facing high effective marginal rates. That is 2.5 million families—or 1.6 million couples—of whom 1 million are single earners, 600,000 are dual earners and 900,000 are single parents.

Put simply, any family paying tax and national insurance and receiving tax credits will be looking at an effective marginal tax rate of 73%. Families that, in addition to receiving tax credits, also receive housing benefit and council tax benefit will be looking at a marginal rate of 96%. Under universal credit, the 73% rate will increase slightly to 75%, but the 96% rate will come down to 80%. A 16% drop is significant, but an 80% effective marginal tax rate is still far too high. There is a lot that I would like to say about improvements that I would propose to universal credit, but that is a debate for another day.

Instead of encouraging aspiration, the combined impact of our tax and benefits system suffocates aspiration, trapping families in poverty. That is a burning social injustice that must be addressed. Much of the cause of our high effective marginal tax rates, particularly for single earner couples, is as a result of the introduction of independent taxation in 1990. Since then there has been little or no recognition of family responsibility in the tax system. Not recognising that responsibility in income tax, through a system such as elective joint taxation, has led to a tax arrangement that is anti- aspirational. It is interesting that the former Chancellor, Lord Lawson, wanted to include some kind of joint responsibility in the new system when it was introduced, but it was opposed by the then Prime Minister.

Families in poverty pay thousands of pounds of income tax, but then have to be supported by very inflated benefits, which offset the failure to recognise family responsibility but with the very costly downside of cripplingly high effective marginal tax rates that suffocate aspiration as the inflated benefits are withdrawn. In 2014 I co-authored a report with my hon. Friend the Member for Congleton (Fiona Bruce) and two other colleagues, “Holding the Centre: Social Stability and Social Capital”, which touched on many of the issues we are debating today, although not in such detail on this particular subject. As we noted in the report, many of the Government’s—all Governments’—most important goals rely on the contribution of families. However, too often that contribution is under-recognised and the impact of policy on these relationships ignored, under all Governments.

The report pointed out the vital role that family relationships play in our economic prosperity, wellbeing and the life of our children, as well as the cohesion and social stability of our nation, where growth and prosperity are underpinned by fairness, responsibility and community. The stability of marriage and supporting aspirational families are integral parts of the social capital of our country that leads to social stability and economic prosperity. A Government who draw on and nurture the wealth of our social capital, supporting families and strengthening relationships, can give people confidence about their future prospects and the ability and opportunity to see aspiration fulfilled.

These issues are vital, and therefore I note with pleasure that the Strengthening Families Manifesto group of Conservative MPs, led by my hon. Friend the Member for Congleton and by Mr David Burrowes, the former Member for Enfield, Southgate, has recently held an inquiry into making work pay for low-income families. The report was published this morning to coincide with this debate. My hon. Friend will outline in greater detail some of the report’s specific findings and recommendations. I underline the call in the report for the Chancellor to review formally the effective marginal tax rate for families, assessing the reasons why work does not pay for so many families and evaluating the possible solutions, with a particular focus on the tax system and the recognition of family responsibility.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

I congratulate my hon. Friend on securing this important debate. Despite all the other things going on, this is hugely important. He mentioned a burning injustice—all our ears will have pricked up at that phrase and he is absolutely right. I and other colleagues signed a new clause to the Finance (No. 3) Bill, which was not selected for debate, but does he agree that this does not need an Act of Parliament for the Chancellor to review it, and that the Chancellor can still review it despite the fact that the new clause was not selected or debated and is not part of a formal Act of Parliament?

[Jeremy Lefroy]

My hon. Friend is absolutely right, and that is why both the debate and that report are so important in showing the Chancellor that this issue is vital for many colleagues across the House.

I will finish with the fact that it is surely very telling that in 1990, just as independent taxation was introduced, far from 73%, the effective marginal tax on a one-earner family with two children on 75% of the average wage was just 34%, close to the average 33% effective marginal tax rate on such families today across the OECD as a whole. We are a total outlier in this respect, and in the wrong direction. If we managed without such aspiration-killing tax rates on working, low-income families in the past, we can and must do so again.

I very much hope that the Minister, for whom I have the highest regard, agrees and will tell us that the Chancellor is willing to review our marginal tax rates, as my hon. Friend the Member for Mid Dorset and North Poole (Michael Tomlinson) mentioned, and bring forward strategies to gradually bring them in line—I realise this is a huge ask— with the OECD average over the years, so that we can become an aspirational economy once again.

Draft Payment Accounts (Amendment) (EU Exit) Regulations 2018

Michael Tomlinson Excerpts

Wednesday 19th December 2018 General Committees

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Rosindell. I am grateful to the Minister for his helpful explanation.

Once again, we are in a Delegated Legislation Committee debating a Treasury-related statutory instrument that makes provision for the financial regulatory framework after Brexit in the event that we crash out without a deal. In each of those debates—there have already been many—I and my Labour Front-Bench colleagues have spelled out our objections to the use of secondary legislation in this manner, as well as the challenges of ensuring proper scrutiny of the sheer volume of legislation that is being passed. We have expressed frustration many times that we must spend time and resources creating a framework that might never be used. The fact that, as of last night, an additional £2 billion will be spent on no-deal planning, all for the sake of a dangerous game of brinkmanship, is not lost on those whose schools, hospitals and other public services are struggling.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

It is disappointing to hear the tone the hon. Lady is striking. Does she not see that this is sensible contingency planning, as the Minister set out? We need to be ready for all eventualities, and that is exactly what we are doing. I look forward to her constructive comments on this measure.

[Anneliese Dodds]

I have spoken in many of these Committees, and I will go on to speak constructively about the details of the measure. However, I reiterate that there is considerable concern in the nation about what is happening. To many of us, the prospect of no deal appears closer than it has in recent days, and that is enormously concerning. If we cannot reflect on that concern in this House, I do not know where we can. I believe we do a service to our constituents—businesses as well as individuals—by expressing their worries. [Interruption.] I beg your pardon? I think the hon. Gentleman wants to say something.

[Michael Tomlinson]

I said we just need to be ready for it.

[Anneliese Dodds]

I absolutely agree—of course we need to be ready for it. That is why the Opposition have spent so much time going through, to the extent of our abilities, every piece of delegated legislation that has been delivered to us. There will be up to 70 pieces of delegated legislation relating to financial services, so that has been a challenge. Much of that legislation has been delivered at the last minute, without the appropriate documents alongside it and so on, but we are doing our very best to make sure that we are as prepared as we can be in the event of no deal, given the considerable disruption it would create for us all.

Much of this particular piece of delegated legislation is straightforward and merely amends existing legislation to create regulatory equivalence. None the less, I have a number of questions for the Minister. The first issue is the gap in reporting between the potential no-deal date and 2022. I am unclear why regulation 13(b) will omit regulation 43(1)(b) of the Payment Accounts Regulations 2015, which commits the FCA to reporting back to the Treasury every two years on

“compliance by the Money Advice Service with the requirements of regulation 12”

of the 2015 regulations. Regulation 12 states:

“The Money Advice Service must provide consumers with access, free of charge, to a website comparing fees charged by payment service providers”.

There is no indication in the 2015 regulations, or in the draft regulations we are considering, why that is in any way necessary or in keeping with the rest of the measures. Perhaps the Minister will explain that.

I note that Baroness Drake raised the issue of the transparency of fees and charges in the other place, but the Minister there did not respond to her question, although he responded to other issues she raised. Will this Minister explain why an alteration is being made in that regard when, in theory, as he said in his introduction, this measure is meant to be a simple transposition of responsibility?

The second issue is that, at least as of this lunch time, the impact assessment has still not been published, despite the fact that this SI was debated by the Lords last week. Will the Minister explain why it has not been published and why we are being expected to pass a measure when we have not even seen an impact assessment? That approach is becoming common across Government, and it is a worrying development. Just last night, we saw that, in relation to the most fundamental power of a Government—the ability to deprive people of their liberty; in that case, people who are mentally incapacitated—an impact assessment was provided only the day before, and it was already out of date.

We have procedures in this House to prevent the passage of flawed legislation and ensure democratic scrutiny. The Opposition are well aware of the pressure that our civil servants are under. They are working in incredibly difficult circumstances, which the Government created. We cannot stand by and let our capacity to scrutinise measures be reduced by information not being made available to us. I hope the Minister will inform us when the impact assessment will be provided and explain why it was not available before the Committee sat or the Lords considered this measure.

Baroness Drake pushed the Minister in the other place on the impact this SI may have on UK citizens resident in other EU countries. We are all aware of the necessity of bank accounts for everyday activities. Even with the two months’ notice period that the Government have stressed applies to this measure, it is worrying that banks could close accounts in the event of no deal. The Minister in the other place seemed to suggest that would be a commercial decision, and this Minister suggested it would be at the discretion of banks—I think that was his terminology. Will he provide deeper assurances that the Government will consider the people who may be negatively affected? I appreciate that there have been conversations—to use his language—but we need something stronger.

In the other place, we were informed that only a very small number of people would be affected, but the impact could be very significant. As my counterpart in the other place, Lord Tunnicliffe, rightly stated,

“for the people it affects, it affects them 100%. If you cannot get a basic bank account, that is pretty close to catastrophic in the modern world”—[Official Report, House of Lords, 12 December 2018; Vol. 794, c. GC88.]

I am not sure about the situation in the UK, as I have not been in that situation myself, but in other countries it is difficult to conduct certain transactions without a domestic bank account. Paying Government bills or bills to public service providers can get very complicated without a domestic bank account. Even with the international bank account number system, it is still very difficult.

I can imagine a UK citizen resident in an EU27 country needing a UK bank account to pay for services or goods consumed by an elderly parent—almost like an emergency bank account. If that account were closed, the UK citizen would have the hassle of searching around to find another bank that was capable of providing an account to them. Presumably, they would have to do that on their own—they would need to shop around themselves, potentially at a time when they were nervous about their ability to use their existing account over the next two months and about needing to get a new one to pay for the items their parent required.

Will the Minister consider asking the FCA or another body, if such circumstances arise, to ensure that people who are affected by closure of their account can at least access information about which other providers may be willing to provide such an account to them as residents in the EU27? Will he look at ensuring that there is some continuing availability if all the banks decide that, commercially, it is not worth the candle and they do not want to provide an account? That may be the outcome.

The Minister in the other place stated that, although there had not been a formal consultation process about these measures with consumer associations beyond sending them the SI and accompanying information, he suspected that there might have been some contact from consumer organisations following the debate in the other place seven days ago. Will the Minister tell us whether there has been contact with consumer organisations? If so, what was their feedback? Are they happy with the change? We need that kind of information before we can be happy with this measure.

Finance (No. 3) Bill

Michael Tomlinson Excerpts

2nd reading: House of Commons & Programme motion: House of Commons
Monday 12th November 2018 Commons Chamber

[Peter Dowd]

The hon. Gentleman needs to speak to his own Government about cross-party support. My party cannot discuss these issues in this Chamber, let alone outside it. He would be better off engaging with his own Government on these matters.

What we have in the Budget is more spent on potholes than on our schools, not a penny more for everyday policing or fire services and nothing to begin to unravel the 40% budget cuts that have taken place across local authorities.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) asked a very straightforward question, and I am going to give the hon. Gentleman another chance to answer it. Will he, as suggested by my hon. Friend, engage in cross-party support—yes or no?

[Peter Dowd]

It is not in the Finance Bill. Frankly, the hon. Gentleman should worry more about the 8% cut to per pupil school funding in his constituency than trying to get me to answer questions that the Government should be answering.

Freeports

Michael Tomlinson Excerpts

Thursday 11th October 2018 Westminster Hall

[Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)]

I beg to move,

This this House has considered the establishment of freeports in the UK.

It is a pleasure to serve under your chairmanship, Mr Hanson. I thank the Backbench Business Committee, chaired by the hon. Member for Gateshead (Ian Mearns), for granting this timely debate, and the many supporters who helped to secure it, in particular the right hon. Member for Birkenhead (Frank Field). He is a great champion of both Brexit and the north of England, and is held in the highest regard on both sides of the House. He has asked me to pass on his apologies today; he is unfortunately detained on Merseyside.

What is the issue that unites us, and what is a freeport? At its simplest, a freeport is an area that is physically within a country but legally outside it for customs purposes. Consequently, goods that enter a freeport do not incur import duty. Instead, import duty is paid only if and when goods pass from the freeport into the domestic economy. That offers a number of advantages, as, for example, goods can be imported, processed and then re-exported without incurring any duty. That incentivises international businesses to use the freeport as part of their supply chain, thereby stimulating domestic manufacturing and creating jobs in the process. The deferral of duty also enables goods to be stored or processed in the freeport before entering the domestic economy. That allows businesses to better control their cash flow and, again, encourages domestic manufacturing, as import tariffs on processed goods are often less than those on the individual component parts.

In addition to the benefits accrued through duty-free status, freeports often offer their users a number of additional advantages, including tax reliefs and a simplified regulatory environment. It is important to stress that there is no one model of freeport. All freeports are different in the mix of advantages that they offer and the physical form that they take—I think we will hear from colleagues today about issues ranging from seaports to airports. The debate, therefore, is about not only whether the UK should establish freeports, but what form they should take. I will begin, however, by briefly describing the case for freeports in general.

Freeports are not a new idea; indeed, approximately 3,500 freeports are now operating in more than 135 countries. The UK is unusual in that we have no operational freeports. If we are to compete seriously in the global trading system once we leave the EU, that has to change, as my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) pointed out in his excellent paper for the Centre for Policy Studies.

Wherever freeports have been implemented properly around the world they have had that effect. Just look at how quickly and impressively the Jebel Ali free zone in the United Arab Emirates has transformed Dubai. In the space of a few decades, that free zone has brought unimaginable wealth to that country. The free zone alone now hosts 7,000 global companies, employs 145,000 people and accounts for around 40% of the UAE’s total direct foreign investment.

Jebel Ali is the most unique and dramatic example, but freeports have demonstrated their worth in highly developed and mature economies as well. The growth in freeports in the US, for example, has outperformed the US economy as a whole. One report predicts that if freeports in the UK were as successful as those in the US, we would create an additional 86,000 jobs. There is every indication that freeports in the UK would be just as successful as those around the world—perhaps even more so, given our excellent links with the United States, Europe and the Commonwealth.

A report commissioned from Mace Group by my fellow Conservative, Tees Valley Mayor Ben Houchen, looked at what a programme of supercharged freeports in the north of England might mean for our economy. It found that such a programme, once established, would boost UK trade by nearly £12 billion a year, create 150,000 extra jobs across the north, including 17,500 in Tees and Hartlepool, and provide a boost to northern powerhouse GDP of £9 billion a year—equivalent to £1,500 a year for every household in the north.

Although the jobs created by freeports would extend to the service sector as well, the vast majority would be in manufacturing. That in itself would be another huge advantage for the UK economy. Although manufacturing as a share of our economy has declined from 32% of gross value added in 1970 to 10% today, it still accounts for 13% of business investment, 50% of UK exports and 70% of business research and development. It also creates high-paying jobs, with the average worker in manufacturing earning £3,400 more than those in the rest of the economy.

Increasing the size of our manufacturing sector is also central to boosting the stagnant levels of productivity that the Government have rightly identified as a key structural challenge for the UK economy. As the Government’s industrial strategy White Paper points out:

“The productivity of the sector has increased four times faster than the rest of the economy”.

By boosting the share of manufacturing in the UK economy, freeports would have positive effects on productivity, wage levels, the current account deficit, investment, and research and development.

Although I would love to see freeports dotted around the entire UK coastline, like giant magnets pulling in container ships from all around the world, I also want to fly the flag particularly for Teesport, and I am delighted to see my friend the hon. Member for Redcar (Anna Turley) here to make that case. Situated immediately adjacent to the site of the former Sahaviriya Steel Industries steelworks—now the centre of the largest regeneration project anywhere in the UK—Teesport is undergoing huge investment to prepare it to rival the major ports in Europe. It handles more than 5,000 vessels each year and around 40 million tonnes of cargo, on an estate covering almost 800 acres. Teesport has all the qualities that will allow it to prosper as an international hub for trade and supply chain processing: deep water access that allows volumes to be maximised, the availability of extensive brownfield land surrounding the port, excellent transport links to the rest of the country, a ready supply of skilled workers, and a local economy that has so much unrealised potential.

For all the reasons that I have set out, I strongly believe that freeports could transform the economic growth and prosperity of the north-east, as well as the wider UK economy. However, as I have mentioned, freeports come in many forms, and it matters a great deal for the success of a freeport that it consists of the right features. Members may be aware that the UK has experimented with freeports once before. My researcher dredged out a wonderful report from the 1980s by the Adam Smith Institute, setting out the experiment that was launched in 1984, giving six ports around the UK freeport status: Belfast, Birmingham, Cardiff, Liverpool, Prestwick airport and Southampton. All those freeports, however, failed to achieve the success that we have witnessed in others around the world, because they did not offer anything like the advantages that could be acquired in many other freeports outside Europe. That was partly due to an uncharacteristic lack of ambition by the Thatcher Government, but mostly due to the regulatory constraints placed on them by the EU.

It is therefore crucial that, if and when we reintroduce freeports to the UK, we allow them the oxygen that they need to breathe and come to life. That is where I take issue with the Government’s current position. In his reply to a written question from me earlier this week, the Financial Secretary to the Treasury emphasised that the Customs and Excise Management Act 1979, which I am sure we all know well, already provides a legal basis for the designation of free zones, and will continue to do so following our departure from the EU.

I am a great admirer of the Minister, and I know that he is deeply committed to boosting our economy. I am also genuinely grateful for the supportive conversations that I have had with other Treasury Ministers about how we could aim to deliver a new generation of freeports. However, if we are not prepared to go further than we did in the 1980s, the results will be the same. During that first freeport experiment, Dr Eamonn Butler and Dr Madsen Pirie, by surveying the characteristics of freeports around the world, produced a list of the advantages that freeports need to succeed, and I will mention a few of them now.

At the macro level, freeports must be able to offer lower levels of taxation and less burdensome regulations than exist outside. Those conditions are crucial for attracting new business, creating jobs, and encouraging start-ups. Freeports also need to be able to curb bureaucratic administration by having both automatic concessions and collective processing. Automatic concessions would mean that freeport users do not have to undertake the costly and lengthy process of applying for individual concessions, such as for inward processing relief. Collective processing would also reduce paperwork, as the freeport operators would deal directly with customs documentation on behalf of all, or a number of, their tenants.

Successful freeports must also offer their users security. The heightened security around freeports is often perceived as a necessary burden, required to prevent smuggling. However, the existence of a highly secure customs perimeter affords freeport users huge cost savings in the form of lower insurance premiums. High-value stock is also more secure, and the insurance need cover only the duty-free, rather than duty-paid, value of the stock.

The final advantage that all freeports must be able to offer businesses is improved cash flow. To an extent, it will arise naturally because of the ability to defer duty payments until the goods actually leave the freeport, but additional measures can be taken. Ideally, VAT should be scrapped on transactions within the freeport so that businesses are not required to wait for needless VAT refunds.

In summary, we should not aim to establish the type of insipid freeport that one finds across the European continent. Instead, we should aspire to construct supercharged freeports like those found in China, the US and the middle east.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

My hon. Friend makes a powerful and compelling case. He mentioned that freeports come in all shapes and sizes. Does he agree that the UK’s regional airports present an opportunity to expand freeports or free zones? It is good to see the Minister in his place; does my hon. Friend, like me, look forward to a positive answer from him to the call for freeports, not only in the north-east but in our regional airports?

[Mr Clarke]

I agree completely that the opportunities are not restricted to Teesport or even to seaports. Airports could be a logical centre for such innovation; I know of freeport zones in Tennessee that are centred around local airports and that keep spreading prosperity to areas that are not naturally at the centre of current economic success. That is the point: freeports can really diversify the benefits of a liberalised economy into areas that have struggled to attract the levels of inward investment that other cities or areas have enjoyed. Regional airports should absolutely be part of the strategy. I think the Government would broadly agree that if the idea is taken forward, it will not be in any way restricted to seaports.

Why are freeports back on the agenda now after a three-decade hibernation? The answer, of course, is Brexit. Leaving the European Union is the perfect opportunity to establish supercharged freeports, for three reasons. First, we will be free from EU regulatory restraint and will therefore have the freedom to create something meaningful, rather than just glorified bonded warehouses. Secondly, as we pivot from Europe to the rest of the world, we will need to be even more competitive to attract new business. I cannot emphasise enough that if we accept a looser economic relationship with Europe, we will have to establish better ways of enhancing our trade relationships with the rest of the world or the exercise will lose all economic meaning. Thirdly, in the event that we end up with no preferential trading relationship with the EU, freeports will help us to maintain frictionless trade, especially for just-in-time supply chains.

That brings me to my final point, which is about our future relationship with the EU. The type of freeport that we can introduce post Brexit is inextricably linked to the type of relationship that we forge with our European partners. At the heart of the question lies state aid, on which the EU has much more stringent rules than the World Trade Organisation. The most fundamental difference is that under WTO rules, only “financial contributions” count as subsidies, whereas the European Commission defines state aid as

“an advantage in any form whatsoever”.

Although setting up a freeport is possible within the EU, the state aid restrictions make it impossible to set up the type of successful freeports that we want and need, with power to attract meaningful levels of foreign investment and incentivise the onshoring of jobs. Crucially, members of the European economic area are automatically bound by all EU state aid rules, while Canada, in its new comprehensive trade agreement with the EU, applies none of them. If we are serious about establishing freeports in the UK, our future relationship with the EU will therefore need to look a lot more like Canada plus than like EEA minus.

From the proposals in the Chequers White Paper, it looks as if the freeport opportunity will die without a shot fired. The White Paper pledges that

“the UK would make an upfront commitment to maintain a common rulebook with the EU on state aid”.

That makes really depressing reading. By committing to apply the entire EU state aid rulebook, we are tying our hands and sapping our ability to attract foreign investment, boost international trade and ultimately create thousands of jobs in the UK, mostly in manufacturing.

To avoid any misunderstanding by the Government, I want it to be crystal clear that, for me, that is not good enough. The whole Chequers approach is characterised by the desire to split the difference between being a member of the EU and being an independent country, but it ends up delivering the benefits of neither. Along with the wider democratic deficit involved in our voting to leave the EU, but then accepting being a rule taker, that is why I must end my speech by emphasising that I am deadly serious that I cannot and will not support the Chequers proposals if they form the basis of an agreement with the EU in a few weeks’ time.

Freeports are one demonstration of why we would fare far better in a looser trading relationship with the EU based on a super-Canada deal. The remaining negotiating time should be spent in practical engagement on the Irish border, to which very clear solutions have been suggested and which I believe is much more about a political than a practical obstacle. It is very simple: time—both for freeports and for a proper Brexit—is running out.