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Politics

Freeport will not be a silver bullet

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AT THE beginning of September, before political focus temporarily dimmed, the Welsh and UK Governments invited applications for Wales’s first freeport, which is planned to be up and running next year.
After years of wrangling, Welsh Ministers agreed to support freeport policies in Wales after the UK Government agreed delivering them would meet the Welsh Government’s demands for a “partnership of equals”.
Part of the agreement reached placed Wales on the same footing for starter funding after three years in which the UK Government refused to fund Wales to the same level as Scotland and England.
A Welsh freeport will be a special zone with the benefits of simplified customs procedures, relief on customs duties, tax benefits, and development flexibility.
Milford Haven Port Authority, which has already expressed interest in Freeport-status, to push the Haven’s claims to be the location of a Freeport in Wales.

WHAT IS A FREEPORT?

Freeports are a special area where normal tax and customs rules do not apply. These can be airports as well as maritime ports. At a Freeport, imports can enter with simplified customs documentation without paying tariffs.
Businesses operating inside designated areas in and around the port can manufacture goods using the imports and add value before exporting again without ever facing full tariffs or export procedures.
Suppose the goods move out of the Freeport into another part of the country. In that case, however, they must go through the full import process, including paying any tariffs.
The UK was previously home to several Freeports, including Liverpool, Southampton, and the Port of Tilbury.
The legislation governing them was not renewed in 2012 because – while the UK remained a member of the EU and in the EU customs area – the economic case for keeping them was lost.
The UK could have chosen to retain freeports; nothing in EU law prevented them. Ending them was a political choice made by the then-administration.
Despite the absence of freeports, England remains home to 24 free zones, which operate on the same principle: in the Tees Valley and Manchester.

THE BENEFITS FOR PEMBROKESHIRE

The Milford Haven Waterway, a busy energy industry hub, is also a sensitive marine environment.
Supporting a scheme which could potentially undermine the Haven Waterway’s environmental status while pursuing a green energy future will be a difficult balancing act.
Milford Haven Port Authority argues that locating a Freeport in Milford Haven makes sense due to the Haven Waterway’s status as a nationally strategic energy asset and a key trade hub for the British energy supply.
A Freeport, it claims, will be an essential vehicle to help safeguard the existing professional energy jobs and skillsets to utilise for low-carbon ambition while regenerating the economy.
The Port Authority says the port’s existing energy infrastructure presents the opportunity for large-scale hydrogen production and injection with minimal additional infrastructure requirements. Alongside strong wind, wave and tidal resources, deep water access has already accelerated an emerging renewable sector such as floating wind in the Celtic Sea.
The Authority claims that a Freeport could support supply chains from equipment manufacturing to system integration and power connectivity, helping companies develop bankable projects and lower energy costs for UK consumers.
The proximity to major shipping routes and the existence of LNG terminals mean the Haven Freeport could also support a cleaner global maritime sector.

NOT PLAIN SAILING

Although freeports could, theoretically, redress imbalances in the UK’s economy by encouraging economic activity in areas where the economy is weakest, a careful balance must be kept.
The use of government subsidies for freeports – whether through direct grants or tax breaks – potentially falls foul of the WTO rules upon which Westminster seems determined to trade.
While freeports are successful in stimulating investment and jobs in a range of locations worldwide, they are neither a “silver bullet” for all locations nor the only way of boosting the UK’s main global gateways.
Freeports are notorious globally for being used to evade tax, launder money, and ease the transportation of stolen or illicit goods.
Moreover, as the experience at the Teesside Freeport development shows, they can lack any form of accountability and create fewer and less widespread economic opportunities than hoped.
The financial scrutiny of the Teesside Freeport is not much more than zero, and a box-ticking exercise carried out without any forensic examination of where the money goes and how contracts are awarded.
Milford Haven Port Authority operates a trust port. There are no shareholders or owners, and, importantly, its Board has independence of action without independent oversight.
A freeport’s financial structure is, if anything, even more financially opaque.
As public money is being invested in a freeport, proper public scrutiny – not merely loose “oversight” or lip service -must be the minimum standard.
Moreover, a freeport could be a money pit and public funding magnet. Too big an opportunity and too large a political totem to allow to fail, even when its economics don’t add up, freeports could end up being propped up by public money while delivering less than promised on the tin.

THE COMPETITION

In all the positive publicity about a possible Freeport in Milford Haven, the Haven is not alone in wanting one.
Holyhead is Wales’s largest Irish Sea port. It is also in the key marginal constituency of Anglesey.
The stalled Wylfa development for nuclear power (part of the UK’s Government economic and energy strategy) is also on the island, and an already massive and expanding wind farm lies off its coast.
Holyhead links the North Wales corridor to England’s northwest and the Midlands. Transport infrastructure is already better to and from Anglesey than from Pembrokeshire to those destinations and will need less investment.
Cardiff Airport is another potential rival and one that could be especially attractive to the Welsh Government.
Since it bought a controlling stake in the Airport, the Welsh Government has propped it up with loans and grants.
Without Welsh Government support, the Airport would be insolvent.
The Welsh Government might be persuaded that making Cardiff Airport the first of Wales’s freeports would kill two birds with one stone.
It would attract more air and freight traffic to the site and decrease the Airport’s reliance on financial help from the Welsh Government.
As with Holyhead, the transport and infrastructure links from Cardiff Airport to other parts of the UK – in this case, the Midlands, the M4 corridor, and Bristol – are superior to those connecting Milford Haven with those regions.

MOVING MONEY

A substantial concern expressed in a report on the Freeport scheme presented to the County Council is the undeniable fact they often do not create jobs but move them from one area to another.
The economic displacement of employment and funding opportunities could pull jobs and investments from one community to another.
If a new freeport only moved jobs and capital from (say) Newport to either Milford Haven or Holyhead, the economic case for their creation becomes – at best – shaky.
That raises the question of whether freeports provide value for public money through direct investment or tax relief.
Freeports could also be used to erode the high standards the UK currently places on workers’ rights and the environment.
Granting freeport operators carte-blanche to do what they want within a designated development area: for example, by allowing shortcuts through planning and environmental law or through allowing employment practices prevented elsewhere, involves trade-offs with unions and planning authorities could find problematic.
While jobs are needed, it is reasonable to ask what jobs and at what cost.
The experience of Welsh Enterprise Zones suggests few new jobs at a massive cost per head.
At a time of enormous hardship, it’s easy to be gulled by the prospect of large sums of public money and the prospect of that money pulling in private investment.
Tax and tariffs apart, a cautious individual might wonder why, if freeports are such a sure-fire thing, they need so much public money.

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News

Kwarteng gambles on rush for growth

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CHANCELLOR of the Exchequer Kwasi Kwarteng unveiled his and Liz Truss’s economic vision for the UK on Friday morning.

The headlines are straightforward.

There will be £45bn in tax cuts by 2027; however, the largest cuts – national insurance cuts, the abolition of the cap on bonuses and the highest income tax rate- benefit only high earners.

MAIN POLICIES

Cut in the basic rate of income tax to 19% from April 2023;

National Insurance will not rise as scheduled, and the Government will reverse the current year rise as of November 6;

New Health and Social Care Levy to pay for the NHS will not be introduced;

The top rate of income tax was cut from 45% to 40%;

Cancel the rise in corporation tax which was due to increase from 19% to 25% in April 2023;

Rules around universal credit tightened by reducing benefits if people don’t fulfil job search commitments;

VAT-free shopping for overseas visitors;

End of the cap on bankers’ bonuses;

Planned increases in the duties on beer, cider, wine, and spirits cancelled;

Government to discuss setting up investment zones with 38 local areas in England.

Alongside the above, the Chancellor announced plans to remove environmental safeguards for building developments and reduce the regulatory burden on financial institutions.

KWARTENG LEAVES LABOUR AN OPEN GOAL

In an interview with Rishi Sunak during the Conservative leadership contest, Nick Robinson observed that it would be a nasty surprise for the former Chancellor when he found out who’d been in power for the last twelve years.

Kwasi Kwarteng followed Liz Truss’s preferred method of operation: he pretended they hadn’t happened.

The Chancellor comprehensively dumped on the policies pursued over the last dozen years by successive Conservative governments, for a decade of which Liz Truss has been a member.

His statement was, as one ministerial colleague said, “a game changer”, although perhaps not in the way he envisaged.

So complete was the change of economic policy that it leaves an open question about how Mr Kwarteng and his Cabinet colleagues ended up in the same political party as most of their backbench colleagues and served under the last three Conservative leaders.

Shadow Chancellor Rachel Reeves did not miss the open goal. Even as Mr Kwarteng and Ms Truss shook their heads on the government benches, she hammered home that the Chancellor’s statement was an admission the record of Conservative governments since 2010 was one of a failure to deliver growth or a viable economic plan.

THE SUPPLY SIDE FIX

The Chancellor and Prime Minister’s rationale is that cutting taxes for the already well-off will benefit all citizens as they are incentivised to invest and act in entrepreneurial ways. In addition, reducing regulation for businesses will encourage increased commercial enterprise.

They believe the growth stimulated will make up for any loss in tax revenues as increased economic activity, encouraged by lower taxes, leads to increased government revenues.

That approach is called supply-side economics, which focuses on increasing the supply of goods and services through growth.

In every developed nation where the Government’s brand of economics has been tried, two things have happened: a cataclysmic bust has followed a short-term burst of economic activity.

In addition, wealth inequalities – and the UK is already grossly unequal – are embedded and made worse.

Low taxes on the wealthiest do not distinguish between those who generate wealth through their industry or create economic activity through business investment and those who inherit wealth or sit on capital without producing anything.

“THE RICH WILL REJOICE”

Wales’s Finance Minister, Rebecca Evans MS, responded: “Rebecca Evans, Minister for Finance and Local Government, said: “Instead of delivering meaningful, targeted support to those who need help the most, the Chancellor prioritises funding for tax cuts for the rich, unlimited bonuses for bankers, and protecting the profits of big energy companies.

“Instead of increasing funding for public services in line with inflation, we get a Chancellor blithely ignoring stretched budgets as public services find their money is not going as far as it did before.”

Plaid Regional MS Cefin Campbell said: “This Budget will see the rich rejoice as their bonuses rocket and their tax bill sliced, once again it will be the poorest and most vulnerable bearing the brunt of the disastrous cost of living crisis.”

 Plaid Cymru’s Treasury spokesperson, Ben Lake MP, added: “Tax cuts for the super-rich will do absolutely nothing to drive growth in the Welsh economy.

“I urge the UK Government to recognise that our Government in Wales must be given the fiscal tools to unlock our economic potential ourselves. That is the only way to improve the lives of people across Wales.”

Welsh Conservative Shadow Minister for Finance, Peter Fox MS, said: “Today shows that the UK Conservative Government has a comprehensive plan to provide a sharp boost to the economy by putting cash back into people’s pockets. Labour in Wales has the power to cut taxes in Wales but chooses not to.

“Mark Drakeford needs to take a leaf out of Liz Truss’ book and take immediate action to support hard-working people and struggling businesses, stimulating the Welsh economy rather than stifling it.”

Scott Corfe, Research Director at Social Market Foundation, said: “The Chancellor is taking a very high-risk gamble with the economy.

“If his package of enormous tax cuts and ‘supply side reforms’ fails to translate into significantly higher economic growth, we risk further falls in the pound and surging gilt yields as investors lose confidence in our ability to pay our way in the world.

“That, in turn, means higher inflation, an unsustainable trajectory for the public finances and steeper interest rate rises – potentially deepening rather than alleviating the cost of living crisis.”

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Senedd: Motion of Condolences was presented bilingually to King Charles III

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DURING The King’s visit to Cardiff on Friday (Sept 16), The Senedd assembled to present a Motion of Condolence to the King.

A Motion of Condolence is a public expression of sympathy that takes place after the death of an important figure.

During an extraordinary session of the Senedd on Sunday, September 11th, MSs agreed the following motion of condolence without a vote:

“That this Senedd expresses its deep sadness at the death of Her Majesty The Queen and offers its sincere condolences to His Majesty The King and other Members of the Royal Family. We recognise Her Majesty’s enduring commitment to public service and duty, including her support for many Welsh charities and organisations, and her lifelong association with Wales and its people.”

The speech was delivered bilingually with this English interpretation provided by the Senedd, along with the images above and below.

The Llywydd of the Senedd, The Right Hon. Elin Jones MS, said, ”

Your Majesties, Senedd Members, Guests.

On behalf of the entire Senedd, I would like to extend a warm welcome to His Majesty the King and Her Majesty the Queen Consort on your first visit to the Senedd since the Queen’s sad passing. We extend our warmest condolences to you and your family.

We welcome your Majesties to our Senedd today and we offer our sincerest condolences on the sad death of your mother, the Queen. We know that so many of the people we represent have been saddened, even shaken, by her loss and hold you and your family in their hearts and prayers at this time.

As we meet here today to offer our motion of condolence, it is poignant for us to think that the Queen’s final visit to Wales was only 11 months ago at the official opening of our sixth Senedd. The Queen was on fine form that day. Many members shared their anecdotes of that visit when we met to pay tribute to the Queen and discussed our motion of condolence in the Senedd on Sunday. And as she left us, eleven months ago, I hope that Her Majesty carried with her the beaming smile of Ffion Gwyther, the last person she met that day in Wales, the young actor from Furnace Llanelli, who smiled broadly as she handed the Queen a posy.

The stories and tributes paid by members to the Queen when we convened on Sunday were warm and witty. As you may imagine, there were many mentions of corgis – her constant, lifelong Welsh companions. Corgi, a Welsh word. Literally small dog. And of course the members here representing Pembrokeshire were particularly keen to champion her preference for the Pembrokeshire corgi. And the member for Ceredigion, me, was silent, and ever so slightly jealous, of the Queen’s choice of the Pembrokeshire corgi over the Cardiganshire corgi.

The Queen was with us for each of the six official openings of this Senedd – and on each occasion, she noted the growth of our powers and the actions that we had taken on behalf of the people of Wales. She respected this Senedd as an expression of the democratic will of the people of Wales.

The Queen was with us in 1999 for the opening of our first fledgling Assembly. She has shared our journey of devolution. She partook in each of our 6 openings, commenting each time on the development of our powers and in becoming a ‘national parliament’ Senedd Cymru. The Queen respected this Parliament because she respected the democratic choices of the people of Wales. She saw us come of age and was interested in our next steps.

From Glyndŵr’s first Senedd of the fifteenth century in Machynlleth to the one in which we are gathered today, our story is old but our democracy is young and ambitious.

It is my sincere hope that the modern relationship between this Senedd, this country and the Royal Family will be rooted in respect and sustained by understanding.

The story of our land, our nation, is a long one, but the story of our Senedd is new and modern. Our eyes are on the future, and I am confident that our co-operation with you, the King, and with the royal family, will reflect that.

And as we remember today the Queen’s enduring commitment to our parliament, we also look forward to the King’s future association with the Senedd and our work on behalf of the people of Wales.

I now invite the First Minister to present the Motion of Condolence to His Majesty the King.

The Motion of Condolences was presented bilingually by the First Minister Mark Drakeford MS, followed by a reply from His Majesty The King in both languages.

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News

Cabinet supports more permissive approach to town centre planning applications

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PEMBROKESHIRE COUNTY COUNCIL planners can now consider a wider variety of planning applications for town centres in Pembrokeshire, thanks to the publication of a new report.
The report by the Council’s planning authority supports a more permissive approach towards the development of multi-functional and vibrant town centres.
Speaking after Cabinet’s endorsement of the report today (Monday), Cllr Paul Miller, Deputy Leader and Cabinet Member for Place, the Region and Climate Change, said: “I strongly believe that the quality of our town centres is important for the wider economic wellbeing of Pembrokeshire.
“However, there is no future in retail-only town centres. Instead, they need to become multi-functional places with a broader range of commercial uses (food and drink, office accommodation) as well as education, health, leisure and public services.
“In addition, they also need to be great places to live and we are committed to supporting the repurposing of vacant retail units to residential where it makes sense to do so.”
Known as the Interim Advisory Note on Development in Town Centres, the report is in line with updates in national planning policy and the publication of Future Wales – a 20-year national development plan produced by Welsh Government.
It means that in primary retail areas, a wider range of planning applications such as those linked to financial and professional uses, and food and drink establishments, are likely to be acceptable.
In secondary retail areas, planning applications for new retail, education, health, leisure and public services are likely to be acceptable as well as residential uses on the ground floor where appropriate. Upper floor residential conversions are already likely to be supported across both primary and secondary retail areas.
Cllr Jon Harvey, Cabinet Member for Planning and Housing Delivery, said the Interim Advisory Note would provide clear and transparent advice for both applicants and the authority when determining planning applications in town centres.
“We’re pleased to endorse its publication and looking forward to it supporting an exciting and different future for our town centres in Pembrokeshire,” he said.
To view the report to Cabinet please go to: https://bit.ly/3RnVd9R (agenda item 12)
To view the webcast of the meeting, please go to: https://pembrokeshire.public-i.tv/core/portal/webcasts

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